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Successful loan withdrawal due to unclear information regarding conclusion of building insurance

December 2017

Missing or incorrect mandatory information in relation to real estate mortgages that have been taken out since June 11, 2010 means that loan withdrawal is still a possibility.

Real estate mortgages that were concluded after June 10, 2010 are not affected by the so-called the “ewiges Widerrufsrecht”, aka perpetual right of withdrawal. We at the commercial law firm GRP Rainer Rechtsanwälte note that it remains possible to play the withdrawal get-out-of-jail-free card here if the relevant bank made use of flawed guidance pertaining to the right of withdrawal or made a mistake in relation to the mandatory information. A judgment of the Oberlandesgericht (OLG) Düsseldorf [Higher Regional Court of Dusseldorf] makes it clear, for instance, that if taking out building insurance is a prerequisite for a loan being issued then this needs to be clear from the contractual documentation (Az.: I-17 U 144/16).

In the instant case, a borrower had taken out a loan in August of 2010. According to the loan’s general terms and conditions, the borrower had in doing so undertaken to conclude a building insurance policy. However, the guidance on the right of withdrawal did not include a sufficiently clear reference to this undertaking, it merely stating that costs to be paid to third parties may arise such as notary and land registry expenses as well as costs pertaining to the building insurance (“sich an Dritte zu zahlende Kosten wie Notar- und Grundbuchkosten sowie Kosten für die Gebäudeversicherung ergeben können”). In 2015, the consumers in question declared that they were withdrawing from the loan agreement.

The OLG Düsseldorf held that the withdrawal had been effective, ruling that the contractual deed did not feature a clear reference to the undertaking to take out building insurance and that this was misleading for borrowers. As a result of the flawed guidance on the right of withdrawal, the withdrawal period never commenced, and it therefore remained possible to withdraw from the loan despite years having gone by since its conclusion.

Banks have repeatedly made mistakes when it comes to mandatory information and thus paved the way for loan withdrawal. In the present case, it was the flawed information concerning the duration of the loan. Because this mandatory information is linked to the beginning of the withdrawal period, mistakes mean that the withdrawal period has yet to commence. This affords consumers the opportunity to benefit from the ongoing low rates of interest if they successfully withdraw from the loan. Lawyers who are experienced in the field of banking law can assess whether the preconditions for loan withdrawal have been met.

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