Defect in form

Defect of form refers to the failure to comply with a form prescribed by law or contract when making a declaration of intent or entering into a contract. In real estate law, a defect of form is particularly significant, as the German Civil Code (BGB) mandates that contracts for the sale of real property must be notarized (§ 311b BGB). A contract that does not meet this formality requirement is generally void.

The Requirement for Notarization and Its Consequences

Any agreement regarding the purchase or sale of a parcel of land, a condominium, or a leasehold must be notarized. This also includes ancillary agreements such as reductions in the purchase price, special features, or handover dates that are agreed upon verbally or via email. If such ancillary agreements are not included in the purchase contract, they are invalid due to a defect in form. If they are deliberately omitted from the purchase contract-for example, to save on real estate transfer tax-this is referred to as a “secret agreement”-a tax offense subject to criminal prosecution.

What Must Be Notarized?

In real estate law, the principle of completeness of notarization applies. Everything that is part of the purchase agreement or agreed upon by the parties as part of the transaction must be included in the notarial deed. This applies in particular to:

• The purchase price and all monetary ancillary payments
• Agreements regarding the handover date
• The transfer of furnishings or inventory, if these have significant value
• Commitments regarding construction measures to be carried out by the seller prior to handover
• Provisions regarding the allocation of burdens and the transfer of risk

Even an email reducing the purchase price after notarization can jeopardize the purchase agreement if it is not subsequently notarized.

Remedying a Formality Defect

The German Civil Code (BGB) includes a so-called remedy provision in § 311b(1) sentence 2: A real estate purchase contract that is void due to a formality defect becomes valid retroactively (remedied) if the transfer of possession (agreement on the transfer of ownership) and the transfer of ownership in the land register are completed. This cure requires that both parties voluntarily execute the transfer of ownership with knowledge of the defect. In practice, the cure is the exception; normally, the defective contract must be replaced by a properly notarized contract.

Defects in Form in Other Real Estate-Related Declarations

Defects in form can also occur beyond the purchase agreement:

• Promises to donate real property: Also subject to notarization under § 518 BGB
• Guarantee declarations: Written form required (§ 766 BGB); oral guarantees are void
• Lease agreements for more than one year: Must be concluded in writing (§ 550 BGB); otherwise they are deemed to have been concluded for an indefinite period and can be terminated at any time with statutory notice

Practical Tip for Property Owners in Nuremberg and Franconia

In practice, buyers and sellers occasionally attempt to regulate price agreements or furnishings sold as part of the deal separately outside the purchase agreement. We strongly advise against this: All agreements relevant to the value of the property belong in the notarized purchase agreement. Notaries in Nuremberg are very sensitive to such issues and will provide appropriate guidance. When in doubt, seeking legal advice from a notary or attorney licensed in Bavaria is the right choice. Occasionally, we observe in practice that parties fail to include the seller’s verbal commitments (e.g., rectifying a defect before handover) in the purchase agreement-and then have no legally enforceable basis in the event of a dispute. Those who anchor such commitments in writing within the purchase agreement are on the safe side.

Frequently Asked Questions

Is a privately executed real estate purchase agreement truly void?

Yes, completely. A purchase agreement for a plot of land or a condominium concluded without a notary is void under Section 311b of the German Civil Code (BGB) and has no legal effect. Even down payments made on the basis of such an agreement can be reclaimed.

What happens if a side agreement to the purchase contract is defective in form?

If a side agreement concerning the purchase price or essential terms of the contract was not notarized, the entire purchase contract may be void-not just the side agreement. This depends on whether the parties would have concluded the entire transaction even without the side agreement.

As a buyer, can I invoke a formal defect to withdraw from the purchase?

In principle, either party may invoke the nullity of a contract due to a formal defect. However, contradictory conduct (venire contra factum proprium) may, in individual cases, lead to an invocation of the formal defect being deemed an abuse of rights. Seek legal advice in such cases.

Does the notarization requirement also apply to preliminary agreements and reservation agreements?

Yes. If a preliminary agreement already binds the parties to conclude a purchase agreement, it is also subject to notarization. Non-binding reservation agreements without legally binding character, on the other hand, are possible without any formal requirements-but their legal effect is correspondingly limited.

What applies to email agreements regarding changes to the purchase price after notarization?

A reduction in the purchase price agreed upon via email after notarization is invalid due to a lack of formal requirements. The parties must record such changes in a notarized addendum to the purchase agreement. If such a side agreement is deliberately kept informal to fraudulently obtain tax advantages-for example, by allocating the purchase price to furniture or fixtures to save on real estate transfer tax-it constitutes a so-called “black agreement,” which can be classified as tax evasion under criminal law. Notaries in Nuremberg and the Bavarian tax authorities monitor such arrangements very closely.

Lack of Formality and Real Estate Transfer Tax: A Common Practical Risk

A special case of lack of formality arises when parties intentionally agree on a portion of the purchase price outside the notarial purchase agreement-for example, through a separate “purchase agreement for inventory” in the amount of 30,000 euros, while the official purchase price for the property is reduced accordingly. This arrangement is well-known to tax authorities and is considered an abuse of legal form: both portions of the purchase price are added together and used as the full tax base for real estate transfer tax. Additionally, fines and criminal penalties for tax evasion may apply.

In the Nuremberg metropolitan area, the my-home.de editorial team has observed that such arrangements occur primarily with high-value condominiums and multi-family homes in the Nuremberg city center. Anyone entering into such agreements risks subsequent tax assessments plus interest-a significantly more expensive solution than honestly stating the purchase price in the notarized contract.

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