Real Estate Junk

Since the late 80s the acquisition of real estate by means of outside finance has been promoted by multi-level marketing firms as a tax shelter scheme.  With the promise, that the scheme will be self-sustainable by means of high income from rent and considerable tax advantages, the distribution companies attracted tens of thousands of investors.

Subsequently these predictions proved to be way out of line: the rents predicted in the prospectuses could by far not be obtained. Also, the announced increase in value of the real estate objects did not materialize. The Federal High Court (Bundesgerichtshof) himself established the term „Schrottimmobilien“ („real estate junk“) for the proceedings resulting from these practices (BGH, Urteil vom 16.5.2006 , Az. XI ZR 6/04; vom 20.3.2007, Az. XI ZR 414/04; vom 26.2.2008, Az. XI ZR 74/06). This term also quickly established itself in the media. 

The term is misleading, though, as it misses the main focus of these cases: In most cases there was no proper authorization of the fiduciary who concluded the financing loans for the investors. Often, the acquirer was not adequately informed about the right of rescission which the acquirer was entitled to. In both cases, the acquirer could have a right of rescission or claims for damages. We assert these rights for our clients outside of court and – if necessary – in court.