Summary:

I.

The statutory arrangements introduced in the Act to Curb the Increase in Rents in Overheated Housing Markets and to Strengthen the Bestellerprinzip in the Facilitation of Residential Tenancy Agreements (Tenancy Law Amendment Act) on 21 April 2015 oblige the party who engages the letting agent to pay the agent’s commission for facilitating the tenancy agreement (Bestellerprinzip). Agreements obliging flat seekers to pay commission which is owed by the landlord or a third party are invalid, too. Violations render letting agents liable to fines of up to EUR 25,000. This amendment largely deprives agents of the receipt of commission from prospective tenants.

The complainants 1) and 2) are estate agents and with their constitutional complaint they are essentially complaining of a violation of their freedom of occupation under Art. 12.1 of the Basic Law. Complainant 3) is the tenant of a flat and is essentially complaining of the violation of his freedom of contract as protected by Art. 2.1 of the Basic Law.

II.

The First Senate of the Federal Constitutional Court decided that these arrangements satisfy constitutional requirements. The legislature balances the conflicting interests of flat seekers and letting agents in a way which meets proportionality requirements.

The Court decided as follows:

The constitutional complaint by complainant 3) is inadmissible. The constitutional complaint by complainants 1) and 2) is admissible but unfounded.

1. Complainants 1) and 2) may raise their constitutional complaint against the statutory provisions directly because, as estate agents, they are directly affected by the amendment of the law. Without any special executing act being required in that respect, they now may no longer demand commission from flat seekers within what was used to be a common form of a contractual structure that can be designed freely with regard to its form and content.

2. While it is true that the challenged provisions restrict the freedom of occupation (Art. 12.1 of the Basic Law) of complainants 1) and 2), this is constitutionally justified.

a) In order to counter social or economic imbalances, the legislature may restrict by mandatory statutory law the freedom, protected under Art. 12.1 of the Basic Law, to agree a fee for professional services in individual contracts. As with other private law provisions which place limits on the freedom to make contractual arrangements, this is a matter of balancing interests so as to bring the freedom of one party into harmony with the freedom of the other party. The legislature has a wide margin of assessment and leeway to design such a balance.

b) The statutory implementation of the Bestellerprinzip satisfies the constitutional requirements. It brings the opposing interests into a balance which satisfies proportionality requirements, and is in particular in line with the legislature’s powers to shape matters with regard to the social state. It has clearly established in a transparent way that social and economic imbalances exist in the market for rented accommodation to the detriment of flat seekers, and has created arrangements intended to bring about a reasonable and appropriate balance, also in terms of the social state.

The challenged provisions bring about a reasonable and appropriate balance between conflicting interests. Letting agents are not compelled to make fundamental changes to their commercial activities and offerings and can continue to be active in this field of business, since it is still possible for them to be engaged to facilitate residential tenancy agreements subject to commission.

The interests of complainants 1) and 2) in the free exercise of their profession, which is protected as a fundamental right, collides with the equally legitimate interests of flat seekers. The statutory implementation of the Bestellerprinzip is intended to remove obstacles for flat seekers in renting flats. The aim is to avoid overburdening flat seekers, especially those who are in an economically weak position. This, and protection against disadvantages due to the demand situation in the housing market, moreover justifies including, on the flat seekers’ side of the scales, considerations reflecting the social state principle (Art. 20.1 and Art. 28.1 of the Basic Law in the balance of interests.

Taking into consideration the wide margin of assessment and leeway to design available here to the legislature, the aim of creating a reasonable and appropriate balance is not missed. The legislature is taking account of an imbalance arising due to demand for rented accommodation outstripping scarce supply. In this regard, it has addressed the burdening of flat seekers with a not inconsiderable cost factor that results from letting agents’ commissions and created arrangements allocating these costs to the landlords, since it is they in whose interests such expenditure is typically incurred. Its decision to choose to do this by limiting the contractual possibilities available to letting agents and thus their freedom of occupation is within the wide leeway to design afforded to the legislature.

3. There is no indication that the introduction of the Bestellerprinzip violates other fundamental rights. In particular, complainants 1) and 2) have not put forward any property rights position which would come under the protection of Art. 14 of the Basic Law.

4. Nor is the freedom of occupation of complainants 1) and 2) violated by the requirement which was introduced at the same time and according to which facilitation agreements for residential tenancy agreements should be concluded in writing (§ 2.1.2 of the Law Regulating the Facilitation of Residential Tenancies). This text form requirement serves the legitimate purpose of reliably informing the parties of the content and legal implications of their declarations and thus promotes legal certainty and legal clarity. The text form is not only suitable and necessary but also appropriate for achieving this purpose.