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Moneyalchemist

Former East Germany Property Auction

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After looking for a while I bought a large property in a hectare of land in a nice part of former East Germany, near the old east-west border, a holiday area.

I bid for it at an online auction which linked to an actual auction at an hotel.

The starting price was very low and the hammer fell on my bid which was only 10,000 EUR above the starting price. It was a normal Immobilien-Versteigerung, not a Zwangsversteigerung.

The Notary then witnessed the contract which was subsequently sent to me. I signed it in front of my own Notary.

The contract had a clause in it which said that it was invalid unless the seller (a federal state, Bundesland), agreed by giving their consent, and it said that the Notary at the auction's task was to ensure that all such consents were obtained.

I paid all the bills and was very surprised to get a letter direct from the seller that as they now decided (no reason given) not to give their consent, the contract cannot be fulfilled and would I like to have my money back.

Rather surprised I asked the auction's Notary what this meant and he wrote confirming what the seller said and I would have to ask them why they want to pull out and get my money back.

Now, and this is my question - I had always thought that at a property auction, once the hammer falls, both parties are obligated - the seller must sell to the buyer at the auction price - and the contract merely regulates the consents and details.

This means that the sellers' action, if allowed, means that there was no auction - after all if he wants to pull out - and if the contract gives him that right - then why bother with the auction al all - with both sides paying the hefty auctioneers' fees etc.

I intend to see a lawyer about this next week - but I would be grateful to hear others' opinions - not necessarily about Germany - but about points of low regarding property auctions.

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After looking for a while I bought a large property in a hectare of land in a nice part of former East Germany, near the old east-west border, a holiday area.

I bid for it at an online auction which linked to an actual auction at an hotel.

Rather surprised I asked the auction's Notary what this meant and he wrote confirming what the seller said and I would have to ask them why they want to pull out and get my money back.

The sales contract said that the seller's consent was required. You knew this. Quite why consent is required after the auction is outwith my experience but non-the-less I think you will have to abide by this.

Where was the hotel? Would this be considered the site of the sale and so determine the country who's law this fell under? The online bit is just spurious.

My suspicion is that this is something like having a reserve price not met (you do say that your "winning" bid was little over the starting price) but a little more flexible for the seller.

Perhaps you could negotiate an acceptable price with the seller. I suspect this is about the money not the seller having a change of heart.

Good luck.

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The sales contract said that the seller's consent was required. You knew this. Quite why consent is required after the auction is outwith my experience but non-the-less I think you will have to abide by this.

Where was the hotel? Would this be considered the site of the sale and so determine the country who's law this fell under? The online bit is just spurious.

My suspicion is that this is something like having a reserve price not met (you do say that your "winning" bid was little over the starting price) but a little more flexible for the seller.

Perhaps you could negotiate an acceptable price with the seller. I suspect this is about the money not the seller having a change of heart.

Good luck.

Thanks for that.

No I did not know anything about the terms of the contract which followed the auction - the auctions' conditions mentioned nothing about seeing a subsequent contract.

Under German Law (this falls under German Law) the fall of the hammer IS the contract - anything subsequent merely regulates the details.

There was a reserve price and I overbid it by the 10K.

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Thanks for that.

No I did not know anything about the terms of the contract which followed the auction - the auctions' conditions mentioned nothing about seeing a subsequent contract.

Under German Law (this falls under German Law) the fall of the hammer IS the contract - anything subsequent merely regulates the details.

There was a reserve price and I overbid it by the 10K.

You said in your OP you bid 10k over the starting price. That's not necessarily the same as the reserve price, unless it was stated as such.

It's interesting that the seller had to give consent after the sale. Can you contact them directly and ask for an explanation - try to get the name of the person authorised to make the yes/no decision. There is no harm doing this and once you call in a lawyer who is familiar with German property law, it's going to get expensive for you. You might also find that the seller's position becomes entrenched if they start getting lawyers letters before other avenues of discussion have been tried.

At the very least I would have thought you should not be liable for any auction fees/commission given that the sale has been terminated by the seller. However, unless this is a large sum, you run the risk of losing more money in legal fees pursuing what you may have already paid out.

On a more positive note, If German law is so clear cut that the fall of the hammer is the contract and you were not made aware of any particular contractual arrangements for this auction, then you have a strong case. What are the auction organisers saying about this?

This might be of some use;

http://www.wilsonsauctions.com/property_buyers_guide_germany.pdf

Apologies if Wilsons were your auction house!

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You said in your OP you bid 10k over the starting price. That's not necessarily the same as the reserve price, unless it was stated as such.

It's interesting that the seller had to give consent after the sale. Can you contact them directly and ask for an explanation - try to get the name of the person authorised to make the yes/no decision. There is no harm doing this and once you call in a lawyer who is familiar with German property law, it's going to get expensive for you. You might also find that the seller's position becomes entrenched if they start getting lawyers letters before other avenues of discussion have been tried.

At the very least I would have thought you should not be liable for any auction fees/commission given that the sale has been terminated by the seller. However, unless this is a large sum, you run the risk of losing more money in legal fees pursuing what you may have already paid out.

On a more positive note, If German law is so clear cut that the fall of the hammer is the contract and you were not made aware of any particular contractual arrangements for this auction, then you have a strong case. What are the auction organisers saying about this?

This might be of some use;

http://www.wilsonsauctions.com/property_buyers_guide_germany.pdf

Apologies if Wilsons were your auction house!

Thanks for that - no Wilsons were not the auction house - and I actually read the Wilsons stuff in my researches.

Talking with a friend here however led me to delve further into the AGBs - General Conditions of Sale - which I had agreed that I had read by clicking a box on registering for the auction.

In the AGBs, hidden away half-way down the text was a short paragraph which said that Para 156 of the BGB (Federal Legal Code) does not apply to this auction!

Para 156 is the one which says that the fall of the hammer is the contract.

So it seems that I was bidding at an auction which was not an auction! -- although the auction house calls it an auction - so certainly sneaky and possibly illegal - the friend pointed out that there is another law which says that you cannot try to hide stuff in small print in the AGBs to mislead lay people who are not fully aware of legalities - perhaps such as the meaning of para 156?

Anyway by chance my friend had an old buddy, a lawyer who knows the seller - and he is looking into it privately for me.

So let's see what he comes up with.

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Thanks for that - no Wilsons were not the auction house - and I actually read the Wilsons stuff in my researches.

Talking with a friend here however led me to delve further into the AGBs - General Conditions of Sale - which I had agreed that I had read by clicking a box on registering for the auction.

In the AGBs, hidden away half-way down the text was a short paragraph which said that Para 156 of the BGB (Federal Legal Code) does not apply to this auction!

Para 156 is the one which says that the fall of the hammer is the contract.

So it seems that I was bidding at an auction which was not an auction! -- although the auction house calls it an auction - so certainly sneaky and possibly illegal - the friend pointed out that there is another law which says that you cannot try to hide stuff in small print in the AGBs to mislead lay people who are not fully aware of legalities - perhaps such as the meaning of para 156?

Anyway by chance my friend had an old buddy, a lawyer who knows the seller - and he is looking into it privately for me.

So let's see what he comes up with.

The plot thickens.

I made enquiries from the vendor (owner) and they eventually said that they did not want to sell me the property.

So it is not a question of them wanting more money from me (I had as I said bid over the reserve price anyway).

However what concerns me now is not particularly if I get the place or not, but a more general issue.

The auction website calls itself an "Immobilien-Versteigerung Auktion" (Property auction) and on their website it says quite clearly that:

"The contract between the owner and the purchaser arises on the fall of the hammer, and thus the winning bidder is the buyer."

Having been to property auctions in the UK I assumed the above was true, paid the 10% deposit after the fall of the hammer and the rest within the usual 30 days.

Now the other side of the party to the contract does not wish to honour the deal simply by saying that they do not want to sell it.

(Of course it begs the question why put up a property for auction if there is no intention of selling it?)

And it is not only the auction house which I used - a reader on another forum contacted me a few days ago - he was about to bid for an E German property on another auction site (Which had similar AGBs), and was warned off by my experience.

My German friends who look into this say that it is unbelievable - perhaps even fraud.

All my research on the Net about legal stuff, EU law etc points to the fact that it is illegal to run such a one-sided auction - one where I as buyer cannot pull out but the seller can.

I took a look at French property auctions to compare and there it says quite clearly that at an auction the Seller cannot choose who the buyer is - which does not seem to be the case in Germany.

I do not want to take the auction house or seller to court - as the saying goes "you can`t fight city hall" - it may take years - cost lots and the outcome is uncertain - but surely potential bidders need to be warned that they are at such a disadvantage in Germany - compared with eg UK and France?

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  • 149 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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