GERMANY Law and Practice Contributed by: Wolfram H. Krüger, Barbara Rybka, Markus Wollenhaupt and Alexander Zitzl, Linklaters
al legal change of ownership only takes place upon registration in the land register. Title insurance is not relevant due to the title guaran - tee resulting from the so-called “public belief” in the land register. Its accuracy is protected by law and, therefore, a buyer can acquire ownership in good faith (bona fide) even if the property is purchased from an unauthorised person registered in the land register. 2.4 Real Estate Due Diligence Legal and technical due diligence is usually performed on documents provided by the seller. Technical advis - ers often carry out site visits. Some information can be obtained from authorities with power of attorney from the seller and public registers. In some cases, separate environmental due diligence is performed. The typical legal report contains information about title and encumbrances, leases, public building and zoning issues and other permits (if required), environmental information and, if relevant, acquisition documents, service agreements and litigation. In a forward trans - action where the building is still to be developed, the report also covers development, project management, construction, architectural and other agreements relating to the development. 2.5 Typical Representations and Warranties The extent of representations or warranties agreed depends on the market climate. In areas with big demand, sellers have enough leverage to avoid grant - ing the buyer large-scale representation or warran - ties. Instead of objective guarantees, guarantees to the seller’s best knowledge are often given. Remedies The parties can agree on the type of remedies – either compensation in cash or actual repair of the dam - ages. The parties often agree on a cap of the overall maximum amount of compensation. This agreement is regularly accompanied by both a de minimis method, granting damages only if the claim exceeds a certain amount, and a basket method, granting compensa - tion only if the sum of all claims exceeds a certain threshold, resulting in the seller having to cover the total amount of the claims rather than just the differ - ence between the total and the threshold.
Possible security for the buyer against the seller’s insolvency would be paying a certain amount into an escrow account, holding back on a certain amount of the payment, or simply lowering the purchase price. In some cases, a joint liability of or comfort letter by a parent company can be agreed with the seller. Less often a W&I insurance is contracted as security for the given seller guarantees. Limitation of Liability The statutory period for expiration of claims of approximately three years is often contractually lim - ited to 12 or 18 months. Depending on the seller’s negotiation skills, a cap, de minimis amount and basket can be agreed to limit liability. The liability is often limited to approximately 5–10% of the purchase price (cap); claims can only be raised if the individual claim reaches at least 0.1–1% of the purchase price (de minimis) and exceeds 0.5–1.5% of the purchase price (however, approximately EUR500,000 maximum) either by itself or together with other claims (basket). It remains to be seen how the changed market environ - ment influences these values in favour of purchasers. 2.6 Important Areas of Law for Investors In addition to the civil and public law provisions men - tioned in 1.1 Main Sources of Law , the provisions contained in the Anti-Money Laundering Law ( Geld- wäschegesetz ) are particularly important for investors and the required know-your-customer checks some - times create unexpected bureaucratic hurdles. Com - pany register excerpts, passport copies, etc, must be provided to those who are obliged to carry out the checks. Corporations, partnerships and founda - tions operating on the financial market and/or buying real estate in Germany have to report their beneficial owners to the register of ultimate beneficial owner - ship ( Transparenzregister ). Checks and notifications not only have to be carried out by providers of finan - cial services, but also to a certain extent by brokers, law firms and notaries. 2.7 Soil Pollution or Environmental Contamination Under the Federal Soil Protection Act ( Bundesbodens- chutzgesetz ), the polluter, all current and former users, and all current and former owners of a property can be held liable for environmental laws irrespective of
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