Non-Competition Clause (Real Estate Agent)

Non-Competition Clause (Real Estate Agents) - A non-competition clause in real estate agency law is a contractual agreement that prohibits a real estate agent from working for competing clients or conducting their own business in the same market segment during or after the termination of a contractual relationship. Such clauses protect the client’s interests and prevent conflicts of interest. Legal admissibility is governed by the German Commercial Code (HGB) and the general principle of freedom of contract.

Legal Basis and Admissibility

For salaried brokers, the statutory non-compete clause under § 60 HGB applies: During the employment relationship, agents may not conduct business in the principal’s line of trade without the employer’s consent-that is, they may neither buy nor sell real estate on their own account nor work for competing brokerage firms.

For self-employed brokers, there is no statutory non-compete clause-contractual agreements are required in this case. A post-contractual non-compete clause for employees is only valid under §§ 74-75d HGB if it:

• was agreed upon in writing
• is limited to a maximum of 2 years after the end of the contract
• provides for reasonable compensation during the non-compete period of at least 50% of the most recent remuneration
• is limited in a reasonable manner in terms of subject matter (only relevant market segments), geographical scope (only the actual area of activity), and duration

If no compensation is provided, the non-compete clause is non-binding for the employee-they may choose whether or not to comply with it. If they do not comply, the right to compensation also lapses.

Non-Competition Clauses in Brokerage Agreements with Clients

The issue of non-competition clauses can also be relevant in brokerage agreements between clients and brokers:

In an exclusive listing agreement, the owner commits to not engaging any other broker-this effectively constitutes a non-competition clause in favor of the appointed broker. In return, under a qualified exclusive listing, the broker has an active marketing obligation: They must list the property on relevant portals, conduct viewings, and provide regular reports. An exclusive listing without a corresponding obligation on the part of the broker is contestable under § 307 BGB as an unreasonable disadvantage to the owner.

Conversely, the client may agree that the broker shall not simultaneously represent the other party (buyer and seller). Since December 2020, dual agency under Section 656c of the German Civil Code (BGB) has been permissible only under strict conditions: The broker must charge both parties an equal commission and disclose their dual agency. The buyer-pays principle in the sales sector (50-50 split of the commission) has exacerbated conflicts of interest in dual agency and made non-compete clauses more relevant.

Conflicts of Interest and Transparency Requirements

Particularly critical are cases in which an agent both represents the seller and advises the buyer, using insider knowledge from one party’s negotiations to the advantage of the other. This can give rise to a claim for damages-regardless of an explicit non-compete clause. We consider it essential that owners and prospective buyers clarify at the outset of the collaboration which interests the broker represents and whether they are acting on behalf of both parties.

The Nuremberg Chamber of Industry and Commerce for Middle Franconia oversees the licensing of real estate agents (Section 34c of the German Trade Regulation Act) and accepts complaints regarding unfair conduct. Property owners who wish to file a complaint about improper dual representation or a violation of a non-compete clause can contact the Chamber of Industry and Commerce directly.

Practical Tip for Property Owners in Nuremberg

We recommend that property owners in Nuremberg ensure transparent contract terms when selecting a real estate agent. Actively ask whether the agent also represents prospective buyers (dual agency), and obtain written confirmation that your interests as the seller take precedence. In the case of a qualified exclusive listing, the real estate agent should document specific performance obligations: professional property listing creation, marketing on relevant portals (ImmoScout24, Immowelt, Immonet), conducting viewings, and providing regular reports on inquiries and feedback.

We always work with clear contractual terms without hidden dual mandates and provide our owner clients with written confirmation of whether and how we will act on behalf of prospective buyers from our database regarding their property.

Frequently Asked Questions

Can my real estate agent work for the buyer at the same time?

Since December 23, 2020, Section 656c of the German Civil Code (BGB) has regulated dual agency: An agent may act on behalf of both parties, but must disclose this and may only charge an equal commission from both parties. In practice, with a standard total commission of 7.14% (including VAT), this means a 50-50 split of 3.57% each. Dual agency becomes problematic when the real estate agent uses insider knowledge from one party’s negotiations to the advantage of the other-in this case, a claim for damages may arise.

How long may a post-contractual non-compete clause last?

According to Sections 74-75d of the German Commercial Code (HGB), a post-contractual non-compete clause for salaried brokers is limited to a maximum of 2 years after the termination of the employment relationship. The statutory provisions do not apply directly to self-employed brokers-here, the general freedom of contract applies within the framework of unconscionability under § 138 BGB. Courts regularly consider non-compete clauses lasting more than 2 years for self-employed brokers to be disproportionate. Geographically, the restriction must be limited to the actual area of activity.

What happens in the event of a breach of a non-compete clause?

In the event of a breach of a valid non-compete clause, the aggrieved party is entitled to damages and may, in urgent cases, obtain a preliminary injunction to immediately stop the anti-competitive activity. Typical contractual penalties range from 5,000 to 25,000 euros per violation. In the case of salaried agents, the employer may also reclaim the compensation paid during the waiting period. An invalid non-compete clause (e.g., one without compensation during the waiting period), however, can be disregarded without consequence.

Can an owner terminate the broker’s exclusive listing agreement due to a breach of non-competition?

If the broker, while under an exclusive listing agreement, actively brokers a comparable property for another owner and thereby harms the interests of the first client, this may constitute good cause for extraordinary termination of the exclusive listing agreement-without the owner being liable for damages. The decisive factor is whether the agent’s conduct has measurably reduced the client’s chances of a successful sale. If you suspect such a breach of duty, we recommend first discussing the matter with the agent and requesting a written statement before taking legal action.

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