Germany Update: (Commercial) Real Estate Agents Beware! Increase in (Subsequent) Declarations of Revocation!

Recently, we have been encountering an increasing number of cases characterised by the search for legal backdoors and, at least in part, by legal subtleties. One example is the issue of proper cancellation instructions when concluding brokerage contracts. The consumer right of withdrawal, which many associate only with housing brokerage, is equally relevant in real estate sales. The right of revocation always arises when the broker contracts with a consumer. This can sometimes involve commission payments in the range of EUR 100,000.00 and more – for example, in the purchase of high-priced residential real estate or even in the purchase of apartment buildings that the buyer also wants to live in.

Scope of Application of the Right of Withdrawal

The statutory right of withdrawal for a consumer always exists when an entrepreneur concludes a contract to which a consumer is also a party. Consumers are (only) natural persons who do not carry out a legal transaction predominantly for commercial purposes or in the context of self-employment.

In most cases, the brokerage contract is then concluded within the framework of a so-called “distance selling transaction”, i.e. with the exclusive use of means of distance communication, for example via a real estate portal, by e-mail or telephone. The brokerage contract is created, for example, by the broker sending an exposé to the interested party and the interested party then requesting a viewing appointment. If, on the other hand, an interested party appears on the premises of a real estate agency, there is no right of revocation.

If there is a right of withdrawal, the consumer must be duly instructed by the broker about this.

Strict Formal Requirements for the Cancellation Policy

The legal requirements for the cancellation policy that the broker must provide to the consumer are high.

Again and again, it happens that brokers adapt the model cancellation policy pre-formulated by the legislator editorially or even in terms of content, fill it out incompletely or even do without it completely. This can be an expensive mistake.

Without a correct cancellation policy, the contract can be revoked for one year and fourteen days

If the cancellation policy deviates from the legal model and this deviation can lead to the consumer being prevented from exercising their right of withdrawal, this results in the invalidity of the cancellation policy (the courts apply a strict standard under general terms and conditions here), so that the consumer can revoke the corresponding contract within a maximum period of one year and 14 days.

In the Event of Revocation, the Remuneration Obligations Cease to Apply; a Commission Paid Must Even be Repaid

The consequences of a revocation are sometimes fatal for a broker. If they have not properly instructed the consumer and have not made up for the instruction in the meantime (start of a new 14-day period), the broker loses their commission claim. This applies even if they have already provided the brokerage service in full. And it goes even further: A commission that has already been paid can be reclaimed by the consumer afterwards.

Practical Tip

(Commercial) Real estate agents should put their business processes and, above all, their general terms and conditions to the test and ensure in advance that they properly instruct customers who are consumers, especially in the case of distance selling transactions, about the legal right of withdrawal. Otherwise, there may be a risk of dangerous and costly discussions, which can be easily avoided by clean drafting of the contract.

This article was first published in ImmobilienReport Metropolregion Rhein-Neckar, issue 186https://immobilienreport-rhein-neckar.de/ausgaben/Ausgabe186.pdf.

By MELCHERS, Germany, a Transatlantic Law International Affiliated Firm.

For further information or for any assistance please contact germany@transatlanticlaw.com

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