Use Of Electronic Signatures In The German Real Estate Industry

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Morrison & Foerster LLPWith the digitization of everyday life, the importance of paper is decreasing and that of electronic documents is increasing. Even in the real estate industry, many matters are already being dealt with electronically. For example, in the case of utility bills or in the relationship between owners and property managers, electronic forms of communication are often unproblematic. Some declarations of greater importance require a specially secured, qualified electronic signature. On the other hand, a signature on paper is only legally required in a few cases. This leaves a lot of room for the simple and inexpensive use of electronic documents and signatures. Since this potential is often not yet used today,

I. Formal requirements in German law

If a form prescribed by law in Germany is not adhered to, the legal transaction is generally acc. § 125 BGB void. Therefore, formal requirements are not just a question of documentation; observing them is often an essential prerequisite for the effectiveness of declarations and contracts.

The BGB contains three main standards as formal requirements: notarial certification, which is necessary, for example, when selling real estate, § 311b (1) sentence 1 BGB; the written form in accordance with Section 126 (1) of the German Civil Code, which is generally fulfilled if the issuer has signed the certificate himself; and finally the rather rarely arranged text form, which only requires a legible and permanent explanation, § 126b BGB. The most important general principle is that the great majority of legal transactions are completely free of form, that is, they can be carried out in any way.

II. Regulations on electronic signatures

At the European level, three forms of electronic signature are distinguished according to the degree of their manipulation security: simple electronic signatures, advanced electronic signatures and qualified electronic signatures. German law only uses two of them, namely the simple and the qualified electronic signature. A simple electronic signature is any type of data in electronic form, which is added to other data in electronic form or logically linked to them in order to sign them, Art. 3 No. 10 eIDAS-VO. According to Art. 3 No. 12 eIDAS-VO, three elements are decisive for a qualified electronic signature: First, a signature is required that enables identification and assignment to the signer, whereby he has control over the exhibition data and a subsequent change in the data must be recognizable, Art. 3 No. 11, 26 eIDAS-VO. In addition, it must be secured by a qualified certificate that must meet certain requirements, which are regulated in Art. 3 No. 15 eIDAS-VO, especially the issuance by a qualified trust service provider. Finally, a secure signature creation unit in accordance with Art. 3 No. 23 eIDAS-VO is required, which can meet the prescribed security requirements, for example with special chip cards, but also with certain computer-based tools for verification, so that a remote signature is also possible. In addition, it must be secured by a qualified certificate that must meet certain requirements, which are regulated in Art. 3 No. 15 eIDAS-VO, especially the issue by a qualified trust service provider. Finally, a secure signature creation unit in accordance with Art. 3 No. 23 eIDAS-VO is required, which can meet the prescribed security requirements, for example with special chip cards, but also with certain computer-based tools for verification, so that a remote signature is also possible. In addition, it must be secured by a qualified certificate that must meet certain requirements, which are regulated in Art. 3 No. 15 eIDAS-VO, especially the issue by a qualified trust service provider. Finally, a secure signature creation unit in accordance with Art. 3 No. 23 eIDAS-VO is required, which can meet the prescribed security requirements, for example with special chip cards, but also with certain computer-based tools for verification, so that a remote signature is also possible.

Since most legal transactions in Germany are informal, the simple electronic signature is generally sufficient. There are a few exceptions to this principle. The most important, albeit rare, is the legally required notarial certification. It can never be replaced by an electronic signature. Where the written form is required by law, sections 126 (3) and 126a (1) BGB stipulate that a qualified electronic signature can be used as a substitute in conjunction with an exhibitor's name. The written form cannot be replaced only if the electronic form is expressly excluded by law (e.g. in the case of a guarantee declaration in accordance with Section 766 sentence 2 BGB) or if this results from the context of the norm or the purpose of the form (e.g. Section 793 BGB, where “certificate” means an embodied declaration that can be read without technical aids). Simple or advanced electronic signatures are therefore not sufficient to replace the legally prescribed written form, but they can be used wherever the law only orders the text or, as is usually the case, no form at all. If the written form is not required by law, but agreed between the parties, any telecommunications transmission and thus a simple electronic signature is sufficient in case of doubt, Section 127 (2) BGB. If the parties have agreed on an electronic form, the simple electronic signature is sufficient in case of doubt, Section 127 (3) BGB. Simple or advanced electronic signatures are therefore not sufficient to replace the legally prescribed written form, but they can be used wherever the law only orders the text or, as is usually the case, no form at all. If the written form is not required by law, but agreed between the parties, any telecommunications transmission and thus a simple electronic signature is sufficient in case of doubt, Section 127 (2) BGB. If the parties have agreed on an electronic form, the simple electronic signature is sufficient in case of doubt, Section 127 (3) BGB. Simple or advanced electronic signatures are therefore not sufficient to replace the legally prescribed written form, but they can be used wherever the law only orders the text or, as is usually the case, no form at all. If the written form is not required by law, but agreed between the parties, any telecommunications transmission and thus a simple electronic signature is sufficient in case of doubt, Section 127 (2) BGB. If the parties have agreed on an electronic form, the simple electronic signature is sufficient in case of doubt, Section 127 (3) BGB. orders no form at all. If the written form is not required by law, but agreed between the parties, any telecommunications transmission and thus a simple electronic signature is sufficient in case of doubt, Section 127 (2) BGB. If the parties have agreed on an electronic form, the simple electronic signature is sufficient in case of doubt, Section 127 (3) BGB. orders no form at all. If the written form is not required by law, but agreed between the parties, in case of doubt, any telecommunications transmission and thus a simple electronic signature is sufficient, Section 127 (2) BGB. If the parties have agreed on an electronic form, the simple electronic signature is sufficient in case of doubt, Section 127 (3) BGB.

The document with the (simple or qualified) electronic signature can be transmitted by email or in any other electronic way. However, in order to ensure that access is legally binding - particularly important in the case of unilateral declarations or information requirements - the recipient must agree to the type of transmission chosen.

III. Specific use cases

This legal starting position enables a large number of applications for electronic signatures in the real estate industry. Without being exhaustive, some of the most relevant are presented here. First one

Overview

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document

Simple electronic signature

Qualified electronic signature

Notarial form / Mandatory written form

Rental

  • Permanent lease
  • Tenants Questionnaire
  • Handover protocol (including meter readings and damage documentation etc.)
  • In addition to cost-accounting
  • Termination (except for rental contracts for housing)
  • Write-Mietanpassungs
  • Master data sheets and changes
  • Self-information from prospective tenants
  • Temporary lease
  • Termination of residential rental contracts
  • Significant change in temporary leases
  • Housing rental contract with index or graduated rent
  • Exercise a statutory tenant pre-emptive right
  • SEPA mandates

 

 

  • rental guarantee

house building

  • construction contract
  • Architect and engineer contract
  • structural analysis
  • Plan released
  • artisan contracts
  • decreased construction site
  • Other construction site documentation (e.g. lists for processed material or completed work)
  • Termination of building contracts
  • Termination of architectural and engineering contracts
 

 

Administration and WEG

  • Caretaker's checklists
  • Logging and information about meter readings
  • Convocation of a WEG meeting
  • artisan contracts
  • Simple powers of attorney
  • Facility management checklists
  • WEG decision without meeting
   

brokerage contracts

  • Brokerage Agreement
  • commission agreement

 

 

  • If necessary. Reservation agreement

Real estate acquisition including financing

  • loan agreement
  • Backup purpose intended
  • Property exposure sheets
  • Checklists pre-valuation of real estate for financing
  • Consumer loan contract for the signature of the consumer
  • Property Purchase Agreement
  • Basically: buying a property holding company
  • Transfer of a land charge
  • Zwangsvollstreckungsun-terwerfung
  • Abstract debt acknowledgment
  • In fact: land charge order
  • In fact: granting a real right of first refusal
   
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1. Leases

A large field of application for electronic signatures is in rental contracts.

1.1 Conclusion of contract

In principle, rental contracts can be concluded informally, so that in most cases a simple electronic signature is sufficient.

The written form is mandatory only for the effective limitation of a rental contract, if it should last longer than one year, and for each limitation of rental contracts for living space (§ 550 BGB or § 575 Abs. 1 BGB). In both cases, it can be replaced by a qualified electronic signature.

1.2 Handover

The handover protocol at the beginning and end of the rental is not subject to any formal requirements, and can therefore also be created and signed electronically - conceivably on a mobile device brought by the landlord's representative.

1.3 Additional costs

The billing of ancillary costs is fundamentally not subject to any formal requirements, so it is also possible by email. A written statement is common, but can easily be replaced by an electronically signed one.

1.4 Tenant self-disclosure

The tenant self-disclosure is not subject to any formal requirements and can therefore be signed with a simple electronic signature.

1.5 termination

Basically, there are no formal requirements for the termination of a rental agreement for commercial space. In most cases, however, the written form will be agreed, which can usually be replaced by a simple electronic signature. When terminating rental contracts for living space, acc. Section 568 (1) BGB stipulates the written form, which in turn can be replaced by the qualified electronic form.

1.6 Rent amount

If an index or graduated rent is agreed for a residential rental agreement, this agreement must be in writing, §§ 557a, 557b BGB. Instead, the qualified electronic signature can be used here.

Rent increases generally do not require any form. If it is a residential rental agreement, the text form is required, § 558a BGB. In both cases, the simple electronic signature can be used. If this involves a change in the content of a temporary rental contract, the written form must be retained and a qualified electronic signature is therefore required: Since a contractual change in the rental amount represents a significant change in the content of the contract, it must be declared in writing so that the contract does not change transformed into an unlimited and therefore terminable, § 550 BGB. This also applies to changes to graduated or index rents.

1.7 Tenant's right of first refusal

According to § 577 BGB, the tenant of housing has a right of first refusal on the apartment he has rented under certain conditions. If he wants to exercise this right of first refusal, he must do so in accordance with Section 577 (3) BGB. A qualified electronic signature can also be used here.

2. Construction and architectural contracts

Construction and architect contracts are also generally not subject to formal requirements. They can therefore be effectively closed with a simple electronic signature.

Documents that are exchanged with architects as part of contract processing, such as structural calculations, building plan releases and changes, and site inspections are generally not subject to formal requirements and are therefore possible with a simple electronic signature.

The consumer construction contract requires Section 650i (2) BGB of the text form. A previous building description in text form is also required, Section 650j, Art. 249 Section 1 EGBGB and instructions on the right of withdrawal according to Section 650l BGB, Art. 249 Section 3 EGBGB in text form. A simple electronic signature can therefore be used here. The withdrawal of the consumer according to § 355 BGB is possible without a form and therefore also with a simple electronic signature.

The termination of the construction contract - regardless of whether it is a consumer or not - requires the written form according to § 650h BGB, which can be replaced by a qualified electronic signature. This applies according to Section 650q BGB also for architectural and engineering contracts.

3. Administration

Contracts between owners and property managers of all kinds, such as administrators, caretakers or craftsmen who carry out regular maintenance work and repairs on the property, are not subject to any legal form, but are usually concluded in writing. A simple electronic signature can also be used here.

4. Apartment owners' associations

In the context of the activities of apartment owners' associations, there are few mandatory formal requirements so that electronic signatures could be used. The written form is required in accordance with Section 23 (3) WEG in the event that a decision by the owner is to be made without a meeting; here it can be replaced by a qualified electronic signature. The convocation of the owners' meeting is subject to the text form according to Section 24 (4) WEG, which is fulfilled with a simple electronic signature.

5. Brokerage contracts

Brokerage contracts are also generally not subject to any formal requirements. They can therefore also be completed with a simple electronic signature. An exception is the case in which remuneration is contractually agreed in the event that the property is reserved for a certain period of time. According to the case law of the German Federal Court of Justice, a notarial certification according to Section 311b (1) BGB is necessary and therefore no electronic form is possible if the agreed remuneration is more than 10% of the broker's commission.

6. Financing

Another area of ​​application for electronic signatures is financing. On the one hand, the financing contracts themselves, on the other hand, the instruments for securing them have to be considered.

6.1 Financing contracts

Basically, loan contracts are not subject to formal requirements. Therefore, they can be effectively closed in any electronic form.

However, the written form is mandatory for consumer loan contracts in accordance with. Section 492 (1) of the German Civil Code, where, however, it can now be replaced by a qualified electronic signature. This form is only mandatory for the borrower, while the lender's declaration can also be created using automatic facilities and then does not have to comply with the written form. On the part of the entrepreneur, a simple electronic signature is also sufficient for the consumer loan contract.

6.2 Collateralization

6.2.1 Ordering and transferring real estate

By far the most common form of collateral for a property purchase loan is the ordering of a mortgage. It has two parts: a security contract and the actual appointment through agreement and registration, § 873 BGB. The security contract does not require any form and offers space for the use of electronic signatures. The agreement on the order itself is also not subject to any formal requirements. Nevertheless, it is practically always notarized, since a binding effect can only be achieved until it is entered in the land register, section 873 (2) BGB. The same applies if the land charge is to be transferred to a third party, unless it is a (practically rare) letter land charge in which § 1154 para. 1 BGB the written form and thus a qualified electronic signature is sufficient.

6.2.2 Submission to foreclosure

Furthermore, a real submission to the enforcement in favor of the lender is common, in order to allow him direct access to the property in the event of a loan default. Here the notarial form is arranged according to § 794 Paragraph 1 No. 5 ZPO, which cannot be replaced by electronic signatures.

6.2.3 Abstract acknowledgment of guilt

An abstract acknowledgment of debt for further protection is also common. Section 781 sentence 2 BGB expressly excludes the electronic form.

7. Acquisition of land

Acquisition of land in Germany is mandatory for notarial certification in accordance with § 311b BGB, so there is no room for electronic signatures here.

It is different, however, if the property is sold through a share deal, not directly, but indirectly through the transfer of ownership of the property owner. If the owner company is a GmbH, a notarized certificate is also required for its transfer in accordance with Section 15 Paragraphs 3 and 4 GmbHG. However, if it is an AG, its shares are generally transferable informally and the use of electronic signatures is therefore possible.

If the owner company is a partnership, the transfer of the shares is also generally possible informally, so that electronic signatures can also be used here. An exception to this is the GmbH & Co. KG, in which the transfer of the shares (including the limited partners) requires the notarial form. There is therefore no room for electronic signatures here.

Apart from these restrictions, many other documents related to the processing of the property acquisition, such as property admission forms, do not require any legal form and are therefore possible with a simple electronic signature.

8. Real pre-emption right

The real agreement to order a right of first refusal is no longer tied to the notarial certification, so that an electronic form can in principle be used here. Nevertheless, there is a risk for the pre-emptive, since the real agreement without this form only becomes effective upon entry in the land register, section 873 (2) BGB. Since the legal business continues according to § 311b BGB must be notarized, the real business will also be regularly certified and in practice there is probably no area of ​​application for electronic signatures.

IV. Outlook

While there are formal requirements for a few documents in the German real estate industry that cannot be easily met with an electronic signature, the use of electronic signatures is possible for the majority of the documents common in the German real estate industry. The fact that the signature on paper still predominates in practice today can hardly be attributed to the supposedly rigid legal situation in Germany. This is because electronic alternatives are permitted and available for a large part of the documents and declarations to be produced on a daily basis.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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