House beats share – really?

The Federal Court of Justice (BGH, ruling of 17.06.2016, file no. V ZR 134/15) decided that claims for damages could only begin to lapse if the investor can see, for example through the annual statement of account of the administrator or rental pool, what higher expenses are based on – in contrast to the advertising statements of the seller of scrap real estate. If the seller proposes an annuity loan, he or she must also point out the decreasing tax effect – after all, the interest portion is decreasing. On the other hand, a fixed loan can also be much more expensive after taxes, especially if the property is used by the owner, and can therefore also lead to damages. Can real estate agents then still give “correct” advice?



Sale of real estate: Damages are also included in the price


Anyone interested in capital investments should not bet everything on one horse – it is better to spread the risk. If your own consultant is “only a salesman”, you should not be surprised if only the later analysis of an independent expert or fee consultant reveals any shortcomings. The wise businessman thinks that the profit lies in purchasing: “As a lay investor, you have to ensure that you receive independent expert advice – just as you would with construction financing.

Many real estate buyers complain that loan repayments no longer work with the earlier promise of a life insurance (LV) maturity payment – but the small print said that the “sample calculation” on future surpluses or profits is only non-binding. However, this does not help if it was clearly excessive after a later assessment by an actuarial expert. Then providers and intermediaries or consultants have a real problem. Such financial shortfalls can even lead to auctioning and the destruction of livelihoods, as can be read in the press.

Life insurance policies work for financing – if you understand them


Life insurance policies normally fulfil their function very well: they continue to provide the guaranteed benefits for all current policies in the future and ensure this. One can only hope for surpluses beyond that – these are often presented in more or less optimistic sample calculations. Even after decades, an expert can still show to what extent, according to sample calculations, the customer became a gambler in the casino because non-binding increases in value were presented as safe – i.e. there was a misadvice – or were even unrealistically inflated.

Declining expiration rates have been known for over 12 years


The now – allegedly – surprised customers were informed as early as 2002/2003 about the extent to which the expiration benefits were decreasing. And they were offered solutions: Successive repayment of their previously redemption-free loans or topping up their life insurance policies. Many customers were happy to take the falling loan interest rates with them – they ignored the falling surplus interest rates of the LV. The reduction had already taken place in stages until around 2005/06. Now – 10 years later – to show surprise is hypocrisy. And who, like the majority of the population, has relied on his or her tax advisor for initial discussions – also because the advisor or wife also lives on commissions?

The European Central Bank (ECB) is not responsible for the low interest rate


It seems almost hypocritical when individual life insurers want to shift the responsibility for the low interest rate onto the ECB. It’s like being soaked by a cloudburst and then pushing it onto a passing car that goes through a puddle again. Except for ailing states, there is hardly any demand for money against interest. Some bankers ask by what right savers actually think they should get interest on their money – and refer to the waste paper bin for disposal.



Media scolding against life insurers


Even with 70 billion hidden reserves, insurers are not sitting on superfluous money that they could give away today. Rather, they need it in order to be able to provide the promised guarantees in the long term. When leading media such as ZDF entitles a contribution with “The life insurance trap: Rich corporations – disappointed customers”, they forget that the customer’s agent or consultant has not been paid by the customer. If a consumer does not afford independent advice from experts and surveyors, i.e. thinks “to know everything better himself”, should not be surprised later if the “seller” had only acted in his own economic interest? And this applies even if mistakes in real estate financing are regularly punished by judges – but not all of them (OLG Munich, judgement of 15.12.2009, Az. 5 U 1590/09).


Capital investment in real estate is a matter of experience


You usually buy a property once in a lifetime – otherwise you are already a “professional”. The professionals know that in the case of fraud by credit institutions and insurance brokers in connection with scrap real estate, it is still possible to offset damages even after more than 10 years – i.e. after the statute of limitations. For if the offsetting situation existed for the first time before the commencement of the limitation period, one can still offset many years later according to § 215 BGB. Many a junk real estate investor has thus eliminated his residual debt with the stroke of a pen, even late – and with success sometimes even completely. Without an expert he would not have recognized this option at all. As a nice bonus, even the life insurance policy that has been cancelled long ago can often be revoked, with the hope of repayment of almost all premiums without deduction of costs plus Interest.



by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm


by courtesy of


www. (published on 16.01.2017)



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About the author

Dr. Johannes Fiala Dr. Johannes Fiala

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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