Fraudulent misrepresentation in real estate purchases is a practical problem and can justify contesting the entire real estate purchase agreement. According to § 433 Abs. 1 S.2 BGB, the seller is generally obliged to provide the buyer with the purchased item free of material defects and defects of title. If the seller is aware of any defects, they must disclose these to the buyer. Fraudulent misrepresentation is committed by concealing facts about such a defect that is subject to disclosure or is hidden. Providing false information and the associated breach of the duty of truthfulness also constitutes fraudulent misrepresentation.
HIDDEN EFFECTS IN REAL ESTATE PURCHASES
Hidden defects are characteristics of the property that are not usually apparent from a simple inspection. Examples include inadequate insulation, pests and damp in the masonry, but also false information about achievable rental income. The decisive factor for the seller’s liability for fraudulent misrepresentation is that they were aware of the defects or at least considered them possible and accepted that the buyer was not aware of the defects and that this influenced their decision to conclude the contract. Defects in the property are often concealed by painting over mould and damp patches or covering them with wooden panels or foil. The defects are therefore not immediately apparent during a viewing, but will become apparent after a while or when the buyer carries out renovation work.
BURDEN OF PRESENTATION AND PROOF
In principle, the burden of proof for the existence of defects subject to disclosure and the seller’s knowledge lies with the buyer. In principle, the seller must inform the buyer of any measures already taken to remedy defects in the property. Malice is excluded in the case of defect rectification carried out by a specialist company. The seller is not obliged to check the success of the defect rectification carried out by the specialist company; he may trust that the work has been carried out properly. Due to the resulting different case constellations and the general problem of the burden of proof and presentation, a decision on a case-by-case basis is often necessary, so it may be worthwhile to have the legal situation reviewed by a solicitor.
LEGAL OPTIONS
Fraudulent misrepresentation in the purchase of real estate entitles the buyer to contest the entire real estate purchase agreement in accordance with § 123 BGB . In addition, the buyer is entitled to compensation or a reduction in price due to the seller’s breach of duty. The buyer can also seek rescission of the purchase agreement and a refund of payments already made. Furthermore, the estate agent’s commission and any land transfer tax already paid are eligible for compensation, as are redemption interest payments in the case of a bank loan. The buyer does not have to give the seller the opportunity to remedy the situation, but can assert claims for damages and withdraw from the purchase agreement without setting a grace period due to the damaged relationship of trust. In practice, real estate purchase agreements often contain a declaration by the seller that they are not aware of any defects that must be disclosed. However, such a declaration does not exclude the possibility of contesting the property purchase agreement and claiming damages from the outset. According to § 444 BGBthe seller cannot invoke an exclusion of warranty in the event of a fraudulently concealed defect. Unless the buyer exercises their right of withdrawal, they are entitled to subsequent performance. In this context, the seller is obliged to repair or remedy the defect and must also bear the costs thereof. The limitation period for claims by the buyer due to defects is five years from the date of delivery in accordance with § 438 BGB . In the case of a fraudulently concealed defect, the limitation period is three years from the date of knowledge of the defect in accordance with § 438, 195 BGB.