What Are the New Limits on Estate Agency Commissions?
A little over a month ago, the Constitutional Court published its long-awaited decision on the fate of the Slovenian statutory framework that caps the maximum commission an estate agency may charge. The key question was whether the applicants would convince the Court that this cap constitutes an unjustified restriction of free economic initiative, or whether consumer-protection considerations would prevail. We reveal all below.
The cap on estate agents’ earnings has been a point of contention ever since its introduction in 2003. For more than twenty years, Slovenian legislation capped the commission payable in the purchase or sale of real estate with a contractual value of at least 10,000 EUR. In such transactions, the maximum commission permitted was 4% of the purchase (or sale) price. Until recently, this cap applied without exception, regardless of the type of property (residential or commercial) or the type of client (consumer, an individual, or a legal entity). Estate agents’ dissatisfaction deepened with the 2019 amendment to the Real Estate Agencies Act (Zakon o nepremičninskem posredovanju, ZNPosr), which introduced a similar cap to agency services relating to the rental of real estate. The only difference was that the 4% limit was applied to the product of the monthly rent and the number of months of the lease, but the commission could not exceed the equivalent of one month’s rent.
Several real estate companies, together with the National Council, initiated proceedings before the Constitutional Court, seeking a constitutional review of Article 5 ZNPosr. They argued that the provision was incompatible with the Slovenian Constitution, the European Convention on Human Rights, the Charter of Fundamental Rights of the European Union, and Directive 2006/123/EC on services in the internal market. They contended, in particular, that the legislator had failed to demonstrate any public interest served by restricting estate agents’ constitutional rights – most notably, the freedom of economic initiative. They also argued that the commission cap did nothing to increase the supply of rental housing; on the contrary, the number of available units had allegedly declined. Finally, they maintained that the cap was set so low that, in practice, real estate agencies – especially in short-term rental cases – were unable to cover their operating costs from the permitted commission.
The Constitutional Court addressed the initiative in two stages. First, in a partial decision issued on 26 October 2023, it annulled the first and second paragraphs of Article 5 ZNPosr insofar as they applied to transactions not involving the estate agency services for residential property provided to individuals. The Court recognised that, in relationships unrelated to natural persons or residential real estate, the public interest had not been convincingly demonstrated and the statutory limitation was disproportionately strict. As for the cap on commission in all remaining cases, the Constitutional Court adopted a separate order referring a request for a preliminary ruling from the Court of Justice of the European Union (CJEU), seeking clarification on whether the surviving parts of ZNPosr were incompatible with EU law.
In its judgment of February 2025, the CJEU explained that EU law (in particular Directive 2006/123/EC) permits Member States to set limits on commission rates for services, provided that the measure satisfies the following three conditions:
– it must be non-discriminatory with respect to an individual’s nationality or a legal entity’s place of establishment;
– it must be justified by overriding reasons relating to the public interest;
– it must be suitable for attaining the stated objectives and must not go beyond what is necessary to achieve them.
The CJEU examined each of these criteria and ultimately advised that EU law does not, in principle, preclude the limitation of commissions. However, it directed the Constitutional Court to assess, in the specific Slovenian context, whether the national regime genuinely meets all EU law requirements, in particular those relating to suitability and proportionality. Guided by the CJEU’s reasoning, the Constitutional Court reassessed the issue and first found that the contested regulation, even in transactions involving individuals, constituted an interference with estate agents’ constitutional freedom of economic initiative. Although the Court recognised that the interference pursued a legitimate public-interest objective and was capable of contributing to that objective, it held that the measure was not necessary to achieve it. It also found that the statutory regime was far from essential even for ensuring price transparency: comparable or even better results could have been achieved through mandatory disclosure of commission amounts to consumers or through the publication of guidance on customary estate agency fees.
Accordingly, the Constitutional Court annulled the entirety of the first, second, sixth, and seventh paragraphs of Article 5 ZNPosr, as well as parts of the fourth and fifth paragraphs. As a consequence, the only remaining limitation on remuneration for estate agent services in Slovenia is found in the third paragraph of Article 5 ZNPosr, which prohibits real estate agencies from charging fees to a party that did not engage their services (typically the buyer or the tenant).
The Court’s decision is a relatively rare example in Slovenian constitutional practice where the freedom of economic initiative was given precedence over the protection of the public interest. However, given that the decision was reached by a narrow majority of five votes to four, it should not be seen as signalling a broader shift toward a more market-liberal approach in the Court’s future jurisprudence. As the reasoning makes clear, the outcome could easily have been different had the legislator made even a minimal effort to provide evidence supporting the proportionality or necessity of the annulled framework.
