The real estate agent is not liable for additional tax payments

A real estate agent is generally not obligated to provide tax advice to their clients during property purchases. With this ruling, the Federal Court of Justice (BGH) dismissed the claim for damages by a private seller whose agent had failed to inform her about the speculation period.

The work of a real estate agent is very extensive. Their tasks have long since ceased to be limited to simply finding and brokering properties. A skilled agent also offers advice and support regarding all aspects of the property. But what can the client expect, and where do the agent's responsibilities end?

This question was at the heart of a lawsuit filed in July 2018 by a property seller against a real estate agent who accused her of failing to comply with her duty to provide information (Federal Court of Justice, Case No. I ZR 152/17). The tax office had demanded a tax payment of approximately €48,000 from the plaintiff's capital gain, as the ten-year speculation period had not yet expired.

In early 2004, the plaintiff purchased the property in Krefeld, containing eight rented apartments, for €170,000. In May 2013, she commissioned a real estate agent to find a buyer. Just two months later, in July 2013, the property was sold for €295,000. In this case, the haste imposed on the real estate agent by the seller backfired. Had she waited another six months, the obligation to hold the property for speculative purposes would have expired.

The saleswoman demanded compensation.

The seller subsequently sued the real estate agent for damages, arguing that the agent had been obligated to point out the fact that the speculation period had not yet expired. However, both the regional court and the higher regional court dismissed the claim.

The plaintiff did not give up and appealed to the Federal Court of Justice, but it too denied her claim for damages. According to Section 280 Paragraph 1 of the German Civil Code (BGB)*, she was not entitled to damages. The defendant could not be held liable for any breach of duty, as a real estate agent generally has no obligation to provide tax advice in connection with a real estate sale. "The assumption of a general obligation for the agent to provide information about the tax aspects of a contemplated transaction would unreasonably extend their duties," the court stated verbatim in its reasoning.

Eligible, but not obligatory.

"While brokers are entitled under Section 4 No. 5 of the Tax Advisory Act to provide information and advice on relevant tax issues (...), they are generally not obligated to do so towards the client under the brokerage contract."

An obligation to provide advice exists only if this has been contractually agreed upon, or if the broker has presented themselves as an expert in tax matters, and/or if the client clearly requires legal guidance. The broker is also obligated to provide special advice and clarification if they induce the client to take a risky course of action or lead them to an unfavorable and hasty conclusion of a contract. However, none of these exceptions applied in the present case.

The situation would be different if the seller had lived in the property herself, because then the speculation tax would not apply.

Sources: *see gesetze-im-internet.de, haufe.de, juris.bundesgerichtshof.de, faz.net, kostenloseurteile.de