*by Johannes Fiala, lawyer (Munich), MBA Financial Services (Univ.Wales), MM (Univ.), certified financial and investment advisor (A.F.A.), banker (www.fiala.de)
Tax savings for every German citizen: For many decades, the state has promoted so-called “tax-saving models” – in reality, these were often only ways of shifting taxes into the future. Resourceful initiators then sold or brokered capital investments together with distributors without significant equity capital. Many a politician became known because he was connected to one or the other party (e.g. via a consultancy contract).
The investors without their own capital then typically got into a (project-wise?) over-indebtedness situation as a result of such tax-saving models, especially junk real estate. The investors did not realize that ?their? real estates were worth only approximately one third of that, which financed the bank as total expenditure by way of a credit. Because the real estates were sold as ?bank-examined? ? in the loan agreement also a ?valuation fee? was usually expressly expelled as price component of the credit. From an overcharging of 89%, the BGH assumes usury in the purchase contract.
A further investor deception was regularly found in the fact that the model only paid off in the first year ? just by the tax savings. For the loss-rich subsequent years, when interest and repayment were no longer covered by the rental income, the capital investors received no or at best embellished sample calculations from the broker.
The ?victims of worthless investments? range from simple construction workers to lawyers, doctors, tax consultants and notaries. As an example, the president of the Bavarian Yacht Club, a notary from Munich, was removed from office – after his Bavarian bank filed for insolvency. In the end, only the bank had done the math.
Capital investors without protection by valuation fee: Because the valuation fee is treated as a component of the price, the loan customer has little chance of obtaining a copy of the property valuation from the bank. Thus the customer cannot prove then also before court that the bank had a ?concrete knowledge projection? Thus the bank is protected before the adhesion due to an clearing-up and/or Beratungspflichtverletzung. Thanks to the lawyers ?
If one counts to the scrap real estates not only dwellings, but also participation in a real estate KG or -GbR (so-called closed participation) so retrospectively several million Federal citizens feel cheated around your money. Intervention by the prosecutor is rare ? more often the referral to legal action.
Revocation of the credit agreement economically senseless: With judgement of 09.04.2002 (Az XI ZR 91/99) the BGH had already decided, what the EuGH had given ? the revocation is possible for an unlimited period of time, provided that no revocation instruction has been given. In the law it stands until today differently inside, §§ 312, 355 BGB.
With the revocation, the loan immediately becomes due for repayment in full, including the usual market interest for the past, as the BGH now clarifies once again: Thus the consumer rights run with dwellings as scrap real estates practically empty, because on the often unsaleable real estate the capital investor remains seated. The ?small change? to pay the bank immediately the complete loan together with usual interest, does not possess the typical scrap real estate investor ? it had already acquired from the outset its personal tax savings model evenly mostly ?without own capital funds?
The dispute between the ECJ and the BGH apparently continues: The normal case in the credit-financed purchase of movable goods (e.g. a washing machine) is reversal. Then, in the event of defects, the object of purchase is returned to the seller and the consumer is reimbursed interest and repayment by the bank. As soon as a mortgage or land charge is involved, the legal situation changes completely according to the BGH.
The ECJ has not only corrected the German legislator in the case of doorstep selling, because the right of withdrawal is so important according to the ECJ’s interpretation of the EC Directives that there is in principle no time limit for it.
Furthermore, the ECJ has expressed that the consumer or investor is to be protected ‘from the risks of a credit-financed capital investment’. This is apparently not entirely in line with the BGH: Thus, the BGH denies a liability for damages of the bank due to omitted revocation instruction of a bank towards the consumer.
According to the BGH, anyone who has concluded a junk property purchase contract before signing the loan agreement is probably no longer worthy of protection. Because after the purchase of the junk real estate, a revocation instruction of the bank had not been able to protect the consumer any longer. Whether the requirements of the ECJ on consumer protection have thus been sufficiently implemented by the BGH will possibly have to be decided by the ECJ.
Calming pills from the lawyer? The mass of cases was probably concluded in practice according to this order (first the purchase of the property, then the signature under the loan agreement). Thousands investors, who waited for up to 10 years with lawyers ?in the waiting loop? in vain for positive judgements against the credit economy, must determine today that their requirements are in particular against the mediators concerned mostly long since statute-barred.
New possibility of redemption due to the BGH ruling: Especially for those cases in which the junk real estate seller or agent has worked together with a bank in an “institutionalised” manner, a bank liability due to an advantage of knowledge comes into question. Hangers are bad-cunning deceptions by incorrect data of mediators, salesmen, initiators and/or in folders. The BGH presumes a fraudulent misrepresentation if the seller or intermediary had also offered the financing and the incorrectness of the false statements (of the seller or fund initiator, intermediary, fund or sales prospectus) is so ?evident? that it is obvious that the bank had closed its mind to this fraudulent misrepresentation.
Practical solutions: The clever people concerned have long since noticed that they had neglected to consult a tax adviser, a legal adviser and an architect for the economic evaluation before concluding the contracts. As a solution often only the reorganization remains, if necessary and more rarely a private insolvency, and for make independent ones a rescue company. To live the ?principle of hope? instead, and to achieve almost nothing in court, with lawsuits ?up to the Last Judgement?, is for those affected in practice usually more a belief in ?hope newsletters?; in fact more wishful thinking and ?belief in late justice? than practical rehabilitation in the personal individual case. The solution is to rehabilitate the problematic investment promptly and finally.
Further information can be found here: Bundesgerichtshof – Mitteilung der Pressestelle (No. 73/2006): click here Bundesgerichtshof – Mitteilung der Pressestelle (No. 77/2006): click here Bayer. State Ministry of Justice (statutory regulations on the revocation of doorstep selling, Oct. 2005): click here
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About the author
Dr. Johannes FialaPhD, MBA, MM
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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