A problem shared is a problem halved - the principle of halving broker commissions Content and regulation

The purchase of land and residential property regularly represents a considerable financial burden - not only in times of rising interest rates. The ancillary purchase costs should not be underestimated. As a rule, potential purchasers must provide at least these from their own funds in order to obtain financing. In addition to notary fees, land transfer tax and land registry costs, the frequently incurred estate agent costs make up a large part of this. Until now, it has been common practice to pass these on to the buyer in full by means of appropriate contractual arrangements. The intention of the "half-share principle" introduced with the reform of real estate agent law at the end of 2020 was to prevent this, to keep the ancillary purchase costs low(er) for a certain group of buyers and thus indirectly promote the creation and acquisition of property and residential property.

Content and regulation

In practice, the estate agent usually acts as a "double agent": Initially, only one of the subsequent parties to the purchase agreement - often the seller of the property - commissions the estate agent. In the past, it was customary for no or only a small commission to be agreed in favor of the broker in this broker-seller relationship. If interested parties now approach the estate agent via the advertisement, a further brokerage agreement is regularly concluded with them. A significantly higher commission was often agreed in this contract. This practice is to be brought to an end with the "half-sharing principle" standardized in § 656 c BGB, among others. This reads:

§ Section 656 c BGB - Entitlement to remuneration when working for both parties

If the estate agent has both parties to the purchase contract for an apartment or single-family house promise to pay an agent's fee, this can only be done in such a way that the parties undertake to pay the same amount. If the estate agent agrees with one party to the purchase contract that he will work for that party free of charge, he cannot be promised an agent's fee by the other party either. A waiver also works in favor of the other party to the contract. Sentence 3 cannot be deviated from by contract.
A brokerage agreement that deviates from paragraph 1 sentences 1 and 2 is invalid. § Section 654 remains unaffected.

If the broker acts for both parties to the purchase agreement, he must now divide his (total) commission equally between the seller and the buyer. If the broker (later) waives the commission for one party to the purchase contract, this also applies to the other party; if the broker acts for one party free of charge, he may not demand any remuneration from the other party either.

If the broker breaches this obligation to split the commission equally, the contracts concluded with him are invalid. As a result, the broker is then left empty-handed - he is no longer entitled to a commission. Prerequisites: Consumer buyer and purchase contract for an apartment or single-family house.

However, the aforementioned obligation to split the commission and the consequences associated with non-compliance only come into effect if the buyer of the property is a consumer and the brokered property or object of purchase is "an apartment or a single-family house".

The consumer status of the buyer is rarely in doubt. In practice, however, the question of whether the object of purchase is an "apartment" or a "single-family house" is by no means so easy to answer and there is sometimes a great deal of uncertainty - both among the parties and the courts. The associated potential for disputes is considerable.

"Standard properties" can easily be subsumed under the aforementioned terms. But how to deal with "atypical" properties? For example, how to deal with a building that has been constructed as a multi-family dwelling but is acquired entirely by a single family as their home? What about a two-generation bungalow that is only used by the buyer and their family? Conversely, what if the buyer divides a single-family home into condominiums?

The law does not help here. It wants an apartment to be understood as "any combination of rooms that is used for residential purposes"; a single-family house is to be "any building that primarily serves the residential purposes of the members of a single household", whereby "other apartments of secondary importance, such as a granny apartment" are to be harmless [BT-Drs. 19/15827, 18].

Experts have different, sometimes conflicting views on the question of which criteria should be used to categorize a property as an "apartment" or "single-family home". In some cases, only objective features of the respective property (number of entrances, kitchens and bathrooms, separation of independently usable living areas, different electricity meters, etc.) are decisive for classification. Others are based additionally or only on the subjective acquisition purpose of the buyer. Thus, if the purchaser acquires an objectively existing apartment building in order to use all the apartments in it for himself and his family, he would, according to this view, benefit from the half-sharing requirement.

So far - as far as can be seen - no view has prevailed either in case law or in academia. Higher court decisions concerning the above issue are few and far between; a decision by the highest court has not yet been issued.

Consequences for practice

In any case, as long as the requirements for an "apartment" and a "detached house" have not been further specified by the (higher) courts, there is considerable potential for disputes about this and the associated (remuneration law) consequences. Both sellers and buyers, as well as estate agents, are therefore advised to describe the property in question as precisely as possible, to disclose the expectations and purposes associated with the purchase and to clearly communicate and document what the property is classified as (from their own perspective). If possible, this should be done before or upon conclusion of the brokerage agreement.

Date: 8. Nov 2023