14. Dec 16

Get-out-of-jail-free card for real estate loans from June 11, 2010

Banks and savings banks continued to make use of flawed guidance on the right of withdrawal with respect to loan agreements even after June 10, 2010. In many cases, it remains possible to withdraw from these loans.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: Much has been said about the demise of the get-out-of-jail-free card for loan withdrawal. However, it is in fact still possible to withdraw from consumer loans in a lot of cases. It is only real estate loans that were concluded between November 2002 and June 10, 2010 from which it is no longer to withdraw. For these loans, the withdrawal period finally ended on June 21, 2016.

In cases involving more recent loans, it is still possible to play the get-out-of-jail-free card, as banks and savings banks continued to use flawed guidance concerning the right of withdrawal even after June 10, 2010. Consequently, the withdrawal period never commenced and withdrawal remains an option. One common source of error is the mandatory information that guidance regarding the right of withdrawal has had to include since mid-2010. If said information is incomplete or includes unnecessary information, this may render the guidance ineffective. That was the verdict of the Oberlandesgericht (OLG) Celle [Higher Regional Court of Celle] in an indicative ruling from December 2, 2015 (Az.: 3 U 108/15).

In the case in question, consumers had taken out a real estate loan in 2011 and subsequently withdrew from this several years later. The guidance pertaining to the right of withdrawal stated, among other things, that the withdrawal period would not commence until the borrower had received all of the mandatory information pursuant to sec. 492 para. 2 BGB (Bürgerliches Gesetzbuch) [German Civil Code]. Among the listed types of mandatory information was “Angaben zum einzuhaltenden Verfahren bei der Kündigung des Vertrages und Angabe der für die Bank zuständigen Aufsichtsbehörde” [information on the procedures to be followed in the event of the agreement’s termination as well as reference to the relevant supervisory authority]. The OLG held that neither of these kinds of information forms part of the mandatory information in the case of a real estate loan and that it was unclear whether the consumers had received this information in the first place. The Court went on to say that this information was misleading to consumers because they would not be able to identify when the withdrawal period commences. For this reason, it concluded that the withdrawal period never commenced and withdrawal had been effective.

In light of the current interest rate trends, withdrawal also represents an interesting financial option in relation to more recent real estate loans. Lawyers who are versed in the field of banking law can assess whether the conditions for withdrawal are met.

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