The Federal Court of Justice (BGH) had to decide in a case which was based on the purchase of built-up land, whether verifiably false information from the seller justified a defect (BGH, judgment of July 16, 2021 – V ZR 119/20). The court had to investigate the question of whether the information in an exposé and the visualization of a planned construction project are public statements on the quality of the material in the sense of German material defect law and which point in time is decisive here.

The purchase of the property

The defendant company had offered the future buyer two building plots, each of which was built on with an apartment building. An exposé was drawn up about the properties, in which it was stated that they had eight vacant residential units plus an expansion reserve on the top floor. After viewing the property, the buyer stated via email to the defendant’s realtor that she wanted to buy the two houses. A little later, the latter announced the acceptance of the purchase offer by the plaintiff and sent the exposé and the visualization of a conversion measure originally planned by the defendant, whereupon a notarized purchase contract was concluded.

Citing the assertion that the seller had already been informed by the building authority before the sale that the renovation according to the visualization could not be approved, the buyer demanded compensation because she assumed that information in the exposé and the visualization was deliberately untruthful.

The time of the notarized purchase contract is decisive

The court of appeal had essentially stated that the information in the exposé and the visualization could not have resulted in any defects, as these were only received by the buyer after her purchase decision. The decision to buy was already made at the moment when she informed the realtor by email of her intention to buy.

This argument did not convince the BGH. It made clear that the purchase decision within the meaning of German material defect law is only made at the moment the purchase contract is concluded. Because until the conclusion of the purchase contract, the buyer has the option of deciding otherwise and not making the purchase. This becomes particularly clear in the case of property acquisition, which in Germany requires notarial certification. Up to this point in time, the parties can – even in the notary appointment – refrain from doing the business without incurring any liability for damages (the only exceptions are particularly serious breaches of duty of loyalty).

Accordingly, it was also possible that the buyer could still be influenced in her purchase decision by the information in the exposé and the visualization up to the notary appointment. The situation is different only if the influence of a public statement on the purchase decision is demonstrably excluded. In this respect, however, the seller bore the burden of proof, for which the appellate court, however, had not made any determinations. The legal dispute was therefore referred back to the appellate court for a new hearing and decision.

Information in the exposé must be correct

The judgment shows that even in the case of the exclusion of material defect liability in real estate transactions, which is customary in Germany, it is essential to ensure that all information on the property is correct. Otherwise there is a risk of the exclusion of liability being ineffective. In addition, the buyer may have a claim for damages from a pre-contractual breach of duty.

Our lawyers will be happy to advise you on all disputes and legal issues relating to real estate transactions in Germany.