The time has finally come: The “broker commission according to the Bestellerprinzip [= meaning whoever hires the agent is responsible for paying the agent’s commission]”, which was included in the government programme of the current coalition, is available as a draft law. After going through a 6-week review phase, the new Broker Act is to be applied from 2023. This means that tenants will no longer have to pay brokerage fees from 2023. Simply put. The law and its effects are still being intensively discussed.
According to Justice Minister Alma Zadic (Green Party), this is the core of the law and the purpose of the “Bestellerprinzip”. This has resulted in consequences that in some cases make for gloomy forecasts for the sector and are highly polarising. However, the real estate sector is likely to face a paradigm shift.
The background to the draft law is the intention to reduce the burden on tenant-seekers. This means that if a property owner puts a property on the market for rent and commissions agents to find suitable tenants, these services will no longer be paid for by the tenant but by the landlord – the one who “orders” the service.
What may seem to be a fair regulation at first glance, however, contains pitfalls that those familiar with the real estate business warn against, backed up by the experiences from Germany, where a similar principle has been in effect since 2015 and has been implemented there for the most part. The aforementioned review phase is a result of the experiences in Germany; the intention in Austria is to avoid vagueness.
This question can be answered differently at first, depending on one’s point of view. For a tenant, it is of course gratifying to be able to save the real estate agent’s commission on the not insignificant burdens that arise when looking for a flat and moving in. This is also the idea of the law, to relieve (supposedly) lower-income market participants. But, as one hears warning voices both from the Arbeiterkammer [Chamber of Labour] and above all from representatives of the real estate business, there would be consequences here that would be drastic for the market as such and at the end of the day cause more harm than good. Why might that be?
The real estate market currently consists of about two-thirds rental apartments. The commissions are paid by the rent seekers. The market volume is correspondingly high, and real estate platforms depend on it just as much as jobs in the entire real estate industry. If we take a look at Germany, the Bestellerprinzip could primarily mean that landlords will in future award contracts “privately”, which gives rise to fears of a less transparent and serious approach to the awarding process. The principle of “who knows whom and what do I have to offer (creditworthiness!)” is applied with a very large potential for crowding out.
A further consequence would be that tenants, in order to find an adequate rental property, would now commission real estate agents themselves to search for properties that are not officially available for rent. In Germany, it can be observed that the principle leads to all kinds of circumvention tactics, which are not exactly conducive to transparency and professionalism in the real estate market. At least an increase in rents induced by the law in force since 2015 has not been observed in Germany.
After more than half a decade, real estate agents in Germany are now seeing the market calm down: Landlords are (once again) increasingly accepting brokerage services based on the experience of the private allocation efforts, and the predicted and feared slump in the rental business has thus failed to materialise.
One would have to be clairvoyant to be able to formulate a conclusion on the consequences of a draft law that is currently being examined. All warning voices are to be taken just as seriously as the arguments of the proponents. It can be assumed that there will be neither “only losers”, as representatives of the Wirtschaftskammer [Austrian Economic Chambers] warn, nor that the law will easily serve the idea of relieving tenants. The application will show whether and where improvements could be made; one can be sure that the law’s implementation and its consequences will be closely observed and analysed. However, an extinction of the brokerage profession is not to be feared; professional services will still have their justification and correspondingly strong demand. “The announcement of the so-called ‘Bestellerprinzip’ with regard to real estate agent fees for tenants is a step in the right direction,” says Georg Niedermühlbichler, President of the Mietervereinigung [Tenants’ Association] of Austria. As everywhere, practice and experience will show the rest.