*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
The credit institutions are calm, while investor advocates are euphorically talking about a ?breakthrough? 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 advisors 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 Anlegerschützer 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 (must) have the legal risks explained by a lawyer, the tax sustainability by a tax advisor and the intrinsic value of the investment/property by an expert, in practice bank advisors are often not in a position to critically assess the prospectuses, let alone recalculate them. 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. Anyone can register a trade as an initiator or simple financial service provider. If the investor saves the purchase of specialized knowledge, the Katzenjammer is large: In the range of the scrap iron real estates up to 1,000,000 Federal citizens are to have been cheated legally. 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 the customer does not get to see this valuation.
The judicial scandal is in reality a political issue: where the threads run together, above all in the bank, hardly any public prosecutor shows his face. Investor protection lawyers allege that some banks have systematically colluded with distributors to the detriment of investors. At Sparkasse Mannheim one or the other member of the Managing Board had to go to jail, and at Badenia-Bausparkasse a special internal report of the banking supervisory authority (BaFin) revealed that the bank was involved in or had joint knowledge of the investment fraud. The numerous proceedings before the European Court of Justice in the area of junk real estate, and not least the statements by the government and banks show what is at stake, namely the threat to the existence of many a credit institution through the financing of dubious transactions. The citizen then asks himself why fare dodgers are punished ? in banks the public prosecutor seems to be reluctant and criminal charges are dropped en masse? 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 case law of the BGH. The current judgements and by the way also quite current German instance courts show that the Haustürsituation can be given also with switching over friends and acquaintance. The typical structural salesperson first uses existing contacts through family, friends and work colleagues to then make referrals. 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 revocation does not exempt from interest: The concern of many investors was and is that a revocation of the loan agreement under the Doorstep Selling Act leads to the immediate maturity of the loan ? the ECJ has 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? As a rule, consumers have 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. Here, 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. Presumably, only cases are affected in which the loan agreement was concluded before the purchase of the real estate – experience shows that the reverse is the rule. The plaintiff has the burden of proof. Therefore the PR euphoria of some self-proclaimed investor protection lawyer is only with difficulty understandable. Expert knowledge and a sense of proportion are also required when dealing with the economic crises of an investor or a property.
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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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