Scrap real estate judgements of the EuGH (C-299 and C-350) of 25.10.2005* The credit institutes give themselves calmly, while investor lawyers speak euphorically of a ?break-through? The reality looks more modest. The information problem: If an investor compares the comparatively meager interest of safe money plants with the enticing net yields, over investment consultants offered investments, it is understandable to decide for the allegedly better net yield. In addition often tax advantages and perhaps the hope on an increase in value of the plant and/or real estate come. However a more at net yield chance always means also a more at risk ? and here investors err regularly. Problematically it becomes always then, if the investor does not understand anything of the thing ? the courts assume in practice unworldly, an investor is expert or at least expertly advised. In the mediator industry it does not look usually better: Also ?investor protectors? and ?industry specialized sheets? praised all too often plant models highly, which turned out later only as disaster for the investor, e.g. Telekom, Falk, Phoenix, ? The know-how problem: While the higher courts assume that an investor of a lawyer the legal risks, from the tax counsel the fiscal load-carrying capacity and from an expert the Werthaltigkeit of the plant/real estate to explain to let (must) be, are in practice often bank advisors not at all in the position the folders critically to appreciate, let alone recalculate. While the courts expect also from the investment consultant and ?mediator that it can examine its offers legally, fiscally and economically, there is in reality no standardized permission to the occupation ? everyone can announce a trade as initiator or simple Finanzdienstleister. Approximately 1,000,000 concerning: If the investor saves the purchase of specialized knowledge, the Katzenjammer is large: In the range ?scrap real estates? up to 1,000,000 Federal citizens are to have been ?legally cheated? A typical sales slogan read ?your real estate is bank-checked ? You also pay a valuation fee in the loan agreement ? no bank will give you a loan if your property is not worth more than the loan amount? This sales statement was of course incorrect: The valuation is paid by the customer, it is also a cost of the loan, but he does not get to see this appraisal as a customer.
Hardly any help from the state: The judicial scandal is in reality a political issue: Where the threads run together, especially in the bank, hardly any public prosecutor shows up. The investor protection lawyers claim that some banks have systematically worked together with the distributors to the detriment of the investors. With the savings bank Mannheim the one or other executive committee had to in custody ? also with the Badenia building savings bank an internal special appraisal of the bank supervision (BaFin) uncovered the co-operation and/or the co-knowledge at ?the investment fraud ? The numerous procedures before the EuGH to the range of the ?scrap iron real estates?, and not least the statements of government and banks show which it concerns, i.e. the existence endangerment of some credit institute by financing of dubious business. The citizen asks himself then, why fare dodgers are punished ? with banks the public prosecutor seems to be restrained and criminal charges are stopped massively ? Even the benefit of private insolvency, a light at the end of the tunnel, on the way out of the debt trap, is now to be restricted for cost reasons: Some state ministers of justice have already put their drafts on the Internet before the election. Interpretation of the ECJ: The ECJ takes a decidedly consumer-friendly line. In the past, this court, like the German Constitutional Court, corrected the predominantly bank-friendly jurisdiction of the Federal Supreme Court. The current judgements ? and incidentally also quite current German instance courts ? show that the doorstep situation can be given also with switching over friends and acquaintance. The typical structure salesman uses first existing contacts over family, friends and work colleagues, in order to come then to recommendations. Also within the family a Haustürsituation can be present, how last the LG Verden in its judgement of 14.07.2005 (Az. 4 O 600/04) stated. Loan recall does not release from the interest: The concern of many investors was and is that a recall of the loan contract leads after the doorstep law to the immediate maturity of the loan ? the EuGH confirmed this in principle. It was questionable whether the bank would then also be entitled to interest, and if so, in what amount. The ECJ assumes that in this case the consumer has to pay the “usual market” interest. interest is to be paid by the consumer. What remains is a mountain of (residual) debt after the sale of the junk property. This situation opens the ?by junk real estate overindebted? This situation usually gives the consumer the option of negotiating with a lawyer or going into insolvency: The advantage of a negotiation lies in the faster completion and sometimes in further also economically noticeable advantages. In addition, the mediator and sales liability always comes into question: Every year, about 30,000 mediators are sued by consumers ? many become insolvent themselves.
Banking risk: The ECJ further states that in certain constellations, national courts should ensure that the consumer is not burdened with the “risks associated with the investment”. This may include differences between the purchase price and the real value, the risk of loss of rent, etc. If necessary, the consumer will need an expert opinion ? the ECJ has only defined a “corridor” for the details. Therefore, numerous questions can still be litigated in this field. The outcome is mostly uncertain. Probably only cases are concerned, in which the loan contract was locked before the real estate purchase ? the rule is according to experience the reverse expiration. The burden of proof has the plaintiff. Therefore the PR euphoria of some self-proclaimed investor protection lawyer is only with difficulty understandable. Also with the accomplishment of economic crises of an investor and/or a real estate expert knowledge and sense of proportion are in demand. *by Johannes Fiala, lawyer (Munich), M.B.A. (Univ.Wales), M.M. (Univ.), certified financial and investment advisor (A.F.A.), EC expert (C.I.F.E.), banker (www.fiala.de)
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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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