Voidability (Contract)

The nullity of a contract means that it has no legal effect from the outset-it is legally deemed nonexistent. A null and void contract is not merely voidable or terminable, but is inherently invalid without the need for a challenge. In real estate law, nullity is particularly relevant because high values are at stake, and formal defects, legal violations, or immorality can often lead to invalidity.

Grounds for Nullity in Real Estate Law

The German Civil Code (BGB) recognizes various grounds that lead to the nullity of a contract:

• Formal defect (Section 125 BGB): Purchase agreements for land and real estate must be notarized (Section 311b BGB). A purchase agreement concluded without a notary is void-even if both parties have signed it.
• Violation of the law (Section 134 BGB): Contracts that violate a statutory prohibition are void. Example: a purchase agreement that intentionally includes payments of illicit funds or in which portions of the purchase price are intentionally agreed upon outside the notarial contract to evade real estate transfer tax.
• Contrary to public policy (Section 138 BGB): Contracts that violate public policy are void. In real estate law, the so-called “usurious contract” is particularly relevant here-when the purchase price is more than twice the market value (objective disproportion) and subjective elements of usury are present, such as the exploitation of a predicament, inexperience, or lack of willpower.
• Fictitious transaction (Section 117 BGB): If the purchase price and the price actually agreed upon differ (e.g., €200,000 in the land register, but actually €250,000), the fictitious transaction is void, but the underlying transaction may be valid-provided it does not itself violate any laws.
• Lack of legal capacity (Sections 104-113 BGB): A contract concluded by a person lacking legal capacity (e.g., due to severe mental illness) is void from the outset. In the case of persons with limited legal capacity (minors), the purchase contract requires the consent of the legal representative and, if necessary, the family court.

Legal Consequences of Nullity

In the case of a void contract, the parties are to be restored to the position they would have been in had the contract never been concluded. This means that any performance already rendered must be returned in accordance with the provisions on unjust enrichment (Sections 812 et seq. BGB). In real estate law, this means that purchase price payments must be refunded and any land registry entries already made must be corrected.

Important: Nullity occurs by operation of law-it does not first have to be established by a court, even though this is often necessary in practice to enforce rescission. Affected parties should immediately consult a specialist real estate attorney in such cases, as claims for unjust enrichment are subject to time limits and practical complications may arise if possession has already been transferred or renovations have been carried out.

Partial Nullity

It is not uncommon for only part of the contract to be void, while the rest remains valid. However, § 139 BGB contains a presumption of total nullity: If a part is void, the entire contract is void in case of doubt-unless the parties would have concluded the contract even without the void part. In a purchase agreement, for example, an invalid clause regarding the real estate agent’s commission may lead to the total nullity of the contract if it is not separable from the main contract.

Distinction from Rescindability

Nullity and rescindability are often confused. A voidable contract is initially valid-it has full legal effect until the entitled party challenges it. Only after the declaration of avoidance does it become retroactively invalid. A void contract, on the other hand, is invalid from the outset, without requiring any party to take action.

Typical grounds for rescission in real estate law:

• Mistake (Section 119 BGB): Anyone who has made a mistake regarding the content of their declaration or regarding essential characteristics of the object of purchase may rescind the contract-but only in the case of mistakes regarding characteristics essential to the transaction and only within the short rescission period.
• Fraudulent misrepresentation (Section 123 BGB): If the seller has knowingly concealed material defects or provided false information about the property, the buyer may rescind the purchase contract-even if it was notarized. The rescission period is one year from the date the buyer becomes aware of the fraud.
• Unlawful coercion (Section 123 BGB): Contracts concluded under duress may be rescinded.

Remedying Defects Leading to Nullity

Within narrow limits, a real estate purchase contract that is void due to a formal defect can be remedied: Section 311b(1) sentence 2 BGB provides that the defect is retroactively remedied through transfer of title (notarized agreement on the transfer of ownership) and subsequent entry in the land register. This remedy requires that the notary certify the transfer of ownership-in doing so, the notary is not required to accept the void written contract as the basis but must independently verify the agreement between the parties.

In contrast, a remedy is excluded in cases of nullity due to immorality or violation of the law. Similarly, a lack of legal capacity cannot be remedied retroactively.

Practical Tip for Property Owners in Nuremberg and Franconia

In real estate law, the rule is: Purchase agreements without a notary are simply invalid-no exceptions, no leniency. In our consulting practice, we repeatedly encounter situations where buyers and sellers believe they have a legally binding document that is, in fact, void. Handwritten reservation agreements with a purchase price agreement are unenforceable under real estate law without notarization.

Particular caution is required with so-called letters of intent to purchase or preliminary agreements: As soon as these contain a binding obligation to purchase or sell at a later date, they too are subject to the notary requirement. Without notarization, neither party can compel the other to complete the purchase-and any down payments or reservation fees already paid may pose legal problems.

We guide all purchase processes in the Nuremberg metropolitan region through to notarization and ensure that all agreements are documented in a legally binding manner. In case of doubt, we recommend consulting a specialist real estate attorney early on-especially when advance payments or binding purchase commitments are involved.

Frequently Asked Questions

Is a real estate purchase agreement invalid without a notary?

Yes, absolutely. The notarization requirement under Section 311b of the German Civil Code (BGB) is a mandatory formal requirement, and a violation of this requirement leads to invalidity under Section 125 BGB. Only if the formal defect is cured by transfer of title and registration in the land register (Section 311b(1) sentence 2 BGB) does the contract become valid retroactively. However, this cannot be deliberately planned, as the land registry office will not make an entry without a valid purchase contract.

Can a void contract be “cured” retroactively?

In some cases, yes. In the event of a formal defect in the notarized purchase agreement, § 311b BGB provides that the defect is cured by the transfer of possession (notarized handover of ownership) and entry in the land register. In other cases-such as when the contract is contrary to public policy or violates the law-remediation is excluded. Agreements involving illicit funds also cannot be retroactively legalized.

What happens to the purchase price if the real estate purchase contract is void?

Any amounts already paid must be refunded in accordance with the rules on unjust enrichment (Section 812 of the German Civil Code). The seller must repay the purchase price in full; the buyer must return the property if it has already been transferred. Additional claims for damages may exist, for example, if costs were incurred as a result of the rescission. In practice, enforcing these claims often requires legal proceedings and the assistance of an attorney.

Can a purchase agreement be void due to an excessive purchase price?

Yes-in the case of a so-called usurious contract under § 138 BGB. The prerequisite is a gross disproportion between performance and consideration (in case law, usually involving a markup of more than 100% on the market value) combined with the subjective exploitation of the other party’s weakness. In markets with strong demand, such as Nuremberg, a contract is rarely deemed contrary to public policy due to an excessive purchase price, but this is conceivable in sales to obviously inexperienced or pressured individuals.

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