Estate agents' commission is a frequent source of dispute, for buyers and agents alike. Whether a claim exists and how high it may be can, however, be checked against a small number of requirements.
What matters is what was agreed.
An agent is only entitled to commission if he was instructed, worked towards the purchase and the purchase actually comes into legal effect. This is often only examined once the invoice has arrived. The course is set earlier, though: at the first contact, when an instruction is signed and at the latest before the purchase offer.
One thing at a time
01
Is there a brokerage agreement?
No instruction, no commission. The brokerage agreement need not be in writing, though. It also comes about by conduct where a prospective buyer makes use of the agent's services and can see that the agent expects commission for them.
The amount of commission is capped. When an apartment or a single-family house is bought, an estate agent may as a rule charge the buyer no more than three percent of the purchase price plus VAT.
From practiceListings, brochures and viewing confirmations usually contain a note on commission. For the buyer it matters when that note first appeared. For the agent it is regularly the most important evidence that a brokerage agreement exists at all.
02
Ordinary brokerage agreement or sole agency
Under an ordinary brokerage agreement the agent is not obliged to do anything. The client remains free. He may instruct other agents and need not conclude the transaction that has been set up.
Under a sole agency agreement the client undertakes not to use any other agent. In return the agent must make every effort to broker the deal. Such an agreement is only permissible for a fixed period and must be made in writing with consumers.
From practiceIf the agent is also to receive a payment where the seller finds a buyer himself during the term, this must be expressly agreed, and in writing with consumers.
Dual agency
Estate agents may customarily act for seller and buyer at the same time and charge commission to both. They must disclose this and are then required to balance the interests of both sides.
03
Did the agent bring about the purchase?
Commission requires that the purchase can be traced back to the agent's work. For estate agents, merely naming the opportunity is already enough, meaning that he discloses the property for sale or the other party. Further steps such as a viewing or taking part in the price negotiations are not required.
In addition, the purchase must come into legal effect. That is often already the case once the purchase offer has been accepted. If the purchase depends on a condition, for example a loan approval, the claim only arises once the condition is fulfilled.
From practiceIf the buyer already knew, before the agent, that the apartment was for sale, merely naming it does not earn commission. If the agent nevertheless helps to bring the deal about afterwards, commission may still arise. The buyer should therefore disclose this prior knowledge immediately and not only once the invoice arrives.
04
When commission must be reduced
The agent must protect his client's interests honestly and with due care and inform him of everything material about the property. Consumers must receive a written overview of the costs of the purchase, including commission, before the brokerage agreement is concluded. If the agent breaches such material duties, commission may be reduced, even if no loss has occurred.
From practiceThe agent does not have to verify the seller's information himself. He may pass it on as long as he has no reason to doubt it. How far a reduction goes depends very much on the individual case.
05
When commission lapses
If the purchase does not come about, there is generally no commission. The same applies if the agent himself becomes a party to the contract. If he has a family or business connection with the other party that could affect his client's interests, he loses his commission unless he pointed this out in good time.
If a purchase that has already taken effect is later not carried out, commission generally remains payable. The fact that financing falls through does not change this on its own.
From practiceEven without a purchase the agent may claim payment if this was agreed in advance. This covers, for example, the case where the client passes the offer on to an acquaintance who then buys. With consumers such an agreement only applies if it was made in writing.
Asked to pay commission — or still waiting for yours?
Send us the documents concerned: the listing or brochure with the note on commission, the overview of incidental costs, the purchase offer and the correspondence. You will receive an estimate of the work and costs involved beforehand.
A general overview, not advice on an individual case. It concerns brokerage of purchases. Separate rules apply to brokering residential leases. In case of doubt the German version prevails.