Bestellerprinzip and Mietpreisbremse: Germany’s tenancy law reforms, the Grand Coalition’s Mietrechtsnovellierungsgesetz (MietNovG), came into force on 01.06.2015 and brought a number of major changes, and a major dose of uncertainty, with them.
We’ve already looked at one of the biggest reforms, the Mietpreisbremse, which has given local authorities the power to impose rental controls in neighbourhoods with “overheated” housing markets.
The second major reform, and one that is starting to attract as much, if not more, press and media coverage than the Mietpreisbremse is the newly introduced Bestellerprinzip. Read on to find out about the intentions behind the new law and the impact it is already having on tenants (Mieter), landlords (Vermieter) and lettings agents (Makler).
He who pays the piper calls the tune…
Up until the latest reforms were introduced it was a tenant who typically ended up footing the bill for the lettings agent’s commission (Maklercourtage). The fact that agents have always typically been commissioned by landlords to advertise their vacant apartments, organise viewings, screen tenants, etc., wasn’t enough to prevent the bill for their services landing in the tenant’s letterbox. Depending on the location and size of the apartment, this could amount to a good few thousand euro. As specified in Germany’s apartment letting law (Wohnungsvermittlungsgesetz), an agent can charge a maximum of two net rents, which are referred to as Kaltmieten (literally “cold rents”), i.e. the apartment’s monthly rent, excluding utilities and shared costs, plus sales tax (Mehrwertsteuer) of 19%. This left tenants with considerable up-front costs—alongside the commission payment they would also have to pay their security deposit (Kaution), which amounted to a further three net rents, plus the other costs associated with moving home. Unsurprisingly, a lot of people pointed out that the system was unfair and eventually their complaints were heard by Angela Merkel’s coalition government.
Clear intentions, clearer warnings
The Bestellerprinzip fundamentally changes this arrangement and enshrines in law the principle that whoever appoints the lettings agent is responsible for paying the agent’s commission. Sounds fair enough, you might think. In any case, whatever extra costs the landlord is subject to will just be added to the tenant’s rent and spread over a number of years, won’t they? This is how you would expect it to play out, but with Mietpreisbremse rent controls introduced at the same time, landlords won’t always have this option to recoup the additional costs.
The government was warned and lobbied (and then warned and lobbied some more) against introducing this reform. Lettings agents predicted that their businesses could collapse as a result of landlords deciding to find their own tenants. Agents also warned that tenants would suffer as many landlords are simply unable to offer the same high standards of service. It has been calculated that a lettings agent spends between 25-30 hours successfully marketing an apartment (including phone calls, placing ads, attending viewings, meeting prospective tenants, etc.) It’s probably unrealistic to expect a landlord to be able to devote that amount of time to the same task.
Viewings will become less convenient for potential tenants—telephone calls will go unanswered—tenants will have to do a lot more work themselves. These were common warnings made by agents and their trade associations. Unfortunately for the lettings agents, most Germans had nothing against landlords having to foot this bill, so there was little support to be found among the general public.
What people describe as “black sheep” within the profession probably didn’t help much, either. It’s difficult to support (or even have sympathy for) lettings agents when so many people have a less than positive impression of them.
I might as well do it myself then…
The initial reaction of some landlords to the Bestellerprinzip was to seriously consider whether the job of a lettings agent was something they could do themselves. Many landlords have longstanding professional relationships with specific lettings agents, so may not have had to think about this for long. But, given the number who are trying to get by without an agent, it is clear that some landlords weren’t necessarily convinced of the value of a service they would now have to pay a few thousand euros for. After all, with all of the websites that have sprung up over the years to help tenants find apartments (and sellers find buyers), how difficult can it be? Only time will really tell, and there are probably quite a few lettings agents across Germany at the moment hoping that their clients don’t take too long to realise just how much they need their tried and trusted agents.
Take it or leave it
It has certainly been interesting to read about some of the creative (although still illegal) methods that landlords and lettings agents have cooked up in an attempt to make sure that the final bill still lands with the tenant. There have been tales of unjustifiable rent increases, fixed-term leases and extra payments demanded from new tenants. There have been articles discussing the legality of small print in contracts that turn the tenant into the commissioning party, despite a pre-existing agreement between landlord and lettings agent. In some cases, especially where demand for apartments far outstrips supply, prospective tenants have reportedly been told that the only way they will get the apartment they want is if they pay the commission.
Clear problems with Germany’s Bestellerprinzip
The reformed law makes life very difficult for lettings agents:
- agents will only be able to offer an apartment to a prospective tenants if it has never been advertised anywhere else or offered to another prospective tenant (otherwise no exclusive commission could exist). A major problem with this is the simple fact that the average tenant has viewed eight apartments before they find the right one. An agent would be left with seven apartments that cannot be offered to anyone else.
- agents will only be able to serve potential tenants once the tenant has signed a contract with them. In the past it wasn’t necessary to have a written contract, a verbal agreement was enough.
- agents commissions were often split between tenant and landlord in regions with balanced supply and demand (or an over-supply). This will no longer be possible as the letting agent can only be commissioned by one party, so either the landlord will pay the full commission or the tenant will
It is going to be interesting to see how all of this develops. If you have experienced either the positive or negative effects of Bestellerprinzip, feel free to let us know in the comments section below.