Broker commission / broker fee under german law

The fee of the real estate agent in Germany

In Germany, the broker's remuneration is generally dependent on the success of his activity. In the event of success, the contracting party owes a commission, the amount of which is derived either from the purchase price of the brokered property or from the rent. It is also commonly referred to as "brokerage fee" in german practice (in short: brokerage). The commission agreement is the most important provision in the german brokerage contract.

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Lawyer services in the area of brokerage fees in german practice

The attorneys, certified specialists and tax advisors of ROSE & PARTNER advise and represent brokerage companies and commercial players on the real estate markets in all matters relating to brokerage commissions in Germany:

  1. Drafting and reviewing brokerage agreements (B2B and B2C), in particular commission agreements (individual contracts and general terms and conditions)
  2. Enforcement or defense of commission claims - in and out of court
  3. Examination of individual questions regarding brokerage commission

In the following, we inform you about the prerequisites for the broker's commission claim and important contractual regulations regarding commission in Gernany.

Effective brokerage contract under german law

The basic prerequisite for a commission claim in german practice is an effective brokerage contract with commission regulations. In principle, brokerage contracts in Germany do not require any form, but Section 2 (1) Sentence 2 of the German Residential Property Brokerage Act (Wohungsvermittlungsgesetz) requires at least text form for brokerage contracts for residential property. Agreements between brokers and customers are regularly to be evaluated as general terms and conditions and are thus in principle subject to the legal requirements and restrictions for such form contracts in german practice.

But beware: from 23.12.2020, a new regulation will apply to the sale of condominiums and single-family houses to consumers in Germany. These brokerage contracts will then require text form, for example by e-mail. A verbal agreement will then no longer be sufficient in german practice.

However, the broker's lack of a license under german trade law (Section 34c of the German Trade Regulation Act) does not render the brokerage agreement invalid under german civil law. The broker's request for commission must be clear, in particular it must be made clear who is to pay the commission and in what amount. As a result of the amendment to the German Residential Mediation Act (Wohnungsvermittlungsgesetz) on June 1, 2015, the so-called "Bestellerprinzip" was introduced for brokerage in the german rental housing market. Tenants in Germany are therefore no longer liable for commission if the landlord has commissioned the broker. This does not (yet) apply to the brokerage of condominiums.

Conclusion of the main contract and causality in german practice

According to the German Civil Code, the broker is only entitled to a commission if the intended main contract between buyer and seller or tenant and landlord is validly concluded. This includes the contract under the german law of obligations - i.e. the purchase contract or the rental contract. This contract must be valid, i.e. in the case of a real estate purchase contract it must meet the strict formal requirements under german law (notarization). The claim to the broker's commission expires if the main contract is effectively contested, e.g. due to fraudulent misrepresentation.      

The activity of the broker must have become causal for the conclusion of the main contract with (not necessarily alone). The success must also be the result of an essential brokerage service in Germany. In this respect, there are different requirements for the verification broker and the intermediary broker in german practice. The broker must have enabled the buyer to conclude the contract. It is therefore harmless if the buyer knows the owner of the property, but does not know whether the owner is interested in negotiating a purchase. The broker must do more in Germany. He must actively work towards the conclusion of a contract between the seller and the buyer, i.e. actively support the negotiations and bring about the willingness of one party to conclude the contract in the first place.

Reservation fees in german practice

Clauses in which the broker undertakes to reserve the german property in question for the prospective buyer without reservation and to ensure that no one else acquires it while the client is still interested in it are quite common. In german practice, this is often done in return for payment of reservation fees. When the main contract is concluded, they are supposed to be credited against the broker's commission, but otherwise they are forfeited. Such agreements run the risk of being regarded as a non-performance-related commission, with the result that the agreement is invalid under german law. The customer could therefore reclaim the reservation fee if the transaction fails.

Amount of the commission in german practice

The amount of the commission, or the way it is calculated in Germany, should be explicitly regulated in the brokerage agreement. Without such an agreement, the statutory regulation takes effect, which regards the brokerage fee as "tacitly agreed if the service transferred to the broker can, according to the circumstances, only be expected in return for remuneration". The amount of the broker's commission is then determined by supplementary interpretation of the contract, taking into account commercial customs. These vary from region to region among real estate brokers in Germany.

Dispute about the commission under german law

In a dispute about the broker's commission claim, questions of proof are often at the forefront in german practice. The german broker is obliged to prove the above-mentioned prerequisites of the commission claim, i.e. in particular the conclusion of the brokerage contract, the main contract and the causal connection between his activity and the conclusion of the contract.

In principle, however, german brokerage law provides for the possibility of simplifying the burden of proof for the broker. In addition, he has a right to information from his customer about the facts that are important for the creation and calculation of the commission. The legal dispute about the commission takes place before the german civil courts, in the first instance before the district courts or regional courts.

Detailed information on the legal dispute about the broker's commission in german practice: Commission action broker

Securing commission

From the broker's point of view, it makes sense to invest in legally secure commission protection agreements in german practice. Here, for example, the notarization of the commission claim comes into question, the issuance of a so-called abstract commission promise, but also the joint and several liability for the payment of a parent company, should a subsidiary ("OpCo" / "PropCo") ultimately carry out the transaction.

Also the fulfillment of the legal information duties arising out of german law, in particular the reference to a possibly existing right of revocation of the broker customer, should be pursued meticulously. In the worst case in german practice, the broker could lose his commission entitlement completely.

Tax deductibility of the broker's commission in Germany

Commercial and freelance buyers, sellers, tenants and landlords in Germany can claim the brokerage fee incurred in the course of their business activities as a business expense for tax purposes. Employees can deduct the broker's commission from their income tax if they are looking for a new apartment through a broker for professional reasons, e.g. because they have a new job, are being transferred or can significantly shorten their commute by moving.

New legal situation for real estate purchase contracts with consumers in Germany

Starting from 23.12.2020 a new law applies to many german real estate sales contracts: The broker may demand its commission when selling owner-occupied apartments and single-family houses to consumers only from buyer and salesman in equal parts, thus in each case to the half. This also applies if the broker agrees with one party to act for that party free of charge.

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