Side agreements

Side Agreements - Side agreements are contractual arrangements made in addition to the main contract (purchase agreement, lease agreement) that supplement or modify it. In real estate law, ancillary agreements are particularly critical: When purchasing real estate, they require notarization (Section 311b of the German Civil Code) if they are part of the overall transaction-verbal or privately written ancillary agreements are then invalid and can jeopardize the entire purchase agreement.

Side Agreements in Real Estate Purchases

Typical side agreements in real estate purchases concern: inventory transfer (built-in kitchen, furniture, garden tools - often listed separately to save on real estate transfer tax), reservation of the right to withdraw (e.g., if a building permit is not granted), dates of possession (different from the transfer of ownership), renovation agreements (the seller commits to certain work before handover), and lease agreements (provisions regarding existing leases).

All these agreements must be included in the notarized purchase contract-separate “under-the-table” agreements are legally invalid and may be considered tax evasion. By law, the notary is obligated to include all ancillary agreements known to him in the deed; he may not knowingly participate in the notarization of an incomplete agreement.

Special Significance of the Takeover of Inventory

The inventory transfer is a common ancillary agreement in real estate purchases: buyers take over built-in kitchens, garden tools, lamps, or furniture-sometimes for a fee, sometimes for free. The tax implications are significant: inventory is not subject to real estate transfer tax, as it is not part of the property. A separate portion of the purchase price allocated to inventory can reduce the real estate transfer tax base.

However, the tax office carefully examines whether the valuation of the inventory is realistic. Anyone who sets an inventory price of 30,000 euros for an old built-in kitchen worth 2,000 euros must expect a tax assessment. We recommend valuing the inventory conservatively and in line with market conditions and providing a clear justification for this in the purchase agreement.

Side Agreements in the Lease Agreement

Under tenancy law, side agreements are not subject to any formal requirements-they can be agreed upon in writing, verbally, or via email. Typical examples include: keeping pets, subletting, renovation agreements, or temporary rent reductions. However, verbal side agreements are difficult to prove.

In addition, many lease agreements contain a written form clause that recognizes only written amendments. A verbally agreed-upon rent reduction would not be valid in this case-the tenant must pay, even if the landlord has verbally agreed to it. In the event of a dispute, only what is documented counts. We recommend recording all ancillary agreements to the lease in writing, preferably as an addendum to the lease agreement.

Formality Defects and Their Consequences

If a collateral agreement in a real estate purchase is not notarized, even though it requires notarization, there is a serious risk: The entire agreement-including the main contract-may be void. Section 139 of the German Civil Code (BGB) stipulates that in the event of partial invalidity of a contract, the entire contract is void if it can be assumed that it would not have been concluded without the invalid part.

In practice, this means: If the buyer and seller reach a separate “handshake agreement” regarding a price reduction or the transfer of furniture, this can not only render that agreement invalid but also call the entire purchase contract into question. The risk is typically borne by the party insisting on the ancillary agreement-a very high price to pay for supposed freedom of contract.

Practical Tip for Buyers in Nuremberg

We recommend that buyers in the Nuremberg metropolitan area disclose all agreements with the seller to the notary-including seemingly minor points such as the transfer of the built-in kitchen or a right of withdrawal in the event of financing rejection. The notary will include everything in the deed. Separate agreements that are not notarized are unenforceable in the event of a dispute.

When taking over the inventory, a realistic valuation should be made-the tax office checks whether the inventory share is plausible to rule out a hidden reduction in the purchase price at the expense of the real estate transfer tax. Transparency protects all parties involved.

Frequently Asked Questions

Can a verbal side agreement regarding a real estate purchase be valid?

No. All agreements that are economically related to the purchase of the property require notarization (Section 311b of the German Civil Code). A verbal agreement-e.g., a price reduction or a promise regarding the condition-is invalid. In the worst case, a side agreement subject to formal requirements can render the entire purchase contract invalid.

Is a separate inventory agreement permitted when buying a house?

A separate inventory agreement is permissible provided it has no economic connection to the purchase of the property. In practice, however, this connection almost always exists in the case of a built-in kitchen or the transfer of furniture-the tax office and case law view the transfer of inventory as part of the overall transaction. We recommend including the transfer of inventory in the purchase agreement.

What happens if ancillary agreements are concealed?

Concealed ancillary agreements-e.g., a separate cash payment to reduce the purchase price in the contract-are illegal and can be prosecuted as tax evasion (real estate transfer tax, income tax). Furthermore, the concealed agreement is invalid under civil law.

Can ancillary agreements be useful for protecting the buyer?

Yes, absolutely. Reasonable ancillary agreements that are recorded in the purchase contract provide the buyer with significant protection: rights of withdrawal in the event of a lack of financing approval, agreements regarding the rectification of defects prior to handover, provisions for vacating still-rented living space, or liability agreements in the event of undisclosed defects. All of this is legitimate and recommended-as long as it is included in the purchase contract.

What provisions regarding tenancies should be included as ancillary agreements when purchasing a rented property?

Anyone purchasing a property in Nuremberg that is still rented out should ensure the following ancillary agreements are included in the notarized purchase agreement: first, an exact list of all existing lease agreements, including rent amounts, lease terms, and any special provisions (graded rents, options); second, a provision regarding the transfer of security deposits-the seller must hand over the deposit to the buyer; third, provisions regarding unpaid utility costs for years still outstanding at the time of transfer of ownership; and fourth, a clear delineation of who is responsible for outstanding defects and repairs. If these ancillary agreements are missing from the purchase contract, disputes regarding conditions and prior liabilities may arise after the handover, which are difficult to resolve. Notaries in Nuremberg are accustomed to incorporating such clauses into the purchase contract at the parties’ request.

Ancillary Agreements and the Obligation to Notarize: Checklist for the Notary Appointment

To ensure that all relevant ancillary agreements are notarized, we recommend the following checklist prior to the notary appointment:

• Is there an agreement regarding the inventory or items sold with the property?
• Were any special circumstances discussed regarding the handover date (early handover, delayed vacating)?
• Are there any conditions precedent (financing, building permit, results of an appraisal)?
• Have known defects in the property been disclosed to the buyer, and should they be mentioned in the contract?
• Should a limitation of liability or an exclusion of liability for certain defects be agreed upon?
• Are there agreements regarding outstanding renovation work to be performed by the seller prior to the handover?

These questions should be communicated in writing in advance during the preliminary meeting with the notary-this allows the notarial contract to be drafted precisely, and the appointment will proceed much more smoothly.

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