Brokerage contract for the purchase of a single-family house can be invalid
Federal Court of Justice on the division of the agent’s commission in the event of dual agency – the significance of the recognisable purpose of acquisition and the subordinate commercial use Background to the decision In its judgment of 21 March 2024 (Case I ZR 185/22), the Federal Court of Justice (BGH) made an important decision on the application of Section 656c of the German Civil Code (BGB). The core issue is when a property is to be regarded as a single-family house within the meaning of this provision and what the consequences are of unequal brokerage commission if the broker acts for two parties.
The plaintiff, a real estate agent, had demanded commission from both parties to the purchase contract for a single-family house – albeit in different amounts. The court of appeal had already dismissed the action, and the Federal Court of Justice has now confirmed this decision.
What was the specific case about?
The estate agent had brokered a property consisting of a detached house with an office extension. She demanded a commission from the buyers amounting to 3.57% of the purchase price (€33,915 in total). Another brokerage contract already existed with the seller – albeit with a different commission rate.
The buyers refused to pay and were vindicated by the court.
Key statements of the decision: Whether it is a single-family house within the meaning of § 656c BGB depends on whether the broker was able to recognise at the time of the conclusion of the contract that the property was to serve primarily the residential purposes of a single household. A subordinate commercial use, which in the specific case only accounted for approx. 1/5 of the total area, is irrelevant.
Brokerage contract invalid if commission is unequal: Section 656c of the German Civil Code (BGB) stipulates that if a broker acts for both the buyer and the seller, the commission must be the same for both. If this is not the case, the contract with the buyer is invalid according to Section 656c (2) BGB. This was precisely the case here.
Third parties can also be considered as contractual partners:
What is crucial is that the broker was ultimately commissioned by both parties – even if the brokerage contract was concluded by the seller’s wife and not the owner himself. The Federal Court of Justice made it clear that in such cases, Section 656c of the German Civil Code (BGB) is to be applied analogously in order to prevent the consumer protection regulations from being circumvented.
Conclusion: estate agents must ensure that commission agreements are fair and equal. The ruling strengthens consumer protection and provides estate agents with clear guidelines: if an estate agent is acting for both parties, it is mandatory that they agree a commission that is equal and divided between them. Otherwise, they risk the complete invalidity of the contract with the buyer.
At the same time, the Federal Court of Justice has provided more specific details regarding the term ‘single-family house’ in the sense of §§ 656a ff: partial commercial use is not detrimental if it is only of subordinate importance – the recognisable residential purpose remains decisive.
Practical tip: Brokers should always document when they are acting as agents for both the private and commercial party, so that they can recognise the commercial purpose – and make immediate corrections if the commission amounts differ. Otherwise, there is a risk of repayment claims or the complete loss of the commission claim.