Breach of tenant’s pre-emptive right can become very expensive
> February 2015
FCJ: Tenant has claim to compensation in the amount of the lost profit upon the sale of the apartment in disregard of the statutory pre-emptive right.
A recent ruling by the German Federal Court of Justice concerned the consequences of the non-consideration of a tenant’s pre-emptive right. Tenants have a statutory pre-emptive right if the flat is converted into a freehold flat after it has been provided to the tenant and the landlord sells the said flat to a third party. The landlord has to inform the tenant of the content of the purchase agreement as well as of his pre-emptive right. The tenant can exercise his pre-emptive right until the expiry of a period of two months.A tenant in Hamburg was only offered her flat for sale when it was sold for the second time. She found out that the purchase price of the flat was approximately EUR 80,000 lower on the first sale.
The VIII Civil Division of the Federal Court of Justice, which is e.g. in charge of residential tenancy law, ruled that the tenant can be entitled to compensation for the difference between the market value of the apartment and the purchase price agreed with third parties – less costs saved – as non-performance damage if the tenant only learns of the content of the purchase agreement and his/her pre-emptive right after the sale of the flat to a third party and, for this reason, decides not exercise the pre-emptive right as a result of a breach of the landlord’s notification obligation.
The notification of the occurrence of the pre-emption event and the information regarding the pre-emptive right are intended to enable the tenant to exercise his/her pre-emptive right and to establish a claim to the transfer of the flat as a result. If the tenant only receives this information at a time at which the purchase agreement has already been settled with a third-party buyer, it can be assumed that the landlord cannot transfer the flat which he no longer owns to the tenant. In such a case, the tenant cannot be expected to exercise the pre-emptive right in order to conclude a purchase agreement with the landlord which the said party cannot fulfil from the outset. Instead, the tenant can directly request compensation for the damage caused by non-performance – in this case: lost profit – which he/she would have generated if he/she had exercised the pre-emptive right (VIII CR 51/14 of 21/01/2015).
