In the past, the question of who has to pay the broker's commission has frequently given rise to conflict. In Germany, the reform of brokerage commission, whose resolution was passed by the Grand Coalition in May 2020, has created clarity. Nevertheless, there are differences, both in amount and design, that need to be considered in advance.
In the case of a rental property, the estate agent's commission is paid by the party who commissions the agent. This has been law in Germany since 1 June 2015. Property owners who wish to rent out therefore appoint the agent and must pay the full amount of the agent's commission in the event of a successful brokerage. This may not be passed on to the tenant, either in parts or via hidden items.
In the case of property for sale, the principle that the party commissioning the agent pays the fees does not apply. Before the new regulations, which came into force on 23 December 2020, the brokerage commission was usually paid by the buyer, even if the sale was commissioned by the owner.
1. The broker can agree the commission with one of the contracting parties, i.e. fix it contractually. This cannot be changed retroactively, nor can the paying party claim the commission from the other party at a later date. The entire brokerage commission is therefore payable by the party who has a contract with the broker.
2. Alternatively, the agent can agree a double commission to be paid by both parties (buyer and seller). This double commission can be charged if the broker acts as an intermediary and agent for both parties. The commission is then divided equally. Thus, if the broker charges 2.5 % from the buyer, they may also only charge 2.5 % from the seller.
3. If the contract is concluded with one party, according to § 656d of the BGB [German Civil Code] half of the commission can be transferred to the other party, provided that the latter agrees, and the buyer also pays their 50%. Both parties must agree to this and put it in writing in the purchase contract for the property.
These regulations apply if the buyer is acting as a private person, i.e. a consumer. Commercial buyers can negotiate the commission just as freely as when buying an apartment building.
In the south of Germany, the usual brokerage commission including VAT is 7.14% - this applies both in the Free State of Bavaria and in Baden-Württemberg. The commission is payable when the broker has successfully completed their assignment. Consequently, it is usually due when the purchase or rental contract is signed.
Note: In Austria and Italy, two real estate markets in which we are also active, different regulations apply.