Who commissions, pays in the future: brokerage fee according to the buyer’s principle

The long-standing practice that tenants looking for an apartment have to pay the broker’s commission has come to an end. On July 1st, 2023, the changes to the Austrian Brokers Act will come into force. From then on, the “buyer’s principle” will apply to apartment rentals. So, what does this mean for you? We have taken a closer look at it:

Who will pay the broker’s commission in the future?

In practice, the real-estate agent is often commissioned by the landlord, but the broker’s commission is still paid by the tenant. As of July 1st, the party who first commissioned the broker will be responsible for paying the commission. This means that if the real-estate agent is commissioned by the landlord, the broker can only claim the commission from the landlord and not from the tenant.

The tenant is only responsible for paying the brokerage fee if a brokerage contract has been concluded between them and the broker and an apartment is brokered for which a brokerage has not previously been commissioned (by the landlord).

This applies to rental apartments both within and outside the scope of the Austrian Tenancy Act (MRG), which also includes single-family and two-family houses. Since the law does not refer to the main residence, it is also applicable to secondary residences.

Excluded from this regulation, however, are commercial rental spaces, lease agreements, purchase agreements and company-provided apartments (as part of an employment relationship).

However, this regulation does not rule out the commonly practiced dual agency by real-estate agents. Since the buyer’s principle only concerns the payment of commissions, free-of-charge brokerage agreements can still be concluded between the tenant and the broker.

Are there any ways to circumvent this?

Even in cases where the initial commissioning of the broker comes from the tenant seeking a property, the law provides for various grounds for excluding the tenant’s obligation to pay the commission in order to rule out any possibility of circumvention.

Excluded is, for example, when the landlord and real-estate agent have a close economic relationship with each other, as this typically involves particular risks of circumvention (for example, a shareholding, a business entanglement or any significant possibility of influence by the broker).

Moreover, the tenant is not obliged to pay a commission even if the landlord refrains from concluding a brokerage agreement to make the tenant the initial client (and thus the party liable for the commission). The explanatory notes state that “there must be at least some form of cooperation between the landlord and the respective broker” in order to speak of a “refraining from concluding the contract” at all. Anyone who concludes from this that the tenant has to prove the intentional refraining from the conclusion of the contract (which may be difficult to demonstrate in practice), may indeed be correct – however, the tenant is also not liable for the commission if they are the initial client of the broker, but the broker advertises an apartment for rent with the landlord’s consent – because the landlord’s consent does not necessarily require a concluded brokerage agreement.

Furthermore, any other payment or service by the tenant to the broker or landlord is inadmissible insofar as it is aimed at passing on the commission to the tenant or partially compensating the tenant. However, it remains to be seen whether this will lead to landlords (unlawfully) disguising the broker’s commission within a higher rental fee.

Lastly, in the future, real-estate agents must record every brokerage agreement concerning a residential lease in writing, including the date. If the broker claims the commission from the tenant, they must provide evidence that the tenant was the initial client and that none of the grounds for excluding the commission apply.

These new regulations cannot be deviated from – by virtue of statutory order – even to the disfavor of the person seeking housing.

Can the tenant still make claims against the broker?

If the broker fails to inform the tenant properly, the tenant may, under certain circumstances, be able to threaten the landlord with nullifying the contract, warranty or reimbursement of frustrated expenses.

However, the explanatory notes make it clear that the broker is to be regarded as the landlord’s negotiating assistant, which is why a business error relating to the object of the contract (“Geschäftsirrtum”) caused by the broker also entitles the tenant to challenge the rental agreement. In addition, direct liability of the broker may also arise from section 1300 of the Austrian General Civil Code (ABGB) – i.e., if the broker provides expert advice or information to the tenant.

Is there a penalty provision for violating the buyer’s principle?

Provided that there is not already an administrative offense under section 27 (5) of the Austrian Tenancy Act (MRG), the law provides for administrative penalties of up to EUR 3,600 against both the real-estate agent and the landlord.

Our experts Daniela Huemer and Roman Büchel from the Real Estate Law Team will be happy to answer any further questions you may have on this topic.

Disclaimer

This article is for general information only and does not replace legal advice. Haslinger / Nagele Rechtsanwälte GmbH assumes no liability for the content and correctness of this article.

 

22. June 2023

 

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