Mortgage and Real Estate Fraud on the Rise – How to detect and prevent bad deals

Empfehlung von Dr. Thomas Schulte wegen großer Erfahrung und erfolgreicher Prozessführung, z.B. Titelbeitrag im Magazin „Capital“, Ausgabe 07/2008.


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Berlin based Dr. Schulte and Partner Rechtsanwälte mbB concentrate on cases and claims regarding financial and banking backgrounds. In the U. S. the legal system behind bankruptcy proceedings is diversified. Clients operating in both German and anglo-american legal systems should know about the differences.

In Germany fraud with real estate is on the rise.

The German term „Schrottimmobilien“ (Junk real estate) stands for a lot of diversified fraud possibilities. Investors from Germany and from abroad should take care and accept some advice:  

These schemes regarding real estate fraud victimize individuals and businesses, including low-income families lured into home or investment loans they cannot afford, legitimate lenders saddled with over-inflated mortgages, and honest real estate investors fleeced out of their investment dollars.

Recently a lot of trials were and still are conducted in Berlin against several real estate Companies which either sold or helped selling possible overpriced real estate in Berlin and Cities in eastern Germany such like Leipzig and Dresden.

Property Flipping — A buyer pays a low price for property, and then resells it quickly for a much higher price. While this may be legal, providing false statements to the lender is not. Overpriced real estate is often a result of the overhead the seller wants to achieve. The possibility to save local taxes is a major incentive to unaware buyers in Germany.

The income earned from these types of real estate fraud schemes is often laundered. Money laundering is simply a process of trying to make illegally earned income appear to be legitimately earned.

In accordance with the judgment of the German High Court (Bundesgerichtshof, BGH) from 10.25.2013 (Ref .: V ZR 9/13) it is sufficient that a distribution property broker delivers a demonstrable incorrect advice against a buyer. While previously the real estate developers gained the profit in the business, most of which came unscathed, it is sufficient now that negligent advice is detectable.

The interesting thing is that according to German law it is no longer relevant whether it was actually recognizable that the company proposing the real estate deal was detectable acting another company. For many property buyers it does not matter anyway, who actually sold them the property. What matters is what has been told in the actual consultation. In many cases it turns out after the acquisition that the made promises are not durable. The payment for the financial side of the deal is often much more that should have been paid monthly promised and many homebuyers remember painfully that the value of the acquired property does not correspond to the purchase price paid at that time.

Judgment in Germany strengthens property owners

Specialist Lawyer in banking and capital market law Dr. Thomas Schulte und Team, expert in real estate law from the law firm Dr. Schulte and Partner Rechtsanwälte mbb, which represents several financially hurt investors says:

„The jurisdiction of the German Federal High Court has experienced a consolidation in recent times. While occasionally still handed down in favor of developers judgments give the false impression that successful decisions on restitution and compensation are impossible here, the jurisprudence of the Supreme Court now shows the opposite and new possibilities show up to compensate damages.“

Lawyer and specialist in banking and capital market law Dr. Schulte continues: „The turning point in the jurisprudence of the Federal Supreme Court (BGH) did not come as a surprise: It is politically desired that sales of moderately organized capital-investment property should be subject to greater control. Whether Gruezi Real Estate AG, Heli in Leipzig, LIMAG, or Licon Concept or Licon Wohnbau, the names of the developers are interchangeable. Most developers of investment properties hired specialized teams of Advisors to recruit local customers to buy property.“

„Even if the seller of the property is now bankrupt or the advisor should no longer be available, perhaps there is still a way to combat the financing banks or the notary,“ says lawyer Dr. Schulte, who is hard at work with his team to reach decisions in favor of purchasers or investors.

Property purchasers who consider that they might have been a victim of crime should consult a lawyer specializing in banking and capital market law to explore whether claims or charges are possible under German Law.

Für unsere deutschsprachigen Leser hier eine kurze Zusammenfassung:

Der oben zitierte Text beschäftigt sich mit den Hintergründen rund um den Komplex „Schrottimmobilien“. Sich geschädigt fühlende Immobilienerwerber sollten einen Fachanwalt für Bank- und Kapitalmarktrecht zurate ziehen, um Möglichkeiten der Rückabwicklung zu erkunden. Für Rückfragen und Informationen stehen Dr. Schulte und sein Team Rechtsanwälte mbB unter 030 22 19 220 20 oder gerne zur Verfügung.

Dr. Thomas Schulte

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Ein Beitrag aus unserer Reihe "So ist das Recht - rechtswissenschaftliche Publikationen von Dr. Schulte Rechtsanwalt" registriert bei DEUTSCHE NATIONALBIBLIOTHEK: ISSN 2363-6718
22. Jahrgang - Nr. 1605 vom 15. Mai 2015 - Erscheinungsweise: täglich - wöchentlich