Ordering principle (real estate industry)

The ordering principle in the real estate industry is a new regulation of the commission for real estate agents in the area of renting accommodation. Here, brokers of rental apartments are paid by the person who orders the broker's service. The ordering principle was included as an objective in the coalition agreement of the grand coalition in 2013: “Landlords and tenants should continue to be able to act as clients. The market economy principle applies: whoever orders, pays ” .

The ordering principle was implemented as part of the Tenancy Law Amendment Act (MietNovG), which was passed by the Federal Cabinet on October 1, 2014 and approved by the Federal Council on March 27, 2015. According to Art. 4, the law mainly came into force on June 1, 2015. As part of this amendment law, the so-called rent brake was also implemented, which is intended to curb rent increases - especially in metropolitan areas .

Since landlords could dispense with the commissioning of brokers in order to avoid the additional costs, the Federal Government assumes that the brokerage fee to be enforced against landlords will be halved. In fact, the average brokerage fee had leveled off at around one month's rent after a year, with real estate agent turnover falling by 20%.

Following several constitutional complaints , the Federal Constitutional Court declared the ordering principle to be in conformity with the Basic Law on June 29, 2016. The regulation is justified in order to counteract the social and economic imbalances that exist on the rental housing market to the detriment of those looking for accommodation.

Previous legal situation and changes

The previous regulation in Section 3 (2 ) sentence 2 Housing Brokerage Act (WoVermRG) allowed landlords of living space to pass the costs of the brokers they commissioned to future tenants. Different problems arose, especially in metropolitan areas and popular residential areas in cities where demand exceeds supply. In such situations, landlords have hitherto been able to hire brokers without hesitation, and let the tenants pay their commission.

With the introduction of the ordering principle, the housing broker is prohibited from demanding a commission from the apartment seeker, unless the broker searches exclusively on behalf of the searcher with whom a rental agreement is then also concluded (cf. § 2 Paragraph 1a WoVermRG). This means that the person who hired him should bear the costs of the real estate agent. However, critics also saw loopholes in how landlords can still pass the commissions on to tenants.

Reactions from real estate agents

criticism

Since the new regulation was announced, it has been criticized by real estate agents and their professional associations.

The real estate association IVD wrote that, contrary to the agreement in the coalition agreement, the new regulation meant that those looking for accommodation could in fact no longer be the buyers of the housing broker . In addition, the constitutional lawyer Friedhelm Hufen expressed serious constitutional concerns in a legal opinion on behalf of the real estate association, whereupon the real estate association IVD announced a constitutional complaint. The Federal Constitutional Court rejected an application for temporary legal protection.

The Federal Association for the Real Estate Industry called on its members to go on strike in a strike vote. The vote was unsuccessful and the idea of a brokers' strike was ridiculed from various quarters. The professional association was of the opinion that real estate agents only advertised the property in question by placing apartment advertisements. To this end, he relied on a case law of the Federal Court of Justice based on the old brokerage law , according to which this type of advertising constitutes an invitatio ad offerendum . In this way, the seeker effectively becomes the agent's client, because he instructs the agent to submit his offer for the apartment to the landlord.

Real estate agents also criticized the scheme for having a negative impact on the quality of their work for apartment hunters. A house hunter who hires a real estate agent of his own accord only has to pay for the apartment he has found if the agent has not already been commissioned by the owner to broker this apartment. Otherwise, only the owner whose job preceded that of the seeker would have to pay. This is why realtors have an incentive to only show those looking for apartments that are not yet in their portfolio, instead of focusing on the suitability of the apartment.

A lawsuit launched by the German Real Estate Association in combination with some real estate agents was the only lawsuit that was admitted beyond the first instance. Above all, the “existential threat to thousands of real estate agents from Germany” was given as the reason that “will lose a considerable part of their sales and will often even be forced to cut jobs”. This lawsuit was dismissed by the Federal Constitutional Court, even though the judges recognized the fact that the ordering principle restricts their professional freedom, but that this is constitutionally in order.

Advocates

Despite all the criticism of the ordering principle from the real estate industry, there are also brokers who draw a positive conclusion after the change in tenancy law came into force. For example, a real estate agent has stated that the feared slump in the rental business has not materialized and will continue to pay off in the long term for both customers and the company. This is also due to the fact that many landlords who have tried unsuccessfully on their own are already returning to the broker.

Although it can be assumed that the services of brokers will be used much less frequently in the future due to the introduction of the ordering principle, Dirk Wohltorf, chairman of the real estate association Germany IVD Berlin-Brandenburg, welcomes the initiative of politics: "In the end, quality will prevail" and "The real estate profession will change massively."

Application of the customer principle to properties offered for sale

Reform discussion

It was not only since the introduction of the “customer principle” for rental properties that discussions about extending this principle to include properties for sale. On August 16, 2018, it became known that the Ministry of Justice is also examining the introduction of the customer principle when buying a house. The following reasons speak for this:

The principle “whoever orders, also pays” leads to real quality and price competition among brokers. At present, competition mainly takes place in that brokers promise the seller the highest possible price, not through the lowest possible brokerage fee, since from the point of view of a seller this - ostensibly - has to be borne by the buyer. Conversely, a buyer typically selects the property and not the broker and effectively often has no way of negotiating the amount of the brokerage fee.

High incidental acquisition costs tend to reduce the socially and economically desirable individual mobility. This is true even if one were to assume that the seller would add the costs for the agent in full to the purchase price, because the buyer would then have the option of marketing the property himself in the subsequent sale and thus the total agent costs for the purchase and sale to save and thus reduce the ancillary acquisition costs.

It is recognized in behavioral economics that people generally value the money they have more than the money they could get. In other words: people are more reluctant to give away a certain amount of money than not to get the same amount. This psychological effect means that sellers are typically less concerned about the amount of the brokerage costs when the buyer has to pay them. This is true even if it is assumed that the costs of the broker would be added in full to the purchase price, because sellers typically do not include the amount of the brokerage fee in their calculation if these costs appear to be borne by the buyer. This effect was already evident when the ordering principle was introduced for rentals.

The counter-argument put forward by broker associations that the seller would add the broker's costs to the purchase price so that nothing improves for the buyer, but on the contrary even the real estate transfer tax and notary costs rise, falls short for several reasons: If the market allows such a markup, a seller without a broker would also make the markup. In the event of a later sale, ceteris paribus , a buyer can also sell again at the same - hypothetically higher - price and thus has at least the option of not suffering a loss, provided that he does not involve a broker himself. For the reasons mentioned above, it is also more likely that the brokerage costs will decrease due to the competitive effect, so that there will in any case not be a price effect in full.

Applicable legal position

According to the current legal situation, a broker's commission according to § 652 as “buyer's commission”, “seller's commission” or “double commission” is possible when buying real estate . Often “local” forms are used, for example as a pure buyer's commission of 5.95 to 7.14% in Berlin, Brandenburg, Hamburg, Bremen and Hesse, or as a double commission of 3.57% for both parties in many other federal states. An explanation of both parties about the dual activity is considered sufficient for the permissibility of the double commission despite § 654 .

Workarounds

Since the ordering principle came into force, brokers have increasingly tried to receive payments from prospective tenants via so-called "contract execution fees". According to a ruling by the Hamburg Regional Court, this practice is at least illegal if the tenant is obliged to pay the fee in the terms and conditions. According to a ruling by the Stuttgart Regional Court, “viewing fees” are also inadmissible. Brokerage fees that have been demanded and paid contrary to the customer principle can be reclaimed for up to three years.

Individual evidence

^ Coalition agreement between the Union and the SPD for the 18th legislative period of the German Bundestag: Final version of November 27, 2013 , accessed on January 23, 2015

↑ Tenancy Law Amendment Act (MietNovG) , text, reasons, synopsis

^ ^A ^b Henrik Mortsiefer: Reform of tenancy law turns the brokerage industry upside down. Der Tagesspiegel on October 31, 2014, accessed on November 11, 2014

↑ ^a ^b Nicolai Kwasniewski: Ordering principle for brokers: Hurray, it works! In: Spiegel Online . May 26, 2016. Retrieved July 23, 2016 .

↑ https://beck-online.beck.de/Dokument?vpath=bibdata%2Freddok%2Fbecklink%2F2003922.htm

^ Richard Haimann: Looking for an apartment also works without a realtor , Die Welt on February 15, 2014, accessed on November 11, 2014

↑ http://www.handelsblatt.com/finanzen/immobilien/zweifel-am-bestellerprinzip-bleibt-der-mieter-der-dumme/11238508.html

↑ Statement of the real estate association IVD to the legal committee of the Bundestag on the occasion of the expert hearing on December 3, 2014 ( memento of the original of January 23, 2015 in the Internet Archive ) Info: The archive link was automatically inserted and not yet checked. Please check the original and archive link according to the instructions and then remove this notice. , accessed January 23, 2015.

↑ Prof. Dr. Friedhelm Hufen - Expert opinion on the constitutional assessment of the ordering principle in housing brokerage law ( memento of the original from June 26, 2014 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. (PDF file), accessed January 23, 2015

↑ Aju: Tenancy Law: Brokers move to Karlsruhe . In: Der Spiegel . No. 40 , 2014 ( online - September 29, 2014 ).

↑ Archive link ( Memento of the original from April 11, 2016 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice.

↑ ^a ^b Brokers threaten to strike - and reap ridicule , Süddeutsche, October 30, 2014

^ BGH, judgment of May 3, 2012 - AZ: III ZR 62/11

↑ Criticism of the IVD on the customer principle ( page no longer available , search in web archives ) Info: The link was automatically marked as defective. Please check the link according to the instructions and then remove this notice. , accessed July 3, 2015@1@ 2

↑ Ordering principle from June 1st: tenants no longer have to pay brokers - and could still be the losers , Focus article from June 1st, 2015; Retrieved July 3, 2015

↑ Constitutional complaint against the ordering principle remains unsuccessful . In: news.immowelt.de . ( immowelt.de [accessed April 10, 2018]).

↑ Brokers go to court: "The ordering principle threatens our existence" . In: news.immowelt.de . ( immowelt.de [accessed April 10, 2018]).

↑ Changes in tenancy law: industry participants draw first positive balance after the entry into force of the ordering principle , immo-magazin.de, accessed on September 2, 2015.

↑ ^a ^b Robin Göckes: Barley examines the ordering principle and brokerage cover when buying a house. In: Immobilien-Zeitung. Retrieved September 7, 2018 .

↑ Similarly, the legislator, BTDrucks 18/3121, p. 15 on the ordering principle for apartment rentals: "Anyone who arranges paid services should ultimately also pay for the costs incurred".