The GbR as a real estate seller (Part 2)

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Why is the notarial process problematic despite the changed legal situation?

that the in Part 1 discussed §§ 899a BGB, 47 Abs. 2 GBO, do not cover the underlying contractual legal transaction, ie the purchase contract, but only affect the real settlement, is of decisive importance in practice. I would like to explain this with an example:

  • A, B and C are entered in the land register as shareholders in an owner-GbR. The owner GbR bears the name of the property, such as "Müllerstraße 5 GbR".
  • In fact, C has recently sold his share in the company to a business partner G. A and B don't know about it and C doesn't tell the notary either.
  • The three now conclude a purchase agreement with D for the GbR. In the purchase agreement, a purchase price of 3 million euros is agreed. A priority notice is ordered for D and the notary commissioned to bring about the transfer of ownership after the purchase price has been paid.
  • The notary enters the priority notice in the land register and takes care of all other documents that are relevant for the transfer. When he thinks everything is in place, he tells D that the purchase price is due. D pays to the GbR.
  • On the day the purchase price arrives in the GbR account, C grabs the money and disappears. His business partner G reports to the land registry and presents a contract in which C's GbR share was assigned to him. He registers an objection to the correctness of the land register and applies for the land register to be corrected so that instead of C he is now a co-partner in the owner-GbR. At the same time, he asks the notary not to apply for the transfer of ownership because the GbR actually did not sell, because he would have had to cooperate to do so.

In this constellation, the registered reservation does not help the D. For this is strictly accessory, which means that it only exists if a claim also exists. However, under the law of obligations, D has no claim against the owner GbR because he did not effectively buy from them. Because G would have had to participate as a true shareholder. D can reclaim the purchase price paid and may also have claims for damages. But he cannot achieve the transfer of ownership, nor prevent A, B, and G from selling the object to someone else (and then maybe the next one disappears, and so on).

Conversely, this is also not unproblematic on the seller side. Let's change the case a bit:

  • Business partner G did not receive the company share as a gift, but paid C 1 million euros for it that morning. He doesn't notice anything about the sale to D in the afternoon. After D has paid the purchase price to the GbR, the notary applies for a transfer of ownership in the land register, which is then carried out.
  • A, B and C disappear with the money, D is the owner, he acquired the property in good faith, since the transfer of ownership took place and his sellers were entered in the land register as shareholders. Only G is rid of both the property and his money.

Apart from the economic issues, the rescission and the mutual claims have a certain legal complexity - provided none of the parties involved disappears. Whether the seller is actually the owner is irrelevant for the effectiveness of the contractual agreements. If an unauthorized person - here A, B and C - transfers the property and this is effective for the entitled person - here the GbR with G as a co-partner - as a result of the land register transfer, the latter has to § 816 para. 1 sentence 1 BGB a claim for the surrender of what the unauthorized person has obtained (i.e. the purchase price). Assuming G got his share of this, he would at least have some economic compensation.

There is a discussion in the literature as to whether § 899a BGB should also be extended to the level of the law of obligations, so that the transfer of ownership would not be conditional on your part. There are reasons for and against, the commentary literature is correspondingly voluminous and the reasoning why it is unconditional without extending the scope is also complex.

How can this be solved in notarial practice?

If there are parties in front of me who want to sell (as a GbR) and buy (as a purchaser), as a notary I can hardly recommend waiting until the courts have clarified the above problems. Instead, I must 1) point out the risks and 2) offer a solution. Luckily, there is a tried and tested method to suggest.

In first task is to ensure the conclusion of an effective purchase contract so that the priority notice to be entered in the land register has a legal basis. Since I cannot ensure this at the level of the GbR, it is advisable to make the individual shareholders co-obligatory. It is not a problem that the shareholders do not own the property, but only a share in the company. You can effectively sell something that you don't own. Then you just can't deliver. However, the contract of sale as such is still effective. The claim from this purchase contract is effectively secured by the priority notice to be entered in the land register.

In second task is to ensure processing. For this I recommend the payment flow via a notary escrow account to be set up by me. If the priority notice is entered in the land register and the other due dates are met, the buyer does not pay directly to the seller, but to me into an escrow account. When the money is there, as a notary, I arrange for the property to be transferred to the land registry. If this has taken place, the buyer has acquired property, either because his business partners could actually represent the GbR, or by virtue of bona fide acquisition, because they are in any case as GbR shareholders - albeit possibly not applicable – were entered in the land register. After I have received the message from the land registry about the transfer of ownership, I pay the purchase price from the escrow account to the seller-GbR, not before.

What I do not find out in this constellation as a notary and cannot secure are any interests of a G if he does not contact me or the land registry. It is not very likely that a G will pay a C the 1 million euros in the example before the land register correction has taken place on him, but should a G have paid an unsecured purchase price for a GbR company share, then he would have after the completion of the real estate purchase contract a problem through me. However, my task as a notary was not to protect the unknown interests of unknown third parties, but to securely carry out the purchase contract that was offered to me. This is possible with the above two strategies.

Can a GbR also sell without a notary escrow account?

Yes, if the buyer agrees. The fact that there are risks doesn't mean that you can't take them anyway. Which contract the parties ultimately want to conclude with each other, they decide for themselves, not the notary.

In this case, my job is to inform those involved about the risks and to show alternative courses of action that can be used to avoid the risks. This risk warning must be included in the purchase contract. If the participants still want to contract with each other unsecured, they can do so.

Concern has sometimes been communicated to me by buyers that the existence of such a risk statement could affect the ability to finance the purchase with a bank loan. I cannot confirm this concern from my previous practice. From the bank's point of view, it is more relevant that the financing land charge is entered in the land register before the purchase price is paid out.

To what extent a GbR as the owner of the land register affects the lending of the object, I will edit in a separate article.