Brokerage commission is the remuneration for successful work by a broker in property brokerage.1 Hier werden die Dienstleitungen von Maklern regelmäßig in Anspruch genommen – sowohl im privaten, als auch im institutionellen Marktumfeld.
The services of brokers are regularly used here – in both the private and the institutional market environment.
Furthermore, brokerage agents are often used to broker insurance and loan agreements.
In accordance with section 652(1) of the Bürgerliches Gesetzbuch (BGB – German Civil Code), the claim to brokerage commission is legally linked to different requirements. Accordingly, a valid agreement must be concluded between the broker and his client. Furthermore, the broker must work for the client. In addition, an agreement must then be concluded between the client and a third party (e.g. the lease) and the broker must be the cause of this principal agreement being concluded. Also, there is the unwritten criterion that the client must be aware of the brokerage activity. Each of these requirements must be met. If just one does not apply, the broker is not entitled to payment.2
A brokerage agreement arises by way of two matching declarations of intent. There are no formal requirements for these declarations of intent. The declarations must refer to the fact that the broker is to provide evidence or brokerage work for the client and that he is owed commission for this in the event of a contract being concluded with a third party. This can also be done by implied contract.
If the client is aware of the broker’s profession and engages him to search for a suitable property or buyer/tenant accordingly, the client must expect to have to pay commission. However, the broker should advise the client of the duty to pay commission in order to avoid legal disputes.3
The amount of brokerage commission is only prescribed by law for the brokerage of rental apartments. For all other types of property it can therefore be freely agreed by the parties in the brokerage agreement. By law, the amount of commission is not dependent on the broker’s time or effort. In property industry practice, commission is therefore calculated as a proportion of the purchase price or rent to be paid. Thus, when concluding property purchase agreements, commission is set at between 1% and 6% of the purchase price plus VAT.4
If there is no agreement on the amount of the commission, the local wage is considered appropriate remuneration in accordance with section 653(2) BGB.5 However, a non-performance-related commission cannot be agreed.6
A maximum of two months’ rent plus VAT can be charged for the brokerage of apartment leases. If the broker demands higher commission, the client can claim back the excess commission. Furthermore, the broker will have committed an offence punishable by a fine.7
Unlike for brokerage transactions for commercial space or land purchase agreements, the party that explicitly engaged the broker to conduct the search must pay the commission (customer principle). This regulation has been in effect since 1 June 2015. Prior to that the landlord often engaged the broker to search for a suitable tenant, but the brokerage agreement was concluded between the tenant and the broker. This can be individually negotiated for commercial leases or property purchase agreements.
If the provider of the property is required to pay the commission, this is referred to as internal commission. However, if the party searching for the property pays the commission, this is external commission.