Online formation of a GmbH via video conference with the notary possible from 1 August 2022!
In June 2021, the German Bundestag passed the Act Implementing the Digitalisation Directive (Gesetz zur Umsetzung der Digitalisierungsrichtlinie - hereinafter abbreviated "DiRUG"). The DiRUG, which was approved by the Bundesrat and promulgated in the Federal Law Gazette in August 2021, contains provisions enabling the online formation of limited liability companies (Gesellschaften mit beschränkter Haftung - GmbH) and certain online commercial register applications, which will enter into force on 1 August 2022. An overview of these new regulations is provided below.
I. Current legal situation
According to the current legal situation, the formation of a GmbH requires the physical appearance of the founding shareholders and the managing director(s) or their authorised representative(s) before the notary. A face-to-face procedure is currently also used for all commercial register applications.
The effective establishment of a GmbH first requires the conclusion of the articles of association in notarial form and thus its notarisation (notarielle Beurkundung). According to current law, for an effective notarial recording the deed of incorporation (the articles of association are usually an annex to this document) must be read out to the parties involved in the presence of the notary, approved and personally signed by their own hand.
In order for the GmbH to come into existence as a legal entity, it must also be entered in the commercial register (Handelsregister), which requires a corresponding application by all managing directors. This initial and all subsequent applications for entry in the commercial register of the GmbH (e.g. in the case of amendments to the articles of association and changes of managing directors) always require public certification (öffentliche Beglaubigung) in order to be effective, for which the execution or acknowledgement of the signature(s) in the presence of the notary is required under the current notarisation law. The same requirement currently exists for commercial register applications of registered sole traders (eingetragene Kaufleute - e.K.), commercial companies (e.g. stock corporations [Aktiengesellschaften – AG], limited partnerships [Kommanditgesellschaften - KG] and general partnerships [offene Handelsgesellschaften – oHG]) and branch offices (Zweigniederlassungen) registered in the commercial register.
As an alternative to these traditional face-to-face procedures, DiRUG will make it possible for the first time, within the framework and under the conditions of newly created online procedures, to carry out notarizations and certifications without the physical presence of the parties involved before the notary. The mandatory participation of notaries in the new digital forms of procedure is intended to ensure that they, as "guardians of private autonomy", can continue to fulfil their special care and advisory function in the future.
II. Online formation permitted from 1 August 2022
In deviation from the current legal situation described above, with the entry into force of the DiRUG from 1 August 2022 certain GmbH formations will be completely digitally permissible and possible by way of a notarial online notarisation procedure, so that the physical presence of the parties involved before the notarising notary will no longer be necessary.
1. Companies covered
For the time being, online notarisations will be limited to the formation of a GmbH (incl. its special form of the entrepreneurial company with limited liability (Unternehmergesellschaft (haftungsbeschränkt)). The online formation of other corporations (AG, KGaA), on the other hand, is not envisaged at the present time.
2. Restriction to the formation of GmbHs
The notarial online notarisation procedure is only open for the formation of a GmbH (i.e. notarial recording of the articles of association as well as the shareholder resolutions passed in the course of formation). Conversely, this means that subsequent measures within the GmbH that require notarisation (e.g. amendment of the articles of association, change of legal form, merger and dissolution) must still be notarised in the traditional face-to-face procedure. The same applies to the disposal of shares in a GmbH (e.g. sale and pledging of shares).
3. Restriction to cash incorporations
The admissibility of the online notarisation procedure is additionally restricted by the fact that it only covers so-called cash foundations (Bargründungen), i.e. where the nominal amounts of the shares of all founding shareholders are to be provided exclusively in cash (i.e. without contributions in kind [Sacheinlagen]). Foundations in kind (Sachgründungen), on the other hand, are excluded from the scope of the notarial online formation procedure.
4. Online model protocol formation
For the online formation of a GmbH it is also possible to make use of two additional model protocols made available by the legislator (model protocols for the formation of a one-person or multi-person company). In contrast to the existing model protocols for the (cost-privileged) simplified formation procedure, there is no limitation to three founding shareholders and one managing director for the (none-cost-privileged) online model protocol formation. Furthermore, there is an abstract rule of representation according to which if one managing director is appointed, he alone represents the company and if several managing directors are appointed, the company is represented by two managing directors together or by one managing director together with an authorised signatory (Prokurist).
5. Online commercial register application
The entry of the company in the commercial register, which is mandatory for the effective formation of a GmbH, can in future be carried out on the basis of a commercial register application of all managing directors using a notarial online certification procedure by means of video communication (see section III.).
6. Details of the online notarisation procedure
a) Video communication system of the Federal Chamber of Notaries
Online notarisation takes place by means of a real-time video conference between the notary and the parties involved. The Federal Chamber of Notaries (Bundesnotarkammer) will set up and operate a secure, manipulation-resistant and reliable video communication system for this purpose. Online notarisation via other video communication systems is not permitted under notarisation law.
b) Identification of the parties involved
A prerequisite for the use of the video communication system is the secure identification of the parties involved using a two-stage procedure.
In a first step, an electronic identification is carried out by means of an electronic proof of identity (eID), which can be provided by a German identity card with eID function (for German nationals), an eID card (for nationals of other EU/EEA member states) as well as an electronic residence permit with eID function (for nationals of third countries). German or foreign passports or ID cards of third countries (e.g. Switzerland, the United Kingdom or the USA) are not suitable means of identification in the sense of the first identification level.
Alternatively, parties involved may also identify themselves by means of an electronic means of identification issued by another EU member state if it has been certified and recognised for the purposes of cross-border authentication in accordance with Regulation (EU) No 910/2014 (eIDAS Regulation) within the framework of a corresponding notification procedure of the respective Member State and complies with the highest security level ("high") of the eIDAS Regulation.
In a second step, the notary has to compare the appearance of each party involved with their electronically transmitted photograph, unless the respective party is personally known to the notary. Before this, the photo is read from the chip of an NFC-enabled identity card or passport. The readout process is technically carried out by the video communication system (see lit. a), whereby the parties involved can use a standard smartphone with an app provided free of charge by the Federal Chamber of Notaries for the procedure as a readout device. The so-called video-ident procedure, in which an identification document is filmed by webcam for the transmission of a photograph affixed to it, is not an option for identification purposes.
c) Electronic record
As part of the notarisation of the negotiation carried out by means of video communication, the notary creates an electronic record of the negotiation instead of a document in paper form as in the traditional face-to-face procedure. This is a purely electronic document and not a paper document produced with EDP support.
In the online notarisation procedure, the notary is subject to the same duties as in the face-to-face procedure, in particular the duty to conduct the proceedings, including reading out the electronic record, to identify the parties involved and to establish their legal capacity. The other provisions on the notarial record also apply, including the provisions on the duty to verify and instruct.
The electronic record shall also be sent electronically to the parties involved for review prior to approval upon request.
d) Electronic signing of the deed of incorporation and the list of shareholders
Since a personal signature is not possible in the context of the online notarisation procedure, the electronic record must be provided with the qualified electronic signatures of the notary and all other persons who are involved in the notarisation and whose signatures are required under the German Notarisation Act (Beurkundungsgesetz). The generation of the qualified electronic (remote) signature(s) and the provision of the electronic deed with this/these signature(s) shall in turn take place via the video communication system of the Federal Chamber of Notaries (see lit. a). The notary will sign the electronic record himself using his signature card.
The list of shareholders that must be submitted to the commercial register on the occasion of the formation of the GmbH can in future also be provided by the managing director(s) with a qualified electronic signature, so that the (external) managing directors do not have to physically appear before the notary either.
e) Possibility of a "mixed notarisation”
The so-called mixed notarisation will also be permitted, whereby some of the parties involved participate in the notarisation digitally via video conference, while the other parties involved are physically present at the notary's office. In this case, in addition to the electronic record with the physically present parties involved, a record with the same content must be recorded in paper form in accordance with the current regulations of the notarisation law. However, the electronic and physical records must only be read out to the parties involved once in total by the notary.
III. Online commercial register applications permitted from 1 August 2022
From 1 August 2022, the DiRUG will also open up the possibility of submitting certain commercial register applications completely online by means of video communication, so that here too the physical presence of the persons making the application (e.g. managing directors of GmbH) before the certifying notary will no longer be necessary. A notarial online certification procedure will make it possible to publicly certify declarations drawn up in electronic form.
1. Scope
The scope of online certifications will initially be limited to applications for entry in the commercial register, so that applications for registration in other public registers (registers of associations, cooperatives and partnerships) will continue to be subject to the traditional notarial presence procedure.
This only includes applications for entry in the commercial register by (i) sole traders, (ii) for corporations (limited to GmbH, AG and KGaA) and (iii) for branches of domestic corporations (such as ii) or of foreign corporations governed by the law of another EU member state or EEA signatory state.
Applications for registration in the commercial register for commercial partnerships (limited partnerships [Kommanditgesellschaften - KG] and general partnerships [offene Handelsgesellschaften - oHG]) can thus not be made by way of notarial online certification, which means that the provisions on the commercial register application of a GmbH & Co. KG (KG) and its general partner (GmbH) will diverge in future.
After the Federal Government's draft DiRUG still provided for opening up the notarial online certification procedure to cooperatives (Genossenschaften) as well, the inclusion of cooperatives in the scope of this procedure was finally deleted on the recommendation of the Bundestag's legal committee.
2. Details of the online certification procedure
In legal terms, online certification is the public certification of a qualified electronic signature. From a procedural point of view, the procedure largely corresponds to the notarial online notarisation procedure outlined above. The video communication system of the Federal Chamber of Notaries must also be used for the online certification procedure and the two-stage identification provided for therein must be carried out (see II. 6.).
Upon request by the notary, an electronic document containing the declaration to be certified is provided by the party/parties involved with a qualified electronic signature assigned by the system, which is then recognised by means of video communication. The online certification is therefore based on the recognition of the signature by the party or parties involved. This is again a remote signature using the system of the Federal Chamber of Notaries (access via its free app), so that the parties involved neither need a physical signature card nor the software or hardware required to read such a card. For the online certification of a qualified electronic signature, the notary creates a simple electronic certificate.
IV. Costs of notarisation and certification in the notarial online procedure
In addition to the notarial fees stipulated in the German Law on Court and Notarial Costs (Gerichts- und Notarkostengesetz) for the notarial recording of the incorporation deed or the certification of commercial register applications, there is a flat fee for the use of the video communication system of the Federal Chamber of Notaries. This amounts to EUR 25.00 for the notarisation procedure and EUR 8.00 for the certification procedure. However, if several qualified electronic signatures are certified in a single certification certificate, the aforementioned flat fee is incurred only once.
Smart and to the point.
DSC Legal is a notary’s office and law firm located at the Brandenburg Gate in Berlin.
Our experienced notaries and lawyers are specialised in providing comprehensive legal advice and support to domestic and foreign clients and principals in connection with real estate transactions, project developments, the creation of condominium property as well as the establishment, acquisition or sale and operation of companies.
Advising on issues relating to corporate law and tenancy law is one of the core areas of our legal practice.
As of 1 August 2022, our notaries will also be available for online notarizations of limited liability company formations and online certifications of commercial register applications (regarding sole traders, GmbHs, AGs, KGaAs and branch offices of corporations) within the scope of their competence.
Berlin's "rent cap" is void from the beginning, what next?
In its decision of 25 March 2021 (2 BvF 1/20, 2 BvL 5/20, 2 BvL 4/20), the Federal Constitutional Court (Bundesverfassungsgericht) declared the Law on Rent Limitations in the Housing Sector in Berlin (Gesetz zur Mietenbegrenzung im Wohnungswesen in Berlin - hereinafter abbreviated "MietenWoG Bln") to be incompatible with the German Constitution (Grundgesetz) and therefore void.
The MietenWoG Bln (also known as “Mietendeckel” - "rent cap") came into force on 23 February 2020. Since then, the rents of approximately 1.5 million flats built before 2014 in Berlin had been frozen at the level of 18 July 2019. However, according to the aforementioned decision of the Federal Constitutional Court, the Land of Berlin exceeded its legislative competence by enacting the MietenWoG Bln. This was because the regulations on rent levels for privately financed housing, as part of the social tenancy law, fell within the concurrent legislative competence pursuant to Article 74 (1) no. 1 of the German Constitution. Since the Federal Government had conclusively made use of its concurrent legislative competence to regulate the amount of rent for privately financed housing with Secs. 556 to 561 of the German Civil Code (BGB), the Land of Berlin had not been authorised to regulate rent law from the outset due to the blocking effect of federal law (Article 72 (1) of the German Constitution). The MietenWoG Bln was thus formally unconstitutional and to be regarded as ineffective from the beginning.
What are the legal consequences for landlords and tenants?
The decision of the Federal Constitutional Court means that landlords can now, on the one hand, again demand the agreed higher rent and, on the other hand, if necessary, also demand an additional payment of the difference from the tenants. This is particularly the case if a permissible rent was effectively agreed between the parties in the period between 18 June 2019 and 22 February 2020, which was however lowered when the second stage of the rent cap came into force on 23 November 2020.
The landlord is entitled to an additional payment in particular if he waived part of the rent under the condition of the effectiveness of the MietenWoG Bln. In principle, this should also apply to agreed "shadow rents". A "shadow rent" is a rent that was not to be paid for the time being, but for which it was agreed at the same time, in the event of the invalidity of the MietenWoG Bln, that the difference between the rent permitted under the MietenWoG Bln and the contractually agreed rent must be paid in arrears by the tenant. In legal literature, however, such agreements are occasionally regarded as rent increases, the effectiveness of which is therefore dependent on compliance with the legal requirements for rent increases (Sec. 557 para. 4 of the German Civil Code). The Federal Constitutional Court had indicated in a prior decision (BVerfG, decision of 10 March 2020 - 1 BvQ 15/20) that landlords had not been prevented "from being promised a higher rent for new leases in the event that the law or parts thereof were unconstitutional". So far, however, the civil courts have not yet (legally) ruled on this legal question, so that for the time being there remain residual doubts about the lawful agreement of "shadow rents" in the case of new or re-letting and any claims for additional payments by landlords could possibly be considered unfounded in court. The landlord is also entitled to an additional payment if the tenant has agreed to a rent increase in the event that the MietenWoG Bln is ineffective. On the other hand, the landlord should not be entitled to an additional payment if he reduced the rent solely on the basis of the "rent cap" - unconditionally - and there was no indication whatsoever for the tenant that he should have expected an additional payment of a differential rent.
Furthermore, the invalidity of the MietenWoG Bln means for the landlords that since the pronouncement of the decision of the Federal Constitutional Court, they can again increase rents up to the amount of the local comparable rent or increase an agreed index-linked or graduated rent.
What are the possible courses of action for landlords and tenants?
As a result of the retroactive invalidity of the MietenWoG Bln, landlords can demand that tenants pay the difference by setting a deadline, provided that the parties had contractually agreed on a permissible rent amount or rent increase. If the tenant is obliged to pay the difference in arrears but is unwilling/unable to do so, the landlord may terminate the lease without notice if the rent is at least two months in arrears pursuant to Sec. 543 para. 2 sent. 1 no. 3 of the German Civil Code. Irrespective of this prerequisite for termination without notice, the landlord may terminate the tenancy agreement in accordance with Sec. 573 of the German Civil Code if the rent arrears exceed one month's rent and the period of arrears exceeds one month (Federal Court of Justice (BGH), decision of 10 October 2012 - VIII ZR 107/12). In addition, he can increase the agreed rent up to the amount of the local comparable rent. When renting out new flats, the landlord should ensure that the permissible rent as a rule (exceptions apply according to Sec. § 556f of the German Civil Code, e.g. for the first-time use and letting of new buildings and the first-time letting after comprehensive modernisation) may not be more than 10% above the local comparative rent (Sec. 556d of the German Civil Code), which he can take from the (qualified) Berlin rent index (Sec. 558d of the German Civil Code). However, the 2019 Berlin rent index should only be valid until the end of May 2021 (Sec. 558c para. 3 of the German Civil Code).
Insofar as the tenant has an obligation to pay the difference in arrears and the immediate payment of the difference results from the contractual agreement or other declarations of the parties, it would be advisable for tenants to pay the difference to the landlord even without a prior request for payment by the landlord. If it can be determined that the agreed rent exceeds the limit of the comparable rent customary in the locality, the tenant may reject the landlord's demand for payment of the higher rent or for payment of the difference in arrears. In case of doubt about the validity of the contractual agreement on the rent amount or the lawfulness of the demand for payment in arrears, the tenant has the option to pay the difference amounts demanded by the landlord subject to the reservation of reclaiming them in order, on the one hand, to be able to assert a possible claim for repayment and, on the other hand, to avoid a threatened termination without notice due to default in payment (Sec. 543 para. 2 sent. 1 no. 3 of the German Civil Code).
Irrespective of the rent cap, which has now been declared void, the federal regulations on rent law (Secs. 556 to 561 of the German Civil Code), especially those on the so-called "rent price brake" (“Mietpreisbremse”) pursuant to Secs. 556d to 556g of the German Civil Code), as well as the local rent index, provided it is not out of date (Sec. 558c para. 3 of the German Civil Code), continue to apply. Whether and to what extent the tenant is obliged to pay rent in arrears or whether the difference can be claimed retroactively requires a careful examination of the individual case.
Smart and to the point.
DSC Legal is a notary’s office and law firm located at Brandenburg Gate in Berlin.
Our experienced notaries and lawyers are specialised in providing comprehensive legal advice and support to domestic and foreign clients and principals in connection with real estate transactions, project developments, the creation of condominium property as well as the establishment, acquisition or sale and operation of companies.
Advising on issues relating to real estate law and tenancy law is one of the core areas of our legal practice.
The information in this newsletter cannot and is not intended to replace in-depth legal advice under comprehensive examination of the respective individual case. Our experts will be happy to advise you on your legal options and represent you with outstanding professional competence and extensive experience in enforcing your claims out of court and in court.
The Condominium Modernisation Act
With the introduction of the German Condominium Modernisation Act (Wohnungseigentumsmodernisierungsgesetz - WEMoG) on 1 December 2020, the regulations concerning condominium ownership will be amended. The following is a summary of the main changes and their effects on the practice of condominium owners' associations and their management.
- Separate ownership of open spaces
Up to now, it has not been possible to establish separate ownership of outdoor parking spaces and other open spaces (e.g. terraces, garden areas). In this respect, legal practice has made use of the establishment of rights of exclusive use or rental solutions. The Condominium Modernisation Act now introduces the separate ownership of such areas. This has the advantage that, for example, outdoor parking spaces and garden areas of which separate ownership is established can be sold and encumbered separately. This increases legal certainty and flexibility in legal structuring. - Facilitation of building measures
Until now, structural changes to common ownership have required the consent of all affected condominium owners. The law intends to privilege building measures for the installation of charging facilities for electrically powered vehicles, barrier reduction, burglary protection and fibre-optic connections by granting each condominium owner a legal right to these measures. The condominium owners' association has a say in how the measure is implemented. The costs are to be borne by the beneficiary condominium owner.
In addition, structural measures can now be decided by a simple majority of votes, provided that no fundamental reorganisation takes place and the individual condominium owner is not unreasonably disadvantaged by the building measure. - Clear powers of representation and extended tasks of the property manager
It is expressly regulated that the condominium owners' association is represented in and out of court by the administrator. However, when concluding a property purchase or loan agreement, the administrator requires a resolution of the condominium owners. If the condominium owners' association does not have an administrator, it is represented jointly by the condominium owners. The power of representation cannot be limited vis-à-vis third parties.
Up to now, administrators often required a resolution of the condominium owners for measures, which from an objective point of view did not require a decision by the condominium owners, unless the administration agreement granted more extensive powers. The Condominium Modernisation Act clarifies that the administrator is entitled and obliged to take measures of proper management, which (i) are of minor importance and do not lead to substantial obligations or (ii) are necessary to meet a deadline or to avert a disadvantage. - Simplification of accounts, introduction of an asset report
The legal requirements for business plans and annual accounts are simplified. The figures on which these are based are only to be prepared by the administrator in advance, but are not the subject of a resolution. This is intended to prevent legal disputes over figures that do not affect the payment obligations of the respective condominium owner.
A new feature is the right of condominium owners to receive an annual property report to be drawn up by the administrator. The property report must include the main assets of the condominium owners' association (receivables, liabilities, other assets).
The Condominium Modernisation Act simplifies tenant management to the extent that the operating costs can now also be apportioned to tenants according to the settlement standard applicable between the condominium owners. This saves the need for time-consuming and error-prone conversions when preparing an operating cost statement for rented condominiums. - Feed for digitisation
Of particular importance during the ongoing corona pandemic is that the law allows online participation in meetings of condominium owners. The condominium owners can resolve to do so, whereby text form (i.e. also by e-mail) will be sufficient for circular resolutions in the future.
Smart and to the point.
DSC Legal specialises in legal advice and notarial support for M&A and real estate transactions, construction and architectural law, banking and financing law, the law concerning start-ups and venture capital as well as IP / IT law.
Advice on issues in the field of real estate law is one of the core areas of our legal practice.
The information in this newsletter cannot and is not intended to replace detailed legal advice based on a comprehensive examination of the individual case. Our experts will be pleased to advise you on your legal options and represent you with outstanding professional competence and extensive experience in the enforcement of your claims both in and out of court.
10 years of DSC Legal – A festive afternoon to mark the anniversary of our law firm
On 31 August 2010, the first e-mail from DSC Legal was sent from the 8th floor of the high-rise building at Kurfürstendamm 207-208 in Berlin-Charlottenburg. On 31 August 2020, we were now able to celebrate the 10th anniversary of our law firm.
We look back on a decade full of interesting events and exciting moments, which is characterised by a considerable number of often very demanding legal mandates, usually involving advice on real estate and corporate transactions as well as real estate project developments. We regularly work on numerous mandates containing a foreign connection together with partner law firms from all over the world, with whom we are a member of the world's largest network of consultants, IR Global, with over 1,000 law firms around the globe. With IR Global, we also associate a large number of business and often friendly contacts as well as the participation in unique conferences all over the world. We also fondly remember the numerous events held at DSC Legal, which left lasting impressions.
The regular recognition of our legal work in the law firm studies carried out by the Federal German Association of In-house Counsels (Bundesverband der Unternehmensjuristen e.V.) found a particularly pleasing highlight in 2018: DSC Legal defended 1st place in the national overall ranking for the real estate sector and was voted “leading law firm in the real estate industry” (“Führende Kanzlei Immobilienwirtschaft”). In the same year our law firm moved to the DZ Bank building at Pariser Platz in the heart of Berlin (next to Brandenburg Gate).
In addition to our activities as lawyers, the notarial practice in particular has gained considerably in importance in these ten years, with thousands of notarizations for national and international parties in the fields of real estate and corporate law. Notarial services have therefore been one of the main pillars of DSC Legal's activity for many years.
Our thanks go to all our clients and parties involved, both nationally and internationally, who have always placed their trust and appreciation in our expertise. We would also like to thank our great team, which delivers outstanding performance day after day.
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New draft bill: Brokerage fees will be split in the future!
On May 14, 2020, the German Bundestag (Federal Parliament) approved the Federal Government's draft bill on the distribution of brokerage fees when brokering sale and purchase agreements for apartments and single-family homes. According to the bill, the buyer will in future pay a maximum of 50 percent of the total brokerage fees for the purchase of real estate.
What is new and when do these new regulations become effective?
The following new regulations are to be introduced into the German Civil Code (Bürgerliches Gesetzbuch – BGB) (§§ 656 a to 656 d BGB):
- Brokerage agreements for apartments and single-family homes require text form to be effective (e.g. via email).
- The new regulations on the distribution of brokerage fees only apply to consumers.
- If the broker acts on behalf of both the buyer and the seller based on two brokerage agreements, the broker can only demand commission from both parties in equal parts. If, on the other hand, only one party has made the decision to engage a broker, this party is obliged to pay the brokerage fee. Agreements with the aim of imposing these fees on the other party are only effective if the fees passed on amount to a maximum of 50 percent of the total brokerage fees. Moreover, the buyer does not have to pay his/her share until the seller has provided proof of payment.
- Additionally, the term „Mäkler“ for broker in the meaning of the German Civil Code was changed to the more modern term “Makler”.
Unless the German Bundesrat (Federal Council) raises objections, the new regulations shall become effective six months after their promulgation - presumably in mid/end December 2020 or January 2021. They shall apply to brokerage agreements concluded after the bill has become effective. This transitional period should enable brokers to adapt their business practices to the new legal situation.
What types of brokerage clauses are commonly included in sale and purchase agreements?
So-called declarative clauses, which merely clarify that the sale and purchase agreement was concluded through the services of a broker, are considered unobjectionable in terms of notarial professional law and notarisation law. These clauses do not constitute a material legal claim for payment by the broker. They serve only for the purpose of proof. Furthermore, they do not trigger any additional costs.
In addition, a so-called transfer agreement can be considered, which is also unobjectionable in terms of notarial professional and notarisation law. This option applies if the parties wish to transfer an existing obligation for payment of broker fees from one party to the other as part of the performance or consideration. The purpose of this clause is to fulfil the obligation to pay the broker's commission by one of the parties, without this constituting an independent claim of the broker. Such a clause requires notarisation, as it is in this respect an agreement between the parties concerning the costs to be borne. It is also conceivable that the broker's fee is imposed on one of the parties by way of an assumption of the contract or debt or on the basis of an abstract acknowledgement of debt (with submission to immediate enforcement).
So far controversial are broker clauses designed as a contract for the benefit of third parties in the sense of § 328 German Civil Code, according to which an independent claim in favour of one of the contracting parties and/or the broker is directly established, irrespective of whether the broker is actually entitled to it. As a rule, this constitutive broker clause establishes an independent claim of the broker against the buyer which leads to an increase of notary and court costs.
What effects do these new regulations have on notarial practice?
In previous practice, brokers have tried to secure their commission claims for brokering purchase agreement for apartments, real property or development agreements by including a constitutive brokerage clause in the notarial sale and purchase agreement.
Even if the inclusion of a constructive brokerage clause does not usually correspond to the actual will of the buyer, this constitutive brokerage clause is nevertheless still used in notarial practice. This is because in most cases the buyer is put under pressure if he believes that he cannot purchase the property without accepting this brokerage clause. Whether and to what extent this so-called constitutive broker clause is effective has been disputed for decades.
In its ruling of November 24, 2014, the Federal Court of Justice (Bundesgerichtshof - BGH) addressed the official duties of a notary in the case of notarisation of such a clause, and the Federal Chamber of Notaries (Bundesnotarkammer) has issued a circular letter to each regional chamber of notaries and their members urging them to handle these clauses with utmost care. When including a constitutive broker clause, the notary should always carefully consider whether the inclusion of such a clause is at all necessary and required and how this clause should be legally structured. If there are no objective reasons, e.g. a concrete threat of pre-emption, the inclusion of a constitutive clause at the unilateral request of the broker against the will of the parties is not advisable.
Due to the obligation of neutrality of notaries and taking into account the interests of the contracting parties, a constitutive brokerage clause should not be included as a regular case in the notarial contract. It is possible for the broker to secure his/her commission claim in other ways, e.g. by concluding a written brokerage agreement.
Taking into account the new draft bill, it can be summarised that such a broker clause will only be effective in the future, if the contracting parties who have appointed a broker by mutual agreement are obliged to pay at least the same amount of commission. If, on the other hand, only one party (either the seller or the buyer) has commissioned the broker, that party alone must pay the broker's commission. Agreements with the aim of imposing the brokerage fees on another party are only effective if the costs passed on amount to a maximum of 50 percent of the total brokerage fees.
If the buyer acts within the scope of a commercial activity, the distribution of the brokerage fees can also be agreed upon otherwise. The inclusion of such clauses always requires careful examination, especially with regard to their legal effectiveness.
Smart and to the point.
DSC Legal focuses on rendering legal advice and providing notary services with respect to M&A, real estate transactions, startup & venture capital, IP/IT, banking & finance and property construction.
Advising on transaction law issues forms a core component of our legal practice.
The information in this newsletter cannot and should not replace in-depth legal advice under extensive examination of the individual case. Our law experts will be delighted to advise you on your legal options and represent you with their outstanding professional competence and extensive experience in the extrajudicial and judicial enforcement of your claims.
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