After sensational decision of the ECJ: Revoke real estate loans and save money

By DR. GIOVANNI GELARDI | 15.04.2020

In these difficult times of the Corona pandemic, good news for consumers.

On March 26, 2020 the European Court of Justice (ECJ; case number: C-66/19) declared so-called withdrawal information in certain credit agreements to be incompatible with European law. Millions of consumers may now possibly be able to revoke their loan agreements for the purchase of real estate or vehicle leasing.

The ECJ explained that the information on the right of withdrawal must specify to consumers “clearly and concisely” how the period of time is calculated for their right to withdraw from the contract. Information in loan agreements which refer to a national provision which in turn refers to other standards is therefore not sufficient. The clause in question can be found in the withdrawal information in the contracts. There, reference is made to “Section 492 (2)” of the German Civil Code for the start of the withdrawal period. Many banks and real estate financiers have used this forwarding across the law of obligations up to the general deadline provisions in the German Civil Code, also known as “cascade reference” among lawyers, in their contracts.

If this is not the case, as is the case here, then the so-called “perpetual” right of withdrawal applies. The 14-day cancellation period does not start to run.

The decision is particularly interesting for property owners who took out a mortgage financing between June 2010 and March 2016. They can use the revocation to withdraw early from an expensive building loan. No prepayment penalty is due. According to the Bundesbank, real estate loans with a volume of 1.2 trillion euros were concluded in the period in question, most of which should now be revocable. For example, anyone who signed a financing agreement in 2012 with an interest rate of four percent can now immediately reschedule their debt to the current interest rate level of around one percent by means of a revocation. 

However, it should be noted that the German Federal Court of Justice (BGH) declared the wording now challenged by the ECJ to be legal in 2016. Whether it will revise this view on account of the ECJ ruling remains open for the time being. It is therefore possible that banks will continue to rely on the decision of the BGH and that an action will be taken. However, the chances of an out-of-court settlement are also good in principle.

If you have any further questions, we will be happy to advise and support you.

Giovanni Gelardi

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