The real estate agent as a scapegoat

"Should the real estate agent have told me that?" – the question of a real estate agent's duty to inform and advise arises repeatedly. The extent of this duty and whether it extends to related areas depends on the circumstances of each individual case.

The lawsuit brought by the seller of an apartment building with eight rented units concerned tax law issues. She had acquired the property in early 2004 and, in May 2013, commissioned a real estate agent to find a buyer. Numerous interested parties came forward, and the building was sold in July 2013 for €295,000, generating a substantial profit. The problem: at the time of the sale, the ten-year speculation period (according to Section 23 Paragraph 1 of the German Income Tax Act) had not yet expired. Therefore, pursuant to Section 22 No. 2 of the German Income Tax Act, the purchase price was subject to income tax. Consequently, the seller had to pay a back payment of nearly €48,000 to the tax office.

Real estate agent sued for damages

She held the real estate agent responsible. In her opinion, the agent should have informed her that any profit from the sale of the property within ten years of its purchase was subject to income tax. She sued the agent for damages. However, both the Krefeld Regional Court and the Düsseldorf Higher Regional Court dismissed the claim: The Higher Regional Court clarified that the agent was an expert in the valuation, sale, and purchase of real estate and in the corresponding market assessment, but not in the tax aspects of the sale or purchase. This would unreasonably extend his duties.

The Federal Court of Justice (BGH) dismisses the lawsuit

The plaintiff appealed, and the case went before the Federal Court of Justice (BGH). The BGH upheld the lower courts' decisions: Since the defendant was not at fault, the plaintiff was not entitled to damages under Section 280 Paragraph 1 of the German Civil Code (BGB). A real estate agent is generally not obligated to examine tax law issues unless there is a corresponding agreement. However, there are exceptions: If the agent presents themselves as an expert in tax matters and, for example, advertises their expertise, then this obligates them to provide tax advice. And according to Section 4 No. 5 of the German Tax Advisory Act (StBerG), they are also authorized to do so. According to the BGH, an exception also exists if the client clearly requires legal instruction regarding contract-relevant circumstances or if the agent induces their client to take a risky course of action or leads them to an unfavorable and hasty conclusion of a contract. This was not the case here.

Controversial opinions

Opinions differ on whether real estate agents are obligated to inform clients about the ten-year holding period for capital gains tax purposes. On the one hand, it is argued that such advice could violate the Legal Services Act, as providing advice from someone outside their area of ​​expertise carries potential liability risks. On the other hand, the tax implications of capital gains tax are not particularly complex – and should therefore be familiar to the seller of a property. An experienced real estate agent who recognizes that the holding period for the property expires shortly after the planned sale will at least recommend that the client consult a tax advisor.

Sources: gesetze-im-internet.de (Federal Ministry of Justice and Consumer Protection), immobilien-zeitung.de, haufe.de