Beauty and the Beast:
Sales particulars (expose’) and sale contract for property acquisition, or why your own lawyer is worth his weight in gold.
A. Facts
As an investor, you want to acquire a plot of land with a residential building (plus a terrace). The price quoted is € 550,000.00. The seller has posted particulars of sale in the expose’ on the internet, which state:
“The living space is about 200 m2, the useable area is about 15 m2”.
This is the beautiful seduction: The price per square metre for the living space amounts to a maximum of € 2,750.00 (550,000/ 200). You know the market, and such a property can easily be resold for at least € 3,000.00 per square metre of living space.
You visit the property several times, and the living rooms and terrace are indeed quite large. But you are wise and experienced, and ask more questions:
The vendor gives you a floor plan which details the area: The rooms and roof terrace add up to 215 m2.
The notary, in whom you place your trust, shall certify the contract. His draft standard purchase agreement states:
The seller is the registered owner of the property … According to the seller, on the property is a single detached house, hereinafter referred to as ‘the purchase item’.”
That’s the beast: The contract text says nothing at all about areas.
But everything is already clarified in detail with the vendor. There are verifiable documents, and the seller is demonstrably reputable. In actual fact, he tells no lies and neither does he conceal anything.
In addition, you have (perhaps) read in the law: The seller is liable for his public statements about the property described as the purchase item’s particulars (e.g. as regards information quoted in sales particulars) and for any (pre-contractual) implied promises about features (e.g. a motorcycle’s mileage in an eBay description), so-called quality agreements, cf. Section 434 sub-section 1, clause 1 and clause 3 BGB (German Civil Code).
The sale is then notarized (authenticated and registered).
Later, you want to resell, and one of the interested parties has the space calculated by an architect. This produces an irrefutable estimate of the living space as being 171 m2. No prospect offers more than € 513,000.00 (171 m2 x € 3000.00 / m2).
You sue your original seller for € 66.411,00 (the reduction in the purchase price, plus damages).
And you lose!
B. Jurisprudence
According to case law from the Federal Court of Justice (BGH), the highest German
Court in civil matters, in such circumstances, the seller is not liable for giving false information about the size of the living space.
I. There has been no false public statement (§ 434 sub-section 1, clause 3 BGB)
- The square metres information in the sales particulars (“The living space is about 200 m2, the useable area is about 15 m2”) was correct:
“No liability arises under § 434 sub-section 1, clause 3 BGB, from the information [given by the sellers] in the particulars of sale and the advertisements published on the Internet, because the actual living space provided by the rooms does not deviate from the area that an average buyer could expect from a floor space of approximately 200 m2 “, BGH judgement of 06. 11. 2015, Reference: ZR 78/14, https://openjur.de/u/872059.print
- The floor plans containing the area data (“rooms and roof terrace add up to 215 m2”) were made available to the buyer only, so they were obviously not “public”.
II. There has been no quality agreement (§ 434 sub-section 1, clause 1 BGB)
- The square metres mentioned in the sales particulars did not constitute an implied promise of 200 m2 of living space, because the information in the sales particulars was not the seller’s last word on the matter; this was given in the floor plans:
“The details in the sales particulars [given by the sellers] and in their advertisements did not become the subject of a conditional agreement between the parties pursuant to § 434 para. 1 sentence 1 BGB; this follows from the fact that the area information had been substantiated by the floor plans which gave information about the areas of the individual rooms … “, BGH judgement of 06. 11. 2015, Reference: V ZR 78/14, https://openjur.de/u/872059.print
- The square metres mentioned in the floor plans is not an implied promise of 200 m2 of living space, because this assurance about the size is not mentioned in the text of the notary contract (and neither were the floor plans included as an annex to that contract):
“A description of the features of a property or building by the seller prior to conclusion of the contract, which is not reflected in the notarial contract itself, does not … lead to a quality agreement according to § 434 sub-section 1, clause 1 BGB … The buyer [of a property] is not entitled to assume that the seller wants to agree a certain condition with him, if that condition is not mentioned in the sales contract “, BGH judgement of 06. 11. 2015, Reference: V ZR 78/14, https://openjur.de/u/872059.print
C. Legal Advice
Given the purchase price of the property, there is an inherent legal risk for the investor if the estimate of 200 m2 of living space is inaccurate, and in fact proves to be less than this figure. Prior to certification, the investor’s lawyer, who was called in to appraise the entire deal and the draft sales contract, should also give an opinion on the factual and legal matters described here as an important element relevant to the whole transaction. To safeguard this risk, and assuming the seller is creditworthy, the lawyer should draw up an explicit agreement about the living space to be included in the draft contract. If there had been a notarial contract in existence which contained the relevant quality agreement, the seller would have been obliged to offer a reduction in price or pay the amount of compensation claimed € 66,411.00 (§ 437 BGB).
According to the Legal Advice Remuneration Act, the lawyer’s fees for the transaction advice would have amounted to € 4,993.48 (presumably gross). Even if a legal audit of the entire transaction had only revealed and secured this one risk, the investor would thus have been spared a financial disadvantage amounting to € 61,417.52.
So, please give me a call!