COMMISSION SHARING

The new Brokers Act on commission sharing

Commission sharing from 23 December 2020 – now in place at Steffen Residential!

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On 23 December 2020, the law passed by the Bundestag and Bundesrat on the distribution of brokerage costs of sales contracts for apartments and single-family homes comes into force, regulating the brokerage commission for real estate purchases nationwide. The aim of this act is the fair distribution of brokerage fees between both parties and the associated reduction of ancillary purchase costs for buyers. Below, we give an overview of the new regulations under the Brokers Act, looking at the key aspects and the challenges that the industry faces due to the new regulations.

Commission sharing – fair, but not fully thought through?

The legally regulated sharing of commission has caused heated discussion within the real estate industry and has forced brokerage companies to change or adapt their business models. Many experts assume that the new regulations will increase the professionalism and quality of the industry. However, there is some criticism from those who fear that the statutory regulation of brokerage costs will limit their flexibility in fee charging. This flexibility has invariably proven itself due to the unique nature of real estate transactions and the diversity of the markets.

Another point of criticism is that the law provides notable relief only for buyers in certain federal states (e.g. Berlin, Brandenburg, Hesse, Bremen and Hamburg), where commission sharing did not previously exist. In the other federal states, it is already common practice to split the brokerage costs between buyer and seller. As such, the new Brokers Act merely consolidates the status quo. In order to ease the burden and enable more people to buy residential property, critics believe that politicians should focus not only on brokerage commission, but also on other general factors affecting the acquisition of property, such as a reduction in real estate transfer tax or extension of child benefit.

When and to whom do the new regulations apply?

With the entry into force of the new law on brokerage commission, it is no longer possible to fully pass on brokerage costs to the buyer if the seller has also commissioned the broker. The law on the distribution of brokerage costs includes the following regulations:

  • Commission sharing applies only to brokerage contracts that concern the purchase of apartments and single-family houses (including semi-detached houses); it does not apply to purchases relating to undeveloped land or apartment buildings.
  • If both the seller and the buyer have hired the broker, both parties pay the same rates of commission.
  • If only one party has concluded a brokerage contract, it must pay the brokerage fee. Agreements to pass the costs on to the other party are valid only if the costs passed on make up no more than 50% of the total brokerage fees. Before the party that entered into the brokerage agreement can demand the other party’s share, it must provide evidence of any brokerage fees already paid.
  • If the broker agrees to work for the seller (or buyer) free of charge, it cannot demand any remuneration from the other party.
  • A brokerage contract that deals with the sale of an apartment or single-family house must be made in writing. Verbal handshake agreements are not legally valid.
  • The law on the distribution of brokerage costs applies only if the buyer is a consumer (according to the German Civil Code, consumers are natural persons who conclude contracts for private purposes). In the context of commercial real estate purchases, it is possible to agree the distribution of brokerage fees in a different way.

Steffen Residential – the real estate service provider for buyers and sellers

At Steffen Residential, we see ourselves as mediators between sellers and prospective buyers, and as a provider of services to both parties. We’ve done all our homework and have decided not to wait until December: we’re implementing commission sharing for all new customers now.

In the eyes of our highly motivated team, which is made up of reputable real estate experts and has been active on the Berlin real estate market for more than 20 years, two tasks are decisive:

  • We take care of the entire marketing process (valuation of property, creation of high quality property profiles, marketing via the most frequented channels, etc.) and steer owners through to the successful conclusion of the sale.
  • We are always on hand to provide interested parties and buyers with advice, support them in important decisions and protect them from mistakes. There is often uncertainty, especially among buyers who are making their biggest ever investment. We endeavour to dispel such concerns by providing comprehensive advice.

Are you planning to sell your property, keen to buy your own home or want to find out more about the new Brokers Act? We are happy to provide bespoke advice on our services and commission.

The Steffen Residential team

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