New Law on Real Estate Agent Commissions

The new law governing real estate agency contracts came into effect on 23 December 2020. It regulates the distribution of the agent’s commission for purchase agreements involving apartments and single‑family homes — from now on, buyers and sellers must each pay half of the agreed commission to the agent.

Previous Regulations

Until now, there were no uniform rules or laws governing the distribution of real estate agent commissions for the sale of apartments and single‑family homes. In the absence of legal requirements, the commission was generally determined through agreements between the parties. The ‘client‑pays principle’ was frequently applied: the party who engaged the agent was responsible for paying the commission. In some federal states, the entire commission was therefore passed on to the buyer.

The Law

To reduce the financial burden on buyers in particular, the law on the distribution of real estate agent commissions was published in the Federal Law Gazette on 23 June 2020. After a six‑month transition period, it came into force on 23 December 2020.

This ‘Act on the Distribution of Real Estate Agent Costs in the Brokerage of Purchase Agreements for Apartments and Single‑Family Homes’ (§ 656a BGB to § 656d BGB) sets out the legal provisions on agent commissions and applies to all purchase agreements for apartments and single‑family homes (including granny flats) concluded on or after 23 December 2020.

Overview of the Changes

The changes regarding the brokerage of apartments and single‑family homes can be summarized as follows:

• The distribution of the real estate agent’s commission is now regulated by law.
• A real estate agency agreement is only valid in text form. Verbal agreements are no longer legally binding. (§ 656a BGB)
• The new statutory provisions apply only to consumers. If the buyer acts in the course of a commercial activity, these regulations do not apply to them. (§ 656b BGB)
• The agent’s commission is divided between the seller and the buyer. (§ 656c BGB)
• The party that concluded the brokerage contract must provide proof of payment of their commission share before the other party is required to make theirs. (§ 656d BGB)

The requirement for text forms also provides greater legal certainty and transparency for both buyers and sellers.
Seller and buyer each pay half of the total commission to the agent. For this purpose, the agent concludes two separate brokerage agreements with the parties.
To protect the buyer in particular, they are only required to pay their share of the commission once the seller has provided proof of payment of their share.
The new law only addresses commission distribution, not amount, which is defined in the brokerage agreement and depends on effort and market conditions.

Exceptions and Limitations of the Law

The new regulations apply exclusively to the sale of single‑family homes and condominiums, but not to the brokerage of rental apartments. Unless there are other agreements, the 'client-pays principle' remains applicable in the rental sector. Multi-family houses, building plots, and commercial properties are excluded from the regulations.