by Johannes Fiala, lawyer
Many lending institutions have provided sales people with their loan forms in recent years. These intermediaries then sold the mortgage-backed loans (or fund shares) to investors in their living rooms.
But the right of withdrawal for doorstep selling now also applies to consumer credit. This was decided by the Federal Court of Justice (BGH) in its ruling of 9 April 2002 (Ref.: XI ZR 91/99). As a result, hundreds of thousands of investors in unprofitable investments have the chance to reclaim all interest and redemption payments made to date. However, the consumers were not informed of the right of withdrawal as required by law.
U-turn of the BGH following the European model
Just over two years ago, the Federal Court of Justice (BGH) ruled by decision that the Doorstep Selling Revocation Act did not apply to consumer loans. At the same time, a request for a preliminary ruling was sent to the European Court of Justice (ECJ). The ECJ answered promptly (judgement of 13 December 2001): The doorstep-selling directive also covers mortgage loan agreements and the prescribed right of withdrawal is not limited in time if no proper information on the right of withdrawal has been given (Ref.: C-481/99). With the current decision, the BGH now followed the judges in Luxembourg.
Condo bought in the living room
A family had sued, which had been persuaded in the domestic living room by a real estate agent to the purchase of a free-hold flat, which was financed with a credit of the today’s Hypo Vereinsbank. Five years after the contract was signed, the couple sued for repayment of all amounts paid. This increases the hope of actually getting the money back. The question is, by whom? Hypo-Vereinsbank, at any rate, sees consequences in the ruling only for the future. So far, the law has been strictly adhered to. If this was not compatible with European law, then German law would have to be changed ? for the future. If anyone is liable at all, it is the state. Funding must be stopped
The BGH first referred the case back to the competent Higher Regional Court in order to re-examine whether a doorstep-selling transaction had existed at all. If this was the case, however, an effective revocation of the loan agreement secured by mortgages would not automatically result in the possibility of a reversal of the purchase agreement. With it the judges dampen in particular the hope of buyers of overpriced real estates to overturn also the sales contracts.
Purchase agreement in the contract bundle also to be overturned
The judgement has consequences on precaution coupling contracts, means Johannes Fiala of the Kanzlei Fiala, Freiesleben &Weber (Munich), right and patent lawyers, chartered accoutants and tax counsels.
Thus, contract bundles are often offered as an “all-round carefree package”, for example as a combination of purchase and financing of real estate. Real estate contract bundles have been popularly brokered as distance business, especially in recent years. The consumer buys a home he has never seen and finances the purchase with a mortgage loan. revoke a loan agreement
According to the ruling of the BGH, the consumer can also revoke his loan agreement (real estate loan). In concrete terms, this means that in the case of a “linked transaction” (contract bundle consisting of real estate purchase and financing), the possibility of complete reversal exists. As in the situation of the ?robbery ?by a vacuum cleaner representative at the entry door the buyer can: – immediately the further and/or remaining payment of the credit refuse – all interest and amortization payments of the bank back require – must leave however the use (rent) and the dwelling to the bank Should only the loan be rückabgewickelt, the high interest and the compound interest effect are omitted. The courts regularly set four percent interest for the ineffective, revoked loan as “reasonable compensation for use for the bank”.
Intermediaries must fear liability
Very indirectly, the BGH pointed out that for the reversal of the real estate loan and the real estate purchase contract, other parties can be held liable in addition to the bank, such as the seller, initiator, distributor and agent.