Building loan agreements: TSP secures victory before the Federal Court of Justice
News from 23.02.17
Thümmel, Schütze und Partner, together with its partner Dr. Hervé Edelmann, has succeeded in securing a victory for the Bausparkasse Wüstenrot in two proceedings which are groundbreaking for the entire savings and loan association sector.
At issue in both proceedings was the question whether building loan agreements will have to be treated like “normal” loan agreements ten years after their initial maturity and may therefore be terminated pursuant to § 489 para. 1 no. 2 of the Bürgerliches Gesetzbuch (the Civil Code, the “bgb”). In both of these proceedings, two questions were problematic: first, there was the question whether the standard of § 489 para. 1 no. 2 bgb, which is unlimited in its applicability to loan agreements, can be teleologically reduced to the effect that the standard does not merit any applicability to the deposit-taking business activity of credit institutes and, in particular, of savings and loan associations (Bausparkassen) – the position initially represented by Judge Hutzel of the Local Court of Ludwigsburg, in his judgment dated 7 August 2015, docket no. 10 C 1154/15, and the legal opinion of which was adopted by the Higher Regional Court of Stuttgart in both previous appellate instances. The second problematic question was whether, due to the special peculiarities of the building loan agreement as of the date of the initial maturities, one can speak of any complete receipt of the loan within the meaning of § 489 para. 1 no. 2 bgb. In this respect, both proceedings – contrary to the false information in part knowingly disseminated in the media and by the consumer advice center – had nothing to do with whether savings and loan associations must adhere to the substantive content of the building loan agreements entered into.
The background of both proceedings involved the termination of 250,000 building loan agreements by savings and loan associations throughout Germany. The terminations were pronounced because, quite understandably in the current environment of low interest rates, nearly all savings and loan association investors – despite the circumstances that their building loan agreements have already been mature for more than ten (10) years – were no longer calling their building loans, but instead wanted to lay claim in perpetuity to their astronomically high (under present conditions) interest income of up to 5% on their saved deposits, whereas on the capital market they availed themselves of “normal” loans at an interest rate of ca. 1.5% instead of ca. 6% as in the case of building loans. As a consequence of the loss of income from loan interest as well as the savings and loan associations’ limited opportunities to actively participate in the capital market, the savings and loan associations were no longer in a position to sufficiently generate the revenues necessary for interest payments on deposits, which jeopardized the business model of the savings and loan associations.
Prior to the decision of the Federal Court of Justice, the courts of previous instance – the Higher Regional Court of Stuttgart as well as the Higher Regional Court of Bamberg and the Higher Regional Court of Karlsruhe – had held the terminations to be ineffective, whereas the Higher Regional Court of Dusseldorf, the Higher Regional Court of Frankfurt, the Higher Regional Court of Koblenz, the Higher Regional Court of Hamm, the Higher Regional Court of Cologne, as well as the Higher Regional Court of Celle, along with the overwhelming majority of the regional courts, had deemed the terminations to be effective under § 489 para. 1 no. 2 bgb.
With the decisions dated 21 February 2017 (docket nos. xi zr 185/16 and xi zr 272/16), the Federal Court of Justice has now adopted Dr. Hervé Edelmann’s line of argument in its entirety, according to which, firstly, § 489 para. 1 no. 2 bgb is applicable to building loan agreements; secondly, the complete receipt of the loan within the meaning of § 489 para.1 no. 2 bgb is to be regarded in the initial maturity, and, thirdly, that in accordance therewith the building loan agreements can be effectively terminated ten (10) years after their initial maturity.
Dr. Hervé Edelmann is frequently retained by savings and loan associations. In 2010, he prevailed in proceedings before the Federal Court of Justice, also of fundamental significance for the entire savings and loan sector, concerning the lawfulness of transaction fees that the savings and loan associations charge their clients upon entering into each building loan agreement. He counsels savings and loan associations throughout Germany in the proceedings concerning the terminated building loan agreements.