GERMANY LAW AND PRACTICE Contributed by: Wolfram H Krüger, Barbara Rybka, Markus Wollenhaupt and Alexander Zitzl, Linklaters
price, the actual legal change of ownership only takes place upon registration in the land register. Title insurance is not relevant due to the title guarantee resulting from the so-called “public belief” in the land register. Its accuracy is pro - tected by law and, therefore, a buyer can acquire ownership in good faith (bona fide) even if the property is purchased from an unauthorised per - Legal and technical due diligence is usually per - formed on documents provided by the seller. Technical advisers often carry out site visits. Some information can be obtained from authori - ties with power of attorney from the seller and public registers. In some cases, separate envi - ronmental due diligence is performed. son registered in the land register. 2.4 Real Estate Due Diligence 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 agree - ments and litigation. In a forward transaction where the building is still to be developed, the report also covers development, project man - agement, 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. Ger - many is currently a seller’s market, giving sell - ers enough leverage to avoid granting the buyer large-scale representation or warranties. Instead of objective guarantees, guarantees to the seller’s best knowledge are often given. No significant additional representations and war -
ranties have developed due to experiences in the COVID-19 pandemic. Remedies The parties can agree on the type of remedies – either compensation in cash or actual repair of the damages. The parties often agree on a cap of the overall maximum amount of compensa - tion. 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 compensation only if the sum of all claims exceeds a certain thresh - old, resulting in the seller having to cover the total amount of the claims rather than just the difference between the total and the threshold. The buyer carries the risk of the seller’s insolven - cy often without being especially secure. Pos - sible security would be paying a certain amount into an escrow account, holding back on a cer - tain 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 insur - ance 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 contractu - ally limited to 12 or 18 months. Depending on the seller’s negotiation skills, a cap, de minimis amount and basket can be agreed to limit liabil - ity. 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 mini - mis) 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
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