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Bestellerprinzip - New German Legislation regarding Commission Fee

Understanding the Bestellersprinzip (new German legislation regarding commission fees)

The so-called ‚Bestellerprizip‘ (a new piece of German legislation regarding commission fees) comes into force on the 1st of June, 2015. Lawmakers have now determined that owners can now call upon an estate agent or subletting agency.

Both owners of furnished homes for short-term rent and subletting agencies must adapt to the new circumstances. The law’s rationale was in effect to liberate long-term tenants from estate agent fees. Despite how one may view the new law, subletting is aimed at a completely different market. Professors-in-residence, companies, relocation agencies and foreign business people are often the regular customers of letting estate agents. Individuals that are in Berlin for a limited time are more than often willing to pay for a letting agency’s service. The social reasoning behind the law does not hold up. Unfortunately, this particular difference was not recognized by lawmakers.

On top of this, the ‘Bestellerprinzip’ has too narrow a scope. It means, quite simply, that since the law change no prospective tenant can instruct an agency to look for an apartment in a particular location or with well-appointed furnishings. Should the tenant end up not renting an apartment, the agency would come away from the situation empty-handed. If an apartment is burnt-out and can no longer be offered to future tenants, it will remain in the agency portfolio nonetheless. Neither can estate agents agree to any other tenancy agreements with prospective tenants as such an undertaking would be considered as an evasive transaction, and as such against the law. Even if a tenant consents to such an undertaking, he would still be entitled to sue for costs ensued from agency fees.

What does the Law Change mean in practice?

In future, letting agencies will charge an owner for the use of their services – and not tenants. Since German rent price control measures do not apply in this case, an owner can shift costs onto the total rent. This is a logical step, since there is certainly a difference between an owner paying an estate agent once in ten years, or offering an apartment for let on a long-term basis through an agency.

The Good News: rent price control does not apply to temporary furnished accommodation

For temporary letting, a tenant pays a lump sum where all incidental charges, as well as furnishing costs are included. In future, an owner is not obliged to follow the stipulated city rent index. Instead, an owner can demand a desired rental price on the market. This is often dependent on how much space is available for a certain amount of people. The owner can factor his/her own costs into the rent. However, this is not the case for unlimited rental term agreements. Since the law change, agency websites display higher rent prices and insodoing commission fees will not be shown.

Will the New Law make temporary accommodation more expensive?

The answer is no. A tenant will ultimately pay just as much as beforehand. Only the billing type has changed and has unfortunately become costlier. The demand for well-furnished accommodation is still high and businesspeople and companies are reliant on this type of housing.

Will Owners prefer to offer their Accommodation on Internet Portals such as Immoscout/Immonet in future?

There is no reason for owners to fear higher rental prices (now with agency commission fees included)! For all intents and purposes, the tenant has already paid for a successful negotiation. Some owners may try to let out their properties for a new price on the aforementioned internet portals. But why should respectable tenants or companies search for apartments on their own, when they can seek professional advice, receive convincing photographic material and entrust the entire coordination of the rental process to a competent third party.

Final Remarks

When all is said and done, not much changes for both tenants and owners for temporary accommodation in light of the new legislation. In effect, the left-pocket, right-pocket principle applies. Until now, rent and commission fees were two separate kettles of fish. The owner will now shift his-her incurred costs onto the tenant, as the rental price increases to take the commission fee into account. This is entirely legitimate and understandable seeing as the costs for consultation, organisation and marketing will of course be passed onto the person who makes use of such services.

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