Berlin Aspire ++ Buying Real Estate in Berlin ++ Berlin Estate
Investors in Israel buy condominiums sold in Berlin by the Israeli real estate group Berlin Estate and Berlin Aspire. But are they really vendees? What are the legal claims that the Israeli investors actually have? Do they really know the risk they take as they sign the precontract in Israel? Are they really so well informed about the factual and legal aspects as confirmed with their signature?
Berlin Estate: Are the investors correctly informed?
The Israeli investors explicitly confirm to be completely informed by Berlin Aspire. The precontract presented to Resch Law makes absolutely clear which legal risks the investors take. It is all written in the precontract. All the investors nonetheless confirm they have not only have read the precontract but they have completely understood what they finally sign. They confirm that they are informed about the importance of this transaction and they understood what the risks and chances of these transactions are. This is most remarkable and hard to believe.
Berlin Estate: How could investors know what to ask?
As a lawyer who is well acquainted to German law and who is used to reading legal texts is hard to believe that an investor would have signed a contract if he had really understood what he is doing. Could the investor really ask the relevant questions without any legal knowledge? If this is so he is a really courageous investor who does not avoid blind risks. Under German law an investor can of course take almost any risks if he is completely informed about all aspects of this contract and no important facts were excluded.
Berlin Aspire: Do the investors know what they do?
30 years of experience as an investor protection lawyer makes me feel skeptical if the investor completely understand what they are doing be buying a condominium in Berlin. So there is suspicion that some kind of psychological marketing strategy works on Israeli investors.
Berlin Estate: Vendor is not owner of the condo
The precontract says that the vendor is not the owner of a real estate as he signs the precontract. The vendee is committed to sign a real estate contract under German law. This purchase contract must be confirmed by German notary. The vendee is informed that the condo is rented for an indefinite time and that the termination of the rent is basically not possible. The vendee gets a kind of guarantee that he will get a rent that corresponds 5% of the buying price. But this is guaranteed only for a period of three years.
Berlin Estate: What happens after the guarantee expires?
This does not exclude that the condo is actually rented for a much lower price. The investor is likely to have much lower revenues which might totally fail after three years. During this time of rent the vendor will take care of everything concerning the rent. And what will happen than?
Berlin Aspire: Can the loan be serviced by the rent?
Most remarkable is that the vendor will take a loan in the name of the vendee. The cost of a loan shall not exceed 5 % of the purchase price. So what happens if the rents might break down after three years? The vendee will have to pay the loan from its own pocket.
Berlin Aspire: Pay down a 50 % on an invalid precontract.
Although the precontract is not valid under German law, which is explicitly mentioned in the precontract, the vendee is obligated to pay down 10 % of the purchase price immediately and another 40 % within 45 days after the signature. The remaining price is to be financed with a loan granted by a German bank.
Berlin Estate: How do banks grant loans?
This makes sense, because the bank will only grant a loan based on the value of a real estate. The credit rules are based on the cash flow that the investor will get from his investment e.g. that is the rent. But as we suppose the rent will not nearly reach the guaranteed amount of 5%.
Berlin Aspire: How will the real estate market develop?
Depending where the real estate is located in Berlin it may very well be that the condo is only worth half the purchase price. So it makes sense that the German bank will only finance half the sum. Of course no one can predict how the real estate market will develop in Berlin. Huge price hikes are not impossible. But that is a speculative component, which is challenged by the intention of the Berlin government to curtail the hikes of the rents. That is good for the tenant but really bad for the landlord. And even worse for those who speculate on rising real estate prices in Berlin.
Berlin Aspire: Do the investors really know all these aspects and risks?
These are only a view aspects and concerns about the contract that is signed in Israel. Every investor may ponder if he really asked all the relevant questions and if he got the relevant information. Did the investor know what he has signed and did he understand the relevance of the action he made?
If you are an investor who might want to know more about Berlin Estate and Berlin Aspire and the real estate market in Berlin you may contact Resch Rechtsanwälte via email or just dial +49 30 885 9770. You will get free information.