Under German real estate law, the seller is required to disclose a variety of information to the buyer before the sale is concluded. As recently as September 15, 2023, these obligations have become more demanding thanks to Germany’s Federal Supreme Court – the Bundesgerichtshof (BGH) (case ref.: V ZR 77/22).
Real estate law recognizes various kinds of defects that can affect a property. When it comes to hidden defects, the seller is obliged to inform the buyer. If defects show up after the property has already been sold, it is a good idea to involve an attorney who has expertise in this field. The team of legal experts at MTR Legal Rechtsanwälte advises buyers and sellers alike on how best to proceed in these instances.
The recent ruling delivered by the BGH places greater demands on those selling real estate in terms of their precontractual disclosure obligations, with the court clearly stating that the seller has not discharged their obligations by simply granting the buyer access to a data room filled with documents and information pertaining to the property. This is because the seller cannot assume that the buyer will actually become aware of facts and circumstances that are the subject of disclosure obligations by having access to the data room. While the court acknowledged that German real estate law does assume that a buyer will recognize easily identifiable defects when inspecting a property, this situation cannot be equated with making documents available in a data room, according to the BGH. As such, the seller ought to have informed the buyer about any defects and pending renovation costs.
The plaintiff had acquired multiple units in a commercial building complex for around 1.5 million euros. The fact that the owners of the units were expected to make a one-time payment to cover the costs of upcoming renovation work was something the plaintiff was unaware of. They were also unaware that the costs associated with this work had the potential to add up to as much as 50 million euros. It was not until shortly before the purchase agreement was concluded that related documents were made available in a virtual data room by the seller and were no longer noticed by the buyer.
The BGH has since ruled that the seller failed to comply with their precontractual disclosure obligations.
The decision may have far-reaching implications for real estate transactions. Both buyers and sellers are well advised to consult a lawyer specializing in this area. He or she will be able to carry out a due diligence review and highlight any hidden costs and risks.
The team at MTR Legal Rechtsanwälte advises on all aspects of real estate law.
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