In its judgement of – V ZR 169/24, the Federal Court of Justice (BGH) ruled that advertising a property as a detached house in an estate agent’s property description gives rise to an expectation of permissible long-term residential use and thus forms part of the quality required of the purchased property. If the property is in fact situated in a holiday home area and is permitted for recreational purposes only, this constitutes a material defect, as the actual possibility of use falls significantly short of the impression conveyed to the buyer by the property brochure. In cases where such restrictions on use are deliberately not disclosed, fraudulent misrepresentation may be considered, which, beyond liability for defects under sales law, gives rise to tortious claims against the estate agent and the seller, in particular for compensation for the difference between the purchase price paid and the actual value of the property.
Facts
In 2019, the sellers had purchased a plot of land in a weekend cottage area for EUR 150,000, on which stood a small residential house, an extension with a covered parking space and a utility room, a further car parking space, and a garden shed. In a subsequent estate agent’s brochure, the property was advertised as a ‘detached single-family house’, even though the local development plan designates the area as a holiday home zone and permanent residential use is not permitted under planning law. The buyer purchased the plot in 2020 for a purchase price of 325,000 EUR, subject to an exclusion of liability for material defects, and subsequently brought a claim for damages against the sellers on the grounds of a lack of fitness for purpose and an alleged fraudulent misrepresentation, seeking, amongst other things, 160,000 EUR in damages and a declaratory judgement regarding an intentional tort.
AN INACCURATE PROPERTY DESCRIPTION MAY CONSTITUTE A MATERIAL DEFECT
Under the framework of sales law, the information contained in a property brochure also forms part of the characteristics that the buyer is entitled to expect, provided that the seller is responsible for it. If the brochure describes the property as a ‘detached single-family house’, the buyer may assume that they will be able to use the property on a permanent basis as a standard residential property. If it later transpires that use is permitted only as a weekend cottage, the actual condition of the property deviates from this expectation, thereby constituting a material defect. Exclusions of liability for material defects are common in notarised property purchase agreements. However, these do not apply if the seller fraudulently conceals a defect that they were obliged to disclose. Fraudulent concealment requires that the seller considers the circumstance giving rise to the defect to be at least a possibility and, at the same time, anticipates that the buyer is unaware of it and would not have entered into the contract, or would have done so on different terms, had they been aware of the true situation. The buyer bears the burden of proof for all circumstances constituting this element of fraudulent concealment. Public statements made by the seller, which also include a property brochure drawn up by an estate agent, define the intended condition of the property. It makes no difference whether the brochure originates from the seller themselves or from the appointed estate agent; both are attributed to the seller. As regards the subjective aspect of fraudulent intent, the decisive factor is whether the seller recognised that permanent residential use was legally impermissible or considered it a possibility. Documents such as architects’ plans containing references to a weekend holiday home estate or the type of weekend holiday home may be relevant in this regard. Whether and to what extent such documents were deliberately altered is ultimately a question of evidence and must be determined in the context of the trial court’s assessment of the facts. If the estate agent’s property description contains an unqualified reference to a detached house, even though use is in fact only permitted as a weekend cottage, this statement may trigger a duty on the part of the seller to provide information, as it gives the buyer a false impression of the property’s usability.
CLAIMS AGAINST THE ESTATE AGENT
In the case of claims against the estate agent, the decisive factor is whether the information contained in the estate agent’s property brochure helps to define the intended characteristics of the property being sold and is capable of influencing the buyer’s expectations regarding its use. If restrictions on use that affect the property’s value – such as, in this case, its location in a weekend cottage area without guaranteed residential use – are not disclosed, this may form the basis for far-reaching claims, in particular for compensation for the loss of value under the principles of tort law. In the case of a tortious claim for damages, for example on the basis of Section § 823 Abs. 2 of the German Civil Code (BGB) in conjunction with Section § 263 of the German Criminal Code (StGB) or Section § 826 BGB, the financial loss is determined according to the ‘difference hypothesis’. The decisive factor here is a comparison of the actual financial position following the conclusion of the contract with the position that would have existed had the misleading conduct not taken place. If the buyer continues to perform the contract, the loss consists of the amount by which the property was purchased at an inflated price due to the concealed defect; it is irrelevant whether the seller would actually have been prepared to sell at a lower price. In the case in question, the reduction in value attributable to the defect amounted to EUR 72,000, which was calculated as the difference between the purchase price and the market value determined taking into account the restricted use.