What sellers point out when buying a property and what information buyers have to gather themselves is controversial. Now Germany’s highest civil court is deciding on this.
In the dispute over real estate sellers’ obligations to provide information about possible renovation costs, for example, the Federal Court of Justice (BGH) wants to announce a decision today (9:00 a.m.).
At the oral hearing in Karlsruhe at the end of June, it was indicated that the sellers could face stricter requirements. Specifically, it’s about a case from Hanover. According to the real estate association Germany IVD, the decision is generally relevant for all purchase investigations.
The Celle Higher Regional Court saw responsibility primarily with the buyer. However, the fifth civil senate at the BGH questioned this. The presiding judge Bettina Brückner said that in principle everyone is responsible for obtaining the necessary information. However, details need to be checked. The court in Celle may have to hear the matter again. (Af. V ZR 77/22)
Point of contention: high maintenance costs
A company had bought several commercial units in a large building complex – the Ihme Center in the Linden district – for more than 1.5 million euros. She feels that she was fraudulently deceived because she found out too late that she could incur high costs for maintaining the shared property.
The seller had placed the minutes of an important owners’ meeting in a digital data room three days before the contract was signed. From the plaintiff’s point of view, this happened “secretly” and was therefore “foisted on” her.
Up to 50 million euros were estimated for the work. Because the majority owner didn’t want to pay, the case ended up in court. The process ended at the beginning of 2020 with a settlement according to which the owners of the commercial units were to pay a special levy. The plaintiff then challenged the purchase agreement.
In this, the seller assured, among other things, that, with one exception, no special levies had been decided. It also said that the seller had given the buyer minutes of the owners’ meetings of the past three years and that the buyer knew the content of the documents.
The BGH is examining the case
The seller’s BGH lawyer said that the buyer knew the text of the contract eleven days before it was signed. If she then doesn’t ask any questions, that would be “very much a fault of her own.” The buyer must carefully look at what information he needs and has. The buyer’s BGH lawyer was of the opinion that the seller had to provide a comprehensive picture in a data room from the outset. If something is added, he must point it out.
The BGH is likely to comment on which perspective is correct. According to Brückner, it could also make a difference whether the documents are intended as expert reports in which one specifically looks for defects or should be sent to a bank for financing questions.
According to the real estate association IVD, a purchase investigation – also known as due diligence – practically always takes place. “Before making a purchase, every buyer checks whether the property meets expectations,” the IVD’s deputy federal managing director, Christian Osthus, explained at the time. As a rule, this is not done in an organized manner or through third parties. “This is actually only the case in larger transactions or when it is the buyer’s practice.”