Anyone acquiring a plot of land must have the purchase agreement notarized. The same applies to the conclusion of a property development contract, in which the buyer acquires a plot of land from the seller and the seller also undertakes to build on the plot of land in the contractually agreed manner. A contract concluded merely under private law (informally), without compliance with the notarial form, is void in these cases. On the other hand, those who wish to build on their own land do not have to have the building contract with the builder certified by the notary. Rather, an informally concluded construction contract is sufficient.
In practice, however, it happens that a builder buys a plot of land from a seller, which is then to be built on by a building contractor, and the two contracts, which at first glance appear to be completely independent of each other, are nevertheless closely "connected". This "connection" may, for example, consist in the fact that there is a personal or economic link between the seller of the land and the building contractor, and the provider of the building contract has at least a decisive influence on the execution of the purchase contract. In this case, the question arises as to whether the otherwise form-free construction contract must also be notarized and what the legal consequences are if the construction contract is not notarized.
Berlin Appellate Court,Judgment of February 09, 2021 (Case No. 21 U 126/19)
In its current decision of February 9, 2021 (file number 21 U 126/19), the Berlin Appellate Court (Kammergericht Berlin, KG) has explained when a construction contract is so closely connected with a land purchase contract that even the construction contract, which is in itself form-free, must be compulsorily notarized before the notary in order to be effective.
The plaintiff had sold a co-ownership share in his property to the defendant by notarized purchase agreement and had a priority notice of conveyance entered in favor of the defendant. Condominiums of several purchasers were to be built on this property. For this purpose, the defendant concluded a private contract (construction management contract) with a company that was also to provide planning and monitoring services for other purchasers of the future building. Construction work on the property was started. However, the parties got into a dispute and the plaintiff demanded the cancellation of the priority notice of conveyance, while the defendant demanded the transfer of the co-ownership share in the land register to him.
The KG ruled in favour of the plaintiff. It is of the opinion that the privately written building supervision contract is so closely connected to the land purchase contract that it should also have been notarised. Both contracts form a legal unit. The purchase contract was to "stand or fall" with the building supervision contract. According to the will of both parties, neither of the contracts could stand alone - in isolation. The lack of notarisation has the consequence that the building supervision contract is ineffective (void). With the further consequence that the land purchase contract cannot develop any validity either. The invalidity of the construction contract affects the purchase contract.
For the KG, the building supervision contract depended on the purchase contract. The defendant only acquired a co-ownership share from the plaintiff and was also only a part of the overall construction measure of all purchasers on this plot of land. He could not decide on its use on his own, but the construction was fixed by the content of the numerous construction contracts of all purchasers in total. The defendant could not "divert" the building supervision contract to another plot of land separately from the land purchase contract. The services under the building supervision contract could only be rendered on the sold property.
And the purchase contract is also (legally) dependent on the building supervision contract. The defendant cannot do anything with the acquisition of a co-ownership share in a plot of land that has already been built on by the other purchasers according to their building supervision contracts. Rather, the defendant only wanted to acquire the co-ownership share because he - together with the other purchasers - wanted the development planned and already started on it. The specifications from the building supervision contract are inseparably linked to the land purchase contract.
If, in practice, a (future) builder has two different contractual partners when acquiring a plot of land and concluding a building contract, and if there are indications that both contracts are to stand or fall with each other because, according to the will of the parties, neither of the two contracts can exist in isolation without the other, the acquirer should definitely have a lawyer check whether the two contracts do not form a legal unit within the meaning of case law. As a rule - for reasons of time or cost, for example - the building contract will not be notarised. However, if there is actually a legal unity between the two contracts, this omission is fatal for the builder. The lack of notarisation of the building contract affects the land purchase contract and renders it ineffective (void). In this case, the builder has not concluded a valid contract. From his point of view, this is certainly an undesirable result, which in case of doubt can only be "repaired" by spending time and money.
Or the builder-owner exploits such a constellation and its legal consequence - the nullity of both contracts - in the completely opposite direction in order to be able to subsequently disengage from undesirable contracts. We will be happy to advise you in such cases.
Düsseldorf, 26 March 2021
Author: Axel Kötteritzsch
