About one million German citizens have had junk real estate sold to them. A typical trick of the agents was and is partly until today to present the property as “bank-approved”.
The customer pays an “appraisal fee” in the loan agreement. Thus, the buyer gets a false idea of the corresponding value of the property. The old “banker’s rule” that only 50 to 60 percent of the value of the property is financed proves to be a deception: in the case of junk real estate, the market value is only a fraction of what the bank lent as “generous total financing”. Hundreds of lawsuits, some of them up to the Federal Supreme Court, had led to the fact that in narrow exceptional cases (BGH judgements of 26.09.2006, file no. XI ZR 283/03 and of 16.05.2006, file no. XI ZR 6/04) a reversal became possible. Now several higher regional courts (OLG) have taken the banks into liability: Reversal! The OLG Nuremberg (Az. 12 U 104/05 of 29.12.2005) wrote the deplored large bank into the Stammbuch that the obviously gesch?nte rent height in the mediator sample calculation and the self information of their customer is to be cleared up. This resulted from an “institutional cooperation” between the bank and the sales department or the seller – but also from the bank’s knowledge of public data, such as the municipal collection of purchase prices or the rent index. In the decided case the buyers had been pretended an over 45 per cent inflated rent – the mediators had been equipped also with bank forms continuously. The buyers had been fraudulently deceived, because the embellished rental amount gave the impression of an economically favourable purchase transaction: the opposite had been the case, as it were below the eyes of the bank employees. The OLG Celle (file no. 16 U 5/06 of 13.02.2006) went one step further and sentenced the credit institution for “intentional immoral damage”. This was due to systematic, deliberately inflated fair value determinations in the lending business. The OLG disapproved of the fact that the buyers had not been informed about the dangers of an interest rate increase with only a five-year fixed interest rate period – and that the periods for built-in advance loans and twelve-year building society savings contracts were disadvantageous for the buyer/borrower. There were also significant cost components in the agent calculation had been concealed for example homeowner and rental pool administrator fees. Particularly serious was the fact that the purchasers were made to believe that the monthly charges were “optically” low and that the purchase transaction appeared to be economically advantageous because the purchase price included an interest subsidy in favour of the bank. In the case decided, neither the risks of a rental pool nor the high two-digit internal commission had been explained. In this case, too, the buyers had been fraudulently deceived by incorrect information – the bank had a knowledge advantage. The market values of the properties had been systematically and deliberately overestimated by the bank by 40 percent. What the agents liked to convey as an “all-round carefree package” or a “carefree and stress-free package” led to over-indebtedness for many buyer families. In the case of the OLG Celle, the bank had also had a share in the seller’s profits. In other cases, employees may be suspected of personal enrichment. These principles are also applicable to the acquisition of real estate funds that have become worthless in the meantime: Here, too, some credit institutions are not afraid to lead their customers up the garden path again after the loss has become known. Customers are then offered, for example, a “comparison” that is favourable only for the bank. It is therefore advisable not to be fooled a second time.
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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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