Real Estate and Property Purchase Contracts in Germany

The legal basis of the real estate purchase contract in Germany is Section 433 of the German Civil Code (BGB). German law also stipulates that this particular type of contract must be notarised (Section 311b (1) sentence 1 BGB). The purchase contract must record all agreements between the buyer and seller. Before signing the purchase contract, you should therefore check it thoroughly. As the buyer of the real estate, you are obliged to check the contract’s content and, in particular, any clauses to prevent (legally) disadvantageous consequences even before signing the contract. The lawyers of the German law firm Schlun & Elseven will examine your existing real estate or property purchase contract or formulate such a contract according to your interests.

An essential part of the real estate purchase contract is the indication of the contracting parties. The buyer and the owner of the property, i.e., the seller, must be named. The first points to be examined already arise regarding the seller’s position as a real estate owner. In some instances, the existence of a power of representation, the consent of a third party or the ownership relationship itself must be examined.

In addition, precise information on the object of purchase (real estate such as land, house, flat) must be provided. This includes, among other things, the following points:

• Address of the property, size and parcel number of the property,
• current land register status (details of the owner, condition, land register encumbrances),
• essential components and accessories (e.g., furniture, buildings, etc.).

Encumbrances on the property can be, for example, a usufruct (Section 1030 BGB), land charges (Section 1191 BGB) or mortgages (Section 1113 BGB). How these encumbrances are to be dealt with after the transfer of the object of purchase is also to be stipulated in the contract.

In addition, the purchase price and the time, as well as other aspects of the due date, must be specified precisely, such as, for example, the specification of which account the payment is to be received in and at what time. With the payment of the purchase price, the so-called transfer of benefits and encumbrances takes place. This is understood to mean the transfer of benefits and burdens of the sold property and the assumption of the duty of care. The buyer, therefore, now has to bear the encumbrances or costs of the property, can use it themselfe or collect all the income associated with the property. The property is, therefore, economically transferred to the buyer.

If you would like to have your contract, as well as the general terms and conditions reviewed or drawn up, please get in touch with our firm’s lawyers. Our specialist lawyers for contract law will support you, advise you and represent your interests.

If you want to buy a condominium, you should check the declaration of division before signing the purchase contract. This regulates the rights and obligations of the co-owners and the formal division of the building where the flat is located. Accordingly, it determines the standard and special property. While separate ownership refers to the part of the property owned by you alone, common ownership describes the rooms/areas used jointly. Therefore, for example, the staircase does not belong to you alone but to all owners. When buying a condominium, the declaration of division always precedes the purchase contract. If you are granted rights of use in the purchase contract not specified in the declaration of division, you must waive them.

In addition to the above-mentioned points, make sure that the following aspects are clarified in the purchase contract:

• Special rights of use (garden, parking space, etc.),
• right of use for common property,
• the amount of the house fees, which are paid to the condominium owners’ association (WEG), as well as
• special property.

Insofar as the prospective buyer of a particular property needs time to settle some essential aspects, such as financing, before the conclusion of the contract, the contracting parties can conclude a so-called preliminary contract. In comparison, the real estate purchase contract represents the corresponding main contract.

Like the real estate purchase contract, the preliminary contract must be notarized. The pre-contract for purchasing a property mainly states that the buyer intends to buy the property and that the seller will not sell the property to anyone else. If there is no preliminary contract, the contracting parties can withdraw from the purchase of the property without having to justify this.

The reservation agreement is to be distinguished from the preliminary contract. This confirms that the selected property will not be sold to third parties. In this agreement, the period of the reservation is specified. In return, the interested party has to pay a reservation fee.

If you have purchased a property and subsequently noticed a defect, the question of how to deal with such a situation now arises. Schlun & Elseven will show you the options available and represent you in asserting your rights and interests. Contact us today via our online form and receive an overview of your legal options after an initial assessment.

The first thing to check is whether you are entitled to any rights, and if so, which ones. The rights of the buyer listed in Section 437 BGB would come into question:

• Subsequent performance/improvement,
• withdrawal from the contract,
• reduction of the purchase price or
• compensation.

If the real estate purchase contract contains a warranty exclusion, the buyer may only be able to assert claims if they were not already aware of the defect when the contract was concluded (Section 442 (1) sentence 1 BGB), and the seller fraudulently concealed the defect or assumed a guarantee for the quality of the object (Section 444 BGB). Therefore, the buyer should inform the seller of any defects before signing the contract and have them repaired afterwards. Once the purchase contract is signed, the property is handed over in the agreed condition, and the warranty exclusion excludes the repair of defects.

However, the exclusion is invalid if the seller has fraudulently concealed the defect in the property. In principle, the seller has the duty of disclosure. This means that the seller is obliged to inform the buyer about severe material defects and defects of title, e.g., a usufructuary right that still exists. By concealment or deception, the buyer acquires the right to subsequent performance. According to Section 439 para. 1 BGB, the buyer may demand the removal of the defect or the delivery of a defect-free item as supplementary performance. If this claim fails, it is also possible to withdraw from the real estate purchase contract (Section 440 BGB), demand a reduction of the purchase price (Section 441 BGB), or claim damages. However, the buyer must prove that the seller fraudulently deceived them to do so. Our German real estate and contract law experts will be happy to advise you in such cases, represent you in court and support you in enforcing your claims.

However, asserting the last described rights from Section 437 BGB requires that they are not yet time-barred. Section 438 BGB regulates the limitation of claims for defects. The length of the limitation period depends in Germany, among other things, on the type of defect. For example, defects of title registered in the land register become time-barred after 30 years, whereas defects of quality of a building become time-barred after five years (Section 438 para. 1 no. 1 b and no. 2 BGB). In the case of other defects, a limitation period of two years applies according to Section 438 (1) no. 3 BGB. The period begins with the handover of the property or delivery of the item (Section 438 para. 2 BGB).

It should be noted that in the event of fraudulent misrepresentation by the seller about the property’s condition, the period may also begin later. The regular limitation period of three years (Section 195 BGB) starts with the knowledge of the defect or the seller’s deception. Accordingly, it can also begin years after the transfer of the property. However, the maximum limitation period is 30 years (Section 199 BGB).

The German lawyers at Schlun & Elseven will check whether you can still assert your rights or the statute of limitations has already occurred and will be happy to illustrate your chances of success.