The German Civil Code (Bürgerliches Gesetzbuch, BGB) stipulates the mandatory form of notarisation for a contract which has as its object the obligation to transfer or acquire a property. Defects in form can be remedied by (i) the so-called conveyance (the in rem agreement to transfer) and additionally (ii) the registration of the transfer of ownership in the land register. It is always questionable whether and to what extent subsequent amendments to the purchase agreement also require notarisation prior to the transfer of ownership. For the group of cases in which the conveyance has already been declared, the Federal Court of Justice (BGH) last ruled in 1984, following old decisions from the imperial court (Reichsgericht), that a later amendment does not require notarial form. The obligation triggering the formal requirement was fulfilled in full and therefore no longer existed. Contrary to the almost unanimous dogmatic criticism in the literature and now – as an appeal instance – also contrary to the decision of the Higher Regional Court Stuttgart (see our Newsletter Spring 2018), the Federal Court of Justice expressly maintained this case law.
The decision was based on an agreement on a purchase price reduction through countersigned correspondence in connection with a property developer (purchase) agreement. The purchase agreement contained the conveyance (Auflassung) as well as the instruction to the notary to arrange for the transfer of ownership in the land register only upon proof of payment of the purchase price. The seller demanded the remainder of the initial purchase price claiming the invalidity of the reduction due to the lack of notarization, the purchaser considered the agreement to be possible without form and thus effective. The higher regional court had decided in favour of the seller and determined a formal requirement of the change. The BGH, on the other hand, expressly maintained its opinion. According to this opinion, the obligation to procure ownership had not yet expired through performance with the notarised declaration of conveyance in the purchase agreement, but the owed performance had been irrevocably rendered by the seller. Thus, the parties would have set a de facto automatism in motion to bring the change of ownership to registration. However, this only applies if the parties' purchase or sale obligations were not subsequently changed or newly established. The practice of declaring the conveyance in the same deed at the time of conclusion of the purchase agreement would not change this either. Instructions to the notary to arrange for the transfer only under further conditions would also only concern the technical execution and would have no effect on the form requirements or their absence.
Effects on practice
On the one hand, the Federal Court of Justice – despite continuing dogmatic doubts about the reasons given by the court – ostensibly creates clarity and determines a clear point in time without focusing on the materiality of the amendments. However, it is more important to note that this old and new absence of form requirements nevertheless has limits, namely whenever the acquisition or disposal obligations are changed or (partially) newly established. Therefore, there will continue to be changes (e.g. in the case of corrections to the object of purchase) in which not only the change must be notarised but also the conveyance must be newly declared or extended. These cases may not be as numerous as subsequent adjustments to the purchase price, which are now judged to be unproblematic. However, it remains to be seen whether and how subsequent private-written changes can be brought into line with the instructions given to the notary in the deed. In addition, the parties themselves would then be subject to many obligations, ranging from notification obligations to the tax authorities to any waiver of pre-emptive rights to be obtained again from the municipalities. For this reason, it may nevertheless make sense in individual cases to notarise the agreement on changes.
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