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 |  Dr. Dieter Jasper, LL.M.

Watch out when buying second-hand real estate!

Property purchase contracts for second-hand real estate can be treacherous for some buyers. Often these contracts contain widely known clauses according to which the seller declares that he is not aware of any invisible defects. Later, however, such defects turn out to exist. What can the buyer do then? Does he withdraw from the contract? Does he declare a rescission of the purchase contract on the grounds of fraudulent misrepresentation? In both cases, there is much to be said for a legal dispute.

In a judgement confirming the previous case law, the Federal Court of Justice (Bundesgerichtshof) (judgement of 6 March 2020, ref. V ZR 2/19; confirmation of the judgement of the Federal Court of Justice of 30 April 2003, ref. V ZR 100/02, NJW 2003, 2380) held that such a declaration by the seller does not justify a deviation from the principle that the buyer bears the burden of presentation and proof for the omitted disclosure of circumstances subject to disclosure.

Eine Umkehr der Beweislast findet nicht statt.

Such a declaration - according to the Federal Court of Justice - has no evidentiary value with regard to the explanation claimed by the seller. If this clarification has taken place, it is obvious that the seller no longer assumed an "invisible" defect. In this respect, the buyer cannot refer to the completeness and correctness of the contract deed. This is because - according to the BGH - it only extends to the complete and correct reproduction of the agreement made. On the other hand, it does not apply to the information provided during viewings and contract negotiations; these do not require the notarial agreement and therefore do not participate in the presumption of the completeness and correctness of the notarial deed (cf. Senate, Judgment of 15 July 2011, V ZR 171/10, VersR 2012, 452, marginal no. 17 to that extent not reprinted in BGHZ 190, 272; Judgment of 13 June 2008 - V ZR 114/07, NJW 2008, 2852 marginal no. 17; Judgment of 30 April 2003 - V ZR 100/02, NJW 2003, 2380, 2382).

According to the Federal Court of Justice (BGH), the contents of the purchase contract can only be indicative of the buyer's obligation to prove that he was not provided with certain information by the seller prior to the conclusion of the contract (cf. Senate, judgement of 15 July 2011 - V ZR 171/10, loc.cit.; judgement of 30 April 2003, V ZR 100/02, loc.cit.).

What does this ruling mean for practice?

In notarial contracts on the purchase of second-hand real estate, knowledge and disclaimer clauses are common, in particular that - as here - the seller is not aware of invisible defects. If the buyer later wants to withdraw from the purchase contract, he bears the burden of proof and explanation for the omitted disclosure of circumstances subject to disclosure (approval situation of the property, etc.).

Since these clauses can be found in almost every property purchase contract for second-hand real estate, the buyer has no choice but to put the object of purchase through its paces (due diligence) before concluding the purchase contract. Real estate professionals have been doing this for years. The private buyer is therefore also well advised to carry out the exact examination of the subject matter of the contract himself and with the help of architects or engineers and lawyers. If the buyer does not want to incur these costs - which are, however, very well invested - it is strongly recommended that all inspections, visits, explanations, negotiations etc. be recorded in detail, if necessary have these records countersigned by the contracting party before the conclusion of the purchase contract, and that they be attached to the property purchase contract. Otherwise, the buyer - as in the case of the Federal Supreme Court - is threatened with the dilemma of being burdened with presenting and proving the failure to clarify circumstances that must be disclosed. In practice, the buyer will usually not be able to overcome these high hurdles and will lose a lawsuit.

Düsseldorf, the 13 January 2021

Author: Dr. Dieter Jasper

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