Brokerage law

Brokerage law in Germany is covered by Sections 652 to 655 of the German Civil Code only. As a result of this rather reduced statutory coverage  brokerage law is largely dominated by innumerable jurisdictional findings and rulings to the point where it is almost impossible to keep track of the same.

As far as real estate brokerage work is concerned it is necessary to differentiate between simple brokerage contracts, exclusive contract  contracts, and qualified exclusive contracts.

In the case of a simple brokerage contract  the broker or agent does not have an obligation to engage in any brokerage activities. The broker’s claim to a commission can, however, only be asserted, if and when it can be successfully proved that the principal  contract has been fulfilled or successfully negotiated (lease contract, agreement for sale and purchase of land,  etc.)

In those cases where an exclusive brokerage contract is signed  the broker’s client is definitely not allowed to  use the services of yet another broker. In terms of counter-performance the broker then does have an obligation to engage in pertinent activities. In that case the broker’s client is, however, still allowed to conclude the principal contract  with an interested party whom the client will have found himself.

A qualified exclusive contract can be concluded by way of an individual agreement.  When signing such a qualified exclusive contract the parties may agree that the mandator must not sell the object concerned to any interested party whom the mandator may have found himself, without the broker’s participation and intervention. If the mandator will then fail to comply with this obligation of his, he is obliged and will be liable for compensation of damages to the broker by payment of the agreed-upon commission.

Contrary to a widely spread opinion it is quite possible for a broker to work for both contracting parties in the quality of what is called a dual broker. As a rule it is then sufficient that the broker will have pointed out this dual function  either in  his General Business Terms and Conditions or at the time of the conclusion of the written brokerage contract.

A brokerage contract can be concluded either in writing or orally or also implicitly by way of  implied intent. In this context it is, however, required  that the given circumstances are such that it will be obvious for the client that a compensation must be paid for the broker’s activities.

Nevertheless there are a variety of cases and situations where the broker cannot assert any claim entitling him to  a commission despite the fact that the principal contract will have been concluded. This will, for instance, apply

  • in the case where the broker’s client already knew  the property to be let or sold, that is to say that the broker’s client was already aware of it; 
  • if the broker is at the same time also the property or the apartment or housing manager or a party to the principal contract himself, or if the broker is economically closely related with the party to the principal contract;
  • if there is no economic or personal identity between the object as offered by the broker and the object which is eventually either purchased or leased;
  • if the broker’s activities were not the basis or the cause for the ultimate conclusion of the principal contract;
  • if a broker were to act mala fide in relation to his client, the broker will forfeit his right to payment of a commission.

And finally it also happens every once in a while that the question is raised  whether  either the broker or the broker’s client is liable to  pay damages in case of breach of contract.

In view of this vast variety of legal problems which may arise in a context with a brokerage contract as well as of the numerous special aspects which are characteristic for brokerage law it is often an absolute requirement to consult an expert who specializes in this field, in order to ensure optimum results  and/or to  be able to in due time ahead assess the imminent risks and chances which may be involved in a legal dispute.


Other legal areas around Real Estate Law