To this day, banks enforce against their clients for unprofitable tax saving schemes in the real estate sector:
The European Court of Justice is called upon to help consumers enforce their rights. Many aggrieved investors often do not know that most claims for damages become time-barred at the end of the year.
In the last 20 years approximately one million German citizens were involved in ruinous real estate business: Structured sales organizations sell up to now as it were at the front door and at the place of work alleged real estate tax saving models, which often count themselves only for the salesmen and mediators.
Many real estate buyers were promised unrealistic increases in value, which did not materialize. The basis was mostly incorrect financial calculations, according to which the property pays for itself. The promised rental income was usually much too high. The vast majority of a tax saving was no longer available in the second year after the purchase. In addition, there were often construction defects, an agent who suddenly “moved unknown”, and usually after a few months already the bankruptcy of a rent guarantor. Dubious trustees and intermediaries helped ensnare the citizen in a bundle of contracts.
Protection from being caught off guard:
Real estate investors feel tempted to speculate on a credit basis. This is all the more true if the agent has prepared and initiated all contracts at the home of the real estate buyer. The Doorstep Selling Act is intended to protect the consumer here. After ? 312 a BGB, the right of revocation also applies if a real estate loan has been taken out for financing purposes.
This applies accordingly if the investment is in a so-called closed-end real estate fund.
German judicial scandal in old cases:
While the Federal Court of Justice (BGH) and the federal legislator are preparing to curtail the rights of consumers (cf. LG Bochum, ref. 1 O 795/02), the European Court of Justice (ECJ, ref. C-481/99) and the European Commission (ref. C-350/03, SS 02.12.2003) are standing up for consumer rights.
The federal legislator limits “contrary to EU law” the right of withdrawal in § 355 BGB to the detriment of the consumer. The Federal Court of Justice (BGH) (ruling 12.11.2002) allows the right of revocation to “effectively run dry” by granting the bank the right to demand immediate repayment of the loan after revocation:
This leaves the real estate buyer “sitting” on the apartment or the remaining debt. He would be at the mercy of the bank’s execution without protection if other regional or higher regional courts did not oppose it.
It would be a scoundrel to think evil of it: after all, at least one major bank would probably fall into insolvency if consumers were protected by the applicable law in such a way that they would ultimately be able to get out of all contracts without any damage. This is exactly what the EU Commission demands (Art.5 II EuRili 85/577).
Danger in default: the new statute of limitations:
A partially renewed law of obligations has been in force in the Federal Republic of Germany since 1.1.2002. According to its transitional provisions, numerous claims for damages no longer become statute-barred after 30 years but on 31.12.2004 at the latest.
In such cases, due to the large number of related contracts (with bank, seller, trustee, rental guarantor, agent, financial intermediary, investment advisor, etc.), there are a plethora of claims that may become time-barred at the end of the year.
Hundreds of those affected have organised themselves into “interest groups”, finance alleged model lawsuits, hope for a class action, or wait until their own file is processed for once: But all this is of little help against the statute of limitations. If you allow little to happen in your own personal case, you must expect forfeiture to occur beforehand. This means the legal and economic loss of the compensation.
What to do ?
In individual cases, appropriate measures should be taken to avoid forfeiture as well as the occurrence of the statute of limitations. In addition, there is not only the option of going to court, but often primarily an out-of-court restructuring. The basis must always be the individual case, because German procedural law knows neither a “model lawsuit” nor a “class action” according to the American model. Anyone who hopes that another injured party will be the “forerunner” and will have gone through all the instances with his case in good time may be in for a nasty surprise on 31.12.2004: By then, most of their claims would be time-barred.
The European Commission has asked the European Court of Justice for an early decision: But consumers who wait until their personal case is dealt with may forfeit their rights simply by failing to act.
by Johannes Fiala, lawyer
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About the author
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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