Compensation

Damages is the legal right of an aggrieved party to financial compensation for harm caused by a breach of contract, a tort, or a breach of duty by another party. In the real estate sector, damages are relevant in many situations: in cases of concealed defects in the purchase agreement, construction defects under a contract for work and services, culpable delays in construction completion, breach of the owner’s duty to maintain safety, and breaches of duty in the tenancy agreement. The aim is to restore the aggrieved party to the financial position they would have been in had the harmful event not occurred.

Damages in Real Estate Purchases: Defects and Fraudulent Misrepresentation

The most common scenario for damages in a real estate purchase arises when the seller has fraudulently concealed material defects. While the blanket warranty exclusion in the purchase agreement (“as is”) protects the seller from claims for material defects, it does not apply in cases of fraudulent misrepresentation. A seller who intentionally conceals known water damage, active mold infestation, or an unresolved legal defect is liable to the buyer for damages.

This includes the costs of remedying the defect, any lost rental income, and transaction costs if the buyer would not have purchased the property had they known of the defect. In cases of serious fraudulent misrepresentation, the buyer may also rescind the purchase agreement and demand full restitution. Therefore, the following applies to sellers: Known material defects should be documented in the purchase agreement-transparency protects against protracted legal disputes.

Damages for Construction Defects and Contracts for Work and Services

Anyone building or renovating a house enters into contracts for work and services with construction companies and tradespeople. If they provide defective work (poor waterproofing, faulty structural design, improper electrical installation), the client initially has a right to subsequent performance (Section 635 of the German Civil Code). If the rectification fails or the set deadline expires without result, damages may be claimed. This includes the costs of remedying the defects by a third-party contractor, consequential damages (e.g., water damage from leaks), and, if applicable, loss of use. The statute of limitations for construction defects is five years after acceptance (Section 634a BGB).

The acceptance is decisive: Upon acceptance of the structure, the burden of proof for defects shifts from the contractor to the client. Before acceptance, the contractor must prove that no defect exists; after acceptance, the client must prove the defect and its cause. We therefore recommend conducting the acceptance carefully and documenting all identified defects in writing in the acceptance report.

Duty of Care and Damages for Property Owners

Property owners are obligated to ensure that their property does not pose any danger to third parties (duty to maintain safety). If an owner culpably violates this duty-for example, by failing to perform winter maintenance on their own sidewalk, providing inadequate lighting in the stairwell, or failing to repair storm damage to the roof-they are liable for damages resulting from personal injury or property damage.

This duty is particularly relevant for landlords: They must maintain the rental property in a safe condition and immediately eliminate known hazards. However, the duty to perform winter maintenance can be transferred to the tenant through corresponding clauses in the lease agreement-which is recommended but does not relieve the landlord of their oversight responsibility.

Damages in a Lease Agreement

In a lease agreement, claims for damages can arise on both sides. The landlord may claim damages if the tenant damages the rental property, uses it in violation of the contract, or fails to carry out the required restoration. The tenant is entitled to damages if the landlord fails to remedy defects despite being aware of them, thereby causing the tenant harm-e.g., due to persistent moisture damage that destroys furnishings.

An important principle: Damages generally require fault (intent or negligence). Anyone who causes damage through no fault of their own is generally not liable for damages, but at most for compensation (e.g., in cases of strict liability).

Practical Tip for Property Owners in Nuremberg and Franconia

In the Nuremberg metropolitan region, claims for damages against property owners due to inadequate winter maintenance are particularly common in winter. We recommend: Clarify exactly who is responsible for winter maintenance on your property and the adjacent sidewalk (owner or tenant via the lease agreement), and document the fulfillment of this obligation.

As a seller, you should always disclose known defects in the purchase agreement and document in writing that the buyer is aware of them. As a buyer, we recommend having defects documented by an expert before the purchase-this significantly strengthens your position in the event of later claims for damages. Building liability insurance is essential for landlords, as it covers third-party claims for damages.

Frequently Asked Questions

As a buyer, can I claim damages if the move-in date is not met due to construction delays?

Yes, if the developer or seller is responsible for the delay. Claims for damages then include the costs of temporary rent, double moving expenses, and, if applicable, lost rental income if the property was intended as an investment. A prerequisite is that a specific handover date was agreed upon or that the seller was given notice of default. In developer contracts, handover dates are often formulated only as target dates; the burden of proof lies with the buyer.

How long can I assert claims for damages due to fraudulently concealed defects?

The statute of limitations for claims for damages due to fraudulent misrepresentation is ten years from the handover of the property (or from the time the defect becomes known, if this occurs later), pursuant to Section 438(3) of the German Civil Code (BGB). This is considerably longer than the standard five-year warranty period for real estate sales. For tort claims (Section 823 of the German Civil Code), the standard three-year statute of limitations applies from the time the damage and the party responsible for it are known.

As a landlord, am I automatically liable for damages if a tenant falls in my apartment?

Not automatically. The landlord’s liability requires that they have culpably breached their duty to ensure public safety-that is, failed to eliminate a known or recognizable hazard. If a tenant trips over their own improperly stored items, there is no breach of duty on the part of the landlord. However, if they fall over a defective stair step that you failed to repair despite being aware of it, you are liable. Adequate liability insurance (building liability insurance for landlords) is therefore essential.

Can liability for damages be excluded through contractual clauses?

A complete exclusion of liability for damages is not possible-liability cannot be effectively excluded in cases of either intent or gross negligence (Section 276 of the German Civil Code). In real estate purchase agreements, the exclusion of warranty is common and legally effective, but it does not protect against liability for damages in cases of fraudulent misrepresentation. Lease clauses that completely exempt the landlord from liability for defects in the leased property are also invalid, as they unreasonably disadvantage the tenant (Section 307 of the German Civil Code (BGB)).

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