Court opines on the obligation to inform and the fraudulent concealment of material defects in connection with the sale of real estate (case no.: V ZR 43/23)
Anyone looking to sell real estate is obligated to disclose any defects that affect the property. According to a judgment of Germany’s federal supreme court – the “Bundesgerichtshof” (BGH) – from October 27, 2023, this obligation persists even if the contract for the purchase of real estate features an exclusion of warranty (ref.: V ZR 43/23).
German law requires that the seller inform the buyer about any serious defects affecting the property without having to be asked. The seller can protect themselves from the prospect of claims for damages by including an exclusion of warranty in the contract for the sale of the property, though this is only valid for obvious defects that the buyer ought to have been able to identify. This recent ruling of the BGH sees the court intensify property sellers’ obligation to inform, even in cases where an exclusion of warranty has been agreed, explains an expert in real estate law at MTR Legal Rechtsanwälte.
Contractual exclusion of liability for material defects
The plaintiff in the case in question had acquired a plot with a single-family home back in June of 2016, the contract for the purchase of which contained a clause aimed at excluding liability for material defects. The house came with a covered patio, which was mentioned in the estate agent’s brochure. Unfortunately, the roof of the patio was leaking and the seller had failed to inform the buyer about this defect.
Upon discovering the damage, the latter decided to file a lawsuit for around 32,000 euros to cover the costs that had been calculated for the repairs. The lawsuit initially met with only partial success. Despite Bremen’s higher regional court – the Oberlandesgericht (OLG) Bremen – concluding that the leaky patio roof represented a material defect, the court also determined that the contractual exclusion of liability for material defects was valid and effective. According to the OLG Bremen, it could not be established that the seller had fraudulently concealed the material defect.
Fraudulently concealed material defect
The BGH, on the other hand, arrived at a different conclusion. In its reasoning, the court highlighted that the leak in the patio roof constituted a material defect and not just a symptom of a material defect. The Karlsruhe judges found that the seller had concealed the water leaking through the patio roof and had therefore acted fraudulently, even though he was not aware, or only partially aware, of the underlying cause.
The court went on to observe that the buyers had been unable to identify the defect. Although the patio roof had been discussed before the contract was concluded, the seller failed to point out the leak through the roof and had fraudulently concealed the material defect.
The BGH has referred the case back to the OLG Bremen, whose job it is now to determine the scope of the claim for damages.
Real estate law is just one of commercial law firm MTR Legal Rechtsanwälte’s fields of expertise.
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