You keep your Eyes on the Ball…

… while we’ll keep ours on the law for you

The German-British Sport Law Experts of Graf & Partners specialise in drafting and negotiating athletes agreements, sponsoring and endorsement deals, sports related litigation and sports event agreements. We consult sports federations, professional sports clubs, major event sponsors and individual professional athletes from many different sports, including football (soccer), ice hockey, golf, baseball, motor sports and winter sports. Since, nowadays, sports law is essentially business law, our sports lawyer team includes experienced corporate, contract and intellectual property lawyers qualified in Germany and England. Head of the sports law department is Bernhard Schmeilzl, who is an international business lawyer called to the bar in 2001 and who has 30 years of experience as a sports manager, arbitrator and coach. He is currently advising English football teams on how to secure unrestricted access to EU football players in spite of the recent Brexit decision.

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The law firm Graf & Partners and its German-English litigation department GP Chambers was established in 2003 and has many years of experience with British-German and US-German business and corporate matters, including the representation of professional sports organisations and professional athletes. If you need legal advice or representation do not hesitate to contact our German-British law firm by calling +49 941 463 7070

International Probate: Assets in Germany will be found (and taxed) by German Tax Office

Nowhere to hide from the German Finanzamt

If the deceased held funds or owned property in Germany, the German Tax Office (Finanzamt) will find out about it and will – most likely – levy German inheritance tax, even if the deceased was not a German national and even if the deceased was not resident in Germany. We have explained the workings of the German Inheritance and Gift Tax Code (Erbschafts- und Schenkungssteuergesetz) here.

Executors are under the legal obligation to submit an inheritance tax declaration (Erbschaftssteuererklärung). The German IHT forms are available for download here.

But would the German tax office (Finanzamt) ever find out about the assets of the testator if the executor would – let’s say – forget to submit such a German IHT declaration? Yes, the tax authorities definitely will find out about such assets of the deceased. For numerous reasons:

In case of German property, all transactions and notifications to the German Land Registry must officially be made through a notary. The notary is obligated to send a copy of each such deed to the German tax authority.

In case of bank accounts or other financial investments, section 33 German Inheritance and Gift Tax Code (Erbschaftssteuer- und Schenkungssteuergesetz) obliges every German bank, insurance company or other financial service provider acting within Germany to proactively disclose the accounts to the German tax office as soon as they learn about the death of the account holder. This includes persons or institutions holding accounts in escrow or as fiduciaries. Furthermore, German banks must also disclose the accounts held by foreign subsidiaries. So if the deceased was a client of Deutsche Bank in Frankfurt and he also had a bank account with the Deutsche Bank branch in Austria or the United Kingdom, these investments will also be fully disclosed to the German tax office. It was only recently confirmed by the European Court of Justice (C-522/14 of 14 April 2016) that section 33 German Inheritance Tax Code does not violate EU law.

Finally, the executor and the beneficiaries are simply not able to access German funds, because banks etc will not release funds (except if there are unsignificant amounts or such amounts necessary to pay funeral costs) unless the executor can provide the so called steuerliche Unbedenklichkeitsbescheinigung (Certificate of Non-Objection) issued by the German tax authorities. More on this here.

So, if the deceased has held any assets in Germany, there is no way to avoid getting in contact with the German tax office. In the light of the above, one must be very careful not to omit any assets, because there is an extremely high risk that the tax office has already been informed about the deceased’s German bank accounts and other investments before the executor even submits the tax form. If the authorities get the impression that the executor is trying to hide something, the next letter will be from the German prosecutor’s office charging the executor with tax evasion.

For more information on German-British probate matters and international will preparation see the below posts by the international succession laws experts of Graf & Partners LLP

Or simply click on the “German Probate” section in the right column of this blog.

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The law firm Graf & Partners and its German-English litigation department GP Chambers was established in 2003 and has many years of experience with British-German and US-German probate matters, including the representation of clients in contentious probate matters. If you wish us to advise or represent you in a German or cross border inheritance case please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 463 7070

Brexit as a Business Opportunity for British SME’s

British SME’s can avoid losing EU customers and business partners by creating a EU subsidiary. And they can get ahead of their British Competitors while doing it.

Brexit leaves many British businesses confused and scared about how and in which legal framework they will be able to continue to operate their business within the EU. Many of those businesses will merely wait and see what happens for many months or even years.

However, waiting can be dangerous: Your existing customers and business partners in Europe may be uncertain about whether they can still rely on you to provide the goods and services in the long run. Consequently, they may turn to non-UK suppliers to avoid risks (more on this here).

Use Brexit as a Chance to grow your European Business

This period of widespread paralysis and confusion gives you the opportunity to get ahead of your UK based fellow competitors by opening a branch office in Germany. This will ensure that you will be fully able to trade and to provide services throughout the entire European Union. Take away your customer’s and supplier’s fears by showing them that you are willing to fully “go Europe” in spite of Brexit.

Secure your EU Business Foothold by establishing a German Subsidiary now

So, if you are already doing business with customers in EU countries or have considered to expand your business abroad: Now is the time to speed matters up in order not to lose scared EU customers. Germany, as the strongest economy within the EU, a very business friendly legal and tax system and its central location within the European continent, is the natural choice for creating a subsidiary or a branch office.

What are the Options avaliable to quickly set up a Business in Germany?

Pre-Brexit, you basically had three options to create a business foothold in Germany: (i) set up a real German Company, (ii) register a Branch Office of an existing UK Company, or (iii) register a mere Representative Office (unselbständige Zweigstelle).

Now, after the Brexit vote, if you wish to avoid any legal uncertainties, the best choice to establish a business on European territory is the formation of an actual Germany company, preferrably a German Limited Liability Company, called Gesellschaft mit beschränkter Haftung (GmbH). Or, of course the acquisition of or merger with an existing German company.

More on the technicalities here:

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Who can be Shareholder and Company Director?

You may decide to set up the German business either as a subsidiary company of an existing UK company or as an independent legal entity which is owned by private individuals as shareholders. This decision is mostly tax driven.

Please note that according to German law the minimum share capital requirement for a real GmbH is 25,000 Euros and the shareholder(s) must pay in at least half of that amount right away, since the company will only be registered once at least 50% of the minimum share capital has been transferred onto the German bank account of the new company. So opening a bank account is inevitably part of the company formation process.

Please also note that the company must have a managing director who is either a national of a European Union country or has a German work permit. In case you wish us to provide someone who can act as director (Geschäftsführer) for the German company, this is, in principle, possible, but please understand that this director has full access to the company account and can obligate the company. Also, this person is personally liable towards the German authorities for compliance with all German laws, in particular with the director is liable for payment of taxes and social security obligations. So please understand that if such services are required from a German (interim) manager, that person will want to know what he is getting himself into and will demand to obtain detailed information on what the business of the company would be and for how long the services of a German company director are required. If it is just for the initial setup period of about 3-6 months, it is usually not a problem to find someone. In case you are looking for a long term manager from Germany, we may be able to help with that too.

For our British corporate clients, we usually draft the company formation documents in bilingual versions (English / German) to avoid the need for certified translations later on. We also employ or recommend German notaries who are fluent in English and are capable to recording the necessary resolutions and drafting the required deeds in English.

If the German subsidiary has only a single shareholder (be it a private person or a British company) the German company statutes can be kept very basic and lean. Should, later on, there be more than one shareholder, the statutes will have to be amended to provide for rules how to deal in case of potential conflicts between the shareholders. If the shareholder is a UK company, the German notary will need to be provided with certified and legalised (i.e. apostilled) copies of the following corporate documents, because these documents will need to be sent to the German Company Register together with the deeds:

 

  • certificate of incorporation
  • articles of association
  • memorandum of association
  • certificate of good standing

 

You can either use a UK notary to obtain this or apply directly, see here https://www.gov.uk/government/organisations/companies-house/about/about-our-services#certified-copies-and-certificates and here https://www.gov.uk/get-document-legalised.

Is the German Mini GmbH an Option?

Some British business clients have heard about the so called German “Unternehmergesellschaft”, which is commonly referred to in Germany as Mini-GmbH (having nothing to do with the car brand of the same name). This was introduced by the German legislator to fend off the at that time increasing use of the English limited liability company by German businessmen. We do, however, strongly discourage our clients from establishing only a Mini-GmbH, because in real German business life such a Mini-GmbH is simply not being taken seriously. Virtually every business partner, bank, potential customer or supplier will immediately assume that the shareholder does not have any money, because he was not even able to come up with the required miminum capital of EUR 12.5k to register a “proper” German GmbH. We therefore urgently recommend to establish a “real” GmbH. Especially since the Mini-GmbH is only an interim stage anyhow, because according to German law every Mini-GmbH must become a real GmbH eventually. Therefore, the shareholders of a Mini GmbH are not allowed to receive dividends until the full share capital of EUR 25k is accrued. In short: A serious businessman would not consider the Mini-GmbH to be a relevant option. Furthermore, a Mini-GmbH is under more scrutiny from the German tax authorities.

The formation procedure (see the above checklist) is identical whether you chose a Mini-GmbH or a real GmbH. The entire formation and registration process can be planned, organised and executed by our firm of British and German lawyers. Depending on the complexity (number of shareholders, natural persons or foreign companies etc.) the time to be spent on such a project is usually between six to 20 hours. Very roughly, the costs to establish a German limited liability company is around 2,000 to 4,000 Euro plus disbursements for notaries, legalisation of documents, translations and German Companies House fees.

In case you decide to “go Europe” in spite of Brexit, we will be happy to help grow your British business on the Continent. Keep calm and keep doing business with(in) Europe!

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The law firm Graf & Partners and its German-English litigation department GP Chambers was established in 2003 and has many years of experience with British-German and US-German business and corporate matters, including the representation of clients in M&A transactions. If you wish us to advise or represent you please call German business lawyer Bernhard Schmeilzl, LL.M. (Leicester) or Munich based English solicitor Elissa Jelowicki on +49 941 463 7070.

Buying German Property as Brexit Counter-Strategy

If you consider to invest some of your money outside the UK due to Brexit and the financial uncertainties caused by it, purchasing property in Germany may be a smart approach. Property value has been rising steadily, in some German cities (like Munich, Frankfurt, Hamburg, Stuttgart) very significantly. The German economy is strong and finding solvent and reliable tenants is hardly ever a problem for landlords. If you consider purchasing a flat or a house in Germany we will be happy to advise and assist with all steps of the process, from finding the right property (either through an estate agent or directly) to the sale agreement and conveyancing process to finding a tenant and arranging for a lease agreement. More information on buying property in Germany, the German Land Registry and conveyancing process and the rights and duties of tenants and landlords in Germany is available in these posts:

– Legal guide to buying a house or apartment in Germany

– Template of German Land Sale & Purchase Agreement

– Apartment Prices in Germany: How to get a quick Overview

– Searching for Property Information in the German Land Registry

– Tenants beware of Waiver Clauses in German Property Lease Agreements

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The law firm Graf & Partners and its German-English litigation department GP Chambers was established in 2003 and has many years of experience with British-German and US-German legal issues. If you need legal advice or representation in Germany please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at this number +49 941 463 7070

How to Renounce the Role as Executor in Germany

If someone who owns assets in Germany dies, these foreign assets will only be released if a German (!) Grant of Probate can be presented. Since the UK has opted out of the EU Succession Regulation, an English Grant of Probate (or Scottish Confirmation) is worthless abroad, just as British financial institutions do not accept non-UK Grants. Thus, in principle, a national Grant of Probate must be obtained in each and every jurisdiction, where the testator held assets.

In Germany, the executors and beneficiaries have a choice between applying for a Certificate of Inheritance (Erbschein) or a Certificate of Executorship (Testamentsvollstreckerzeugnis). Details of which are explained here.

Depending on how the relevant Will is worded, one or the other may be the smarter choice. If there is an English Will, then the easier way is usually the Certificate of Executorship, because English Wills are, in most cases, very precise about who the executors are. However, most Wills name more than one executor. Sometimes the wording even is

“I appoint the partners at the date of my death in the firm of Solicitors XYZ to be the Executors…”

This can be a large number of people who would all have to apply jointly and would later on also have to act jointly. This, of course, is impracticable and the normal approach in cases like this one is for all but one or two of those people to refuse to act as executor. Under German law, this can be done by a simple letter to the German Probate Registry in charge (usually the Probate Court where the deceased has had his or her last residency, if resident outside of Germany then it is usually the Local Court Berlin).

An example for such a simple letter of renunciation of executorship is available for download here: Renunciation_Executorship_Template

The document does not necessarily have to be witnessed and, since there are no strict formal requirements (in contrast to the application for a certificate) it can even be sent to German Probate Registry by way of facsimile.

For more information on German-British will preparation and probate matters please see these posts provided by the international succession laws experts of Graf & Partners LLP

Or simply click on the “German Probate” section in the right column of this blog.

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The law firm Graf & Partners and its German-English litigation department GP Chambers was established in 2003 and has many years of experience with British-German and US-German probate matters, including the representation of clients in contentious probate matters. If you wish us to advise or represent you in a German or cross border inheritance case please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 463 7070

Corresponding with Germans: How not to come across as being rude

Proper Email Etiquette when corresponding with Business Partners in Germany, Austria or Switzerland

Our law firm specialises in British-German legal issues, so most of our email correspondence takes place in English. In many cases, we represent German business clients for whom we liaise with UK business partners, barristers, solicitors, tax advisors, or other consultants.

Rule 1: Do not address people by their first name right away

German clients, especially if they do not have any prior experience with Anglo-American business partners, are often shocked, when the UK (or US) counterpart responds using the German client’s first name. This is sometimes considered as too intimate or even rude. Especially, if the British business partner uses only the first name – and nothing else, which is rather common in Britain and the USA.

However, to a German, an email starting with “Bernhard, could you give me a call …” sounds very much like “Bernhard, you have messed up and I need to straighten you out”. Virtually no German would write to another German by just using his first name. Even if they are on a first name basis, they will always use “Hello Bernhard” or “Hi Bernhard” or even just “Hello” or “Good morning”. Again, using only the first name without any salutation will ring alarm bells with the German recipient and it will remind him of when his mother used to yell “Bernhard, how often do I have to tell you to clean up your room”.

My recommendation: Use “Hello Bernhard” or “Hi Bernhard” or “Good morning Bernhard”. When in doubt about whether your German counterpart is old fashioned and/or unaccustomed to the Anglo-American habit of using first names even in business correspondence, use “Mr” or “Mrs”.

By the way: I personally would stay away from addressing a German with “Hello Herr Schmidt” or “Dear Herr Schmidt”. Surely, most British and US partners who use this “Herr” (or “Frau”) mean well and just intend to “do as the Germans do”. However, there is always the risk that the German recipient of such an email may take this the wrong way and feel ridiculed. When I do get such emails adressing me with “Hello Herr Schmeilzl” it always conjures up the image of John Cleese doing the Fawlty Tower Nazi Walk On the other hand side, maybe it’s just me  :-)

Rule 2: Don’t hesitate to use “Dear”

The standard German salutation in a letter to someone you are not on a first name basis with is “Sehr geehrter Herr Schulz”, which literally translates into “Much esteemed Mr Schulz”. In German, it does not sound that old fashioned and stiff, it is simply the standard greeting one uses. In order to use “Lieber Herr Schulz” (Dear Mr Schulz), one must really have a very good personal rapport with the addressee. Thus, the combination of “Lieber” and “Herr” is rare, because if I can use “Lieber” then I am usually already on a first name basis with that person.

Now, since there is no practical English language equivalent to the German “Sehr geehrter”, you have the choice between “Hello”, “Hi” or “Dear”. To a German, the English “Dear” does not have the same intimate sound as the German “Lieber” has, so feel free and go ahead using “Dear Mr Schulz”, even if you would not use it to adress an English speaking business partner. Using “Sir” in the first ever letter or email to someone is fine, but it will sound stand offish and very formal if you keep using it.

German lawyers (Rechtsanwälte), by the way, do greet each other with “Sehr geehrter Herr Kollege Soandso”, i.e. “Well esteemed colleague Mr Soandso”. Leaving out the “Kollege” will be considered as impolite.

Rule 3: Explain

Finally, my advice is to get the matter out in the open and simply explain to the German recipient what you are doing. An introductory sentence like this one, for example, will mostly do the trick: “Dear Bernhard, I hope it is ok to address you on a first name basis as we do here in Britain…”. Very rarely, a German will then still insist on being formally adressed as Mr Soandso. Instead, in most cases, the German recipient will be flattered and happy to have “hit it off so well” with his British counterpart to even be called by his first name already.

As always, there are exceptions to these rules. Especially since the younger generation is much more international nowadays and many young Germans will be well aware of the fact that Britains and Americans do address each other with their first names without this meaning that they are best pals.

While Germans and Austrians are quite similar in their approach to business correspondence etiquette (or netiquette), the average Swiss will be much more conservative and traditional. So I suggest to stick with Mr and Mrs if you write to a Swiss person until he or she makes the first move re the first name issue.

Good luck with your British-German business correspondence! And if anything goes wrong after all, you can always call a Cross Channel Lawyer :-)

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The law firm Graf & Partners and its German-English litigation department GP Chambers was established in 2003 and has many years of experience with British-German and US-German probate matters, including the representation of clients in contentious probate matters. If you wish us to advise or represent you in a German or cross border inheritance case please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 785 30 53.

Expert Reports on German Law

As a full service German and English law firm, established in 2003, we are often asked to provide English Law Firms with an expert report based on issues of German Law.

Bernhard Schmeilzl, a bilingual Lawyer, is qualified and is able to provide expert reports to be used in English litigation and arbitration cases based on various issues of German law, whether it be Civil, Commercial or Criminal law, including procedural aspects . Not only does he have a very good grasp of the English Civil Procedure Rules on expert reports, but he also has a vast experience of working closely with Solicitors and Barristers within England. Bernhard has prepared reports for all types of law firms in England, from Magic Circle firms to regional firms, including the following areas:

  • Corporate and commercial law disputes between British and German businesses;
  • Contentious probate matters around the validity of German wills;
  • Accidents involving British citizens in Germany (personal injury); and
  • Medical malpractice cases involving German GP’s and hospitals

Do you need an expert report from a German Solicitor? Then please do not hesitate to contact us on +49 (0) 941 7853053 or mail@grafpartner.com

Careful with Deed of Variation if Estate comprises Foreign Assets

Using a Deed of Variation in the UK may cause additional Taxes Abroad

Let’s take an easy example: An English testator owns property or a significant investment in Germany, which already triggers German inheritance tax, even if neither the legator nor the beneficiaries are resident in Germany. He has two children and gives the German house (or flat) to child 1, the German investment to child 2. For whatever reasons, the children prefer a different distribution of these assets and thus agree to use a Deed of Variation. From an English law perspective: no problem. From a German tax law perspective: potential financial mayhem for the English beneficiaries. Why?

The German principle of universal, direct and immediate accession of the estate (Generalsukzession, Vonselbsterwerb) means that the beneficiaries (Erben) automatically acquire the estate (or their share of the estate) literally in the second the legator dies. There is no administration persiod, no personal representative etc. From a German inheritance tax perspective this means that it is clear in the second of death of the legator, what the beneficiary has inherited and what the German IHT debt is. This tax situation cannot be changed later on by a deed of variation. This legal instrument is unknown to German law.

The beneficiaries are, of course, free to agree amongst themselves that they wish to distribute the assets differently. However, this is a separate transaction, a second taxable event under German law.

Looking at the above example this means that the German tax office will first levy tax on the situation as it presentated itself from the black letter wording of the Will, i.e. child 1 needs to pay German inheritance tax on the value of the property, child 2 on the value of the investment. The Deed of Variation now is a second, separate taxable event, which can trigger German gift tax (if the house and the investment have different values) and also German property acquisition tax (Grunderwerbsteuer).

Also, there is a risk that the German tax office will not fully recognise the right to apply for unilateral relief (section 23 ErbStG) anymore, which is normally available in cases where UK IHT has already been paid on assets which are also relevant for German IHT.

The details are horribly complicated. Whether actual taxes become due depends on a number of factors, including domicile and residence of everyone involved, nationality, nature of the investment and the relationship between legator and beneficiary as well as between the beneficiaries, because German inheritance tax law allows for personal allowances. These IHT allowances (Steuerfreibeträge) differ hugely (from EUR 20k to EUR 725k), depending on degree of kinship.

The situation is even more complex, if either the legator or any beneficiary had or has a residence in Germany, even if it is just a holiday flat. Because this qualifies the beneficiary as a “Steuerinländer” (tax resident) which means that German IHT applies to either the entire estate (if the UK legator had a German residence) or to all assets the beneficiary with residence in Germany receives, even if these assets are outside of Germany (for details see the posts on German interitance and gift tax listed below).

In summary: If foreign assets are part of an estate, probate lawyers must be extremely cautious and evaluate the inheritance taxes in all countries concerned, before they recommend a deed of variation to be used. Any property swap and any disproportionate distribution of cash or other assets can trigger unexpected additional taxes in some jurisdictions.

For more information on German-British will preparation and probate matters please see these posts provided by the international succession laws experts of Graf & Partners LLP

Or simply click on the “German Probate” section in the right column of this blog.

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The law firm Graf & Partners and its German-English litigation department GP Chambers was established in 2003 and has many years of experience with British-German and US-German probate matters, including the representation of clients in contentious probate matters. If you wish us to advise or represent you in a German or cross border inheritance case please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 785 30 53

Compensation for a wrecked Car under the German Law of Torts

Car Accidents: How are Damages calculated under German Law?

Each year, German police registers 2.2 million traffic accidents (for official 2016 stats see here). German insurers, lawyers and Courts are thus constantly faced with the question how to calculate damage claims after a car accident has occured.

If the car can still be repaired, the matter is fairly simple. The Defendant must pay for the costs for a state of the art repair plus the so called “merkantilen Minderwert”, i.e. the reduction in market value due to the fact that the car has been involved in an accident, even if the car has been repaired.

What if the car is beyond repair or the costs would be unreasonably high?

The general principle under German law is that in case of a “write off” (Totalschaden, i.e. if economically it makes no sense to repair the car), then the Claimant is entitled to the so called “Wiederbeschaffungswert”, i.e. the amount necessary to purchase a substitute car with identical value of the damaged car, minus what the Claimant may have received as scrap value payment for the damaged car (if anything). Mostly, experts and lawyers refer to the so called “Schwacke Liste“, a German company which since 1957 publishes lists with the current market value of virtually every car out there. This being used as a first point of reference. The individual condition of the car before it was damaged is then taken into account.

In addition to that “Wiederbeschaffungswert” (replacement purchase value), the Claimant can (only) demand interim car hire costs for a reasonable period, i.e. for the time which the Claimant needs to look for a suitable replacement car and purchase it.

More on civil litigation and evidence rules in German Courts of law and before German arbitration tribunals:

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The law firm Graf & Partners was established in 2003 and has many years of experience with British-German and US-German legal matters.The Anglo-German litigation lawyer team of GP Chambers is well equipped to advise and represent clients from the UK and other English speaking countries. If you wish us to advise or represent you in a German or cross border case, or if you need an expert report on German law, please contact German lawyer Bernhard Schmeilzl, LL.M. (Leicester), managing partner and head of the litigation department. Bernhard is also frequently asked by British and US Courts and Tribunals or by legal counsels to provide expert reports and legal opinions on German law.

German Law of Torts: Are Accident Victims entitled to a New House?

Can a disabled injured person claim for the predicted cost of accommodation or only the actual costs after they have been incurred?

Under German law, a person who is impaired by an accident is entitled to adequate housing. The extent and amount necessary for adequate housing depends on what an impaired person would reasonably require. This can be determined by an expert, who will be appointed by a German court.

However, a difficult and strongly debated question under German law of torts is whether the injured person may only claim compensation for costs he or she has actually incurred (reimbursement approach) or whether the injured person is entitled to request a lump sum payment for necessary measures, even if actual costs have not (yet) been incurred, based on sec. 843 (3) German Civil Code (for details see German Supreme Court ruling of 19 May 1981, published in NJW 1982, p. 575; also see Münchner Kommentar zum BGB, Band 5, Auflage 6, § 842, Rd. 66 and Rd. 77).

Those in favour of the “lump sum approach” argue that German law does accept the concept of so called “fiktive Pflegekosten” (fictitious costs for home help), i.e. the market value of such home help (usually between EUR 7 and EUR 10 per hour, depending on the cost of living in the area where the Claimant lives) must be paid by the injurer regardless of whether the injured person actually hires paid help or whether a relative or friend provides such help without remuneration. Thus, costs which are objectively necessary for modifying an existing or buying another house must also be compensated by the wrongdoer, regardless of whether and when the impaired person actually incurs these costs.

The mainstream opinion amongst German litigation lawyers seems to be, however, that under German law, notional costs cannot be claimed. Consequently, a Claimant can only request reimbursement of the amounts he or she has actually spent on housing (repair, modification, new purchase etc). This view is supported by legal literature (e.g. Gerhard Küppersbusch “Ersatzansprüche bei Personenschaden” [“Claims in the case of personal injury”] 10th edition 2010) as well as by case law (Higher Regional Court Hamm, ruling published in VersR 2003, 780).

So, what actual costs can an impaired person claim under German law of torts? Here are some examples:

  • If a new apartment is rented, which better suits the individual’s needs, then the additional rental costs must be reimbursed. It may get difficult, however, if this new apartment has additional advantages (e.g. more rooms for other family members). Then, there may be a reduction.
  • In case an existing house is remodelled to meet the special requirements of an impaired person, the reasonable and adequate remodelling costs must be reimbursed. The above re-additional advantages does apply here as well: modification of a house or flat usually leads to an increased value of the same, which then again must be set off (this was also discussed in the Supreme Court ruling of 1981)
  • In case a new house is built or another house is bought, a German court would verify whether the impaired person has obeyed his duty to keep the damage at a minimum (obligation to mitigate losses), i.e. if it would have been less cost-intensive to rent an adequate house, especially since leasing an apartment or even a house is much more common in Germany than it is in the UK. However, even if the Court is convinced that buying or building another house was necessary, then it is very difficult to calculate the exact amount which must be compensated by the injurer, because this new house will often have a higher value. This extra value of the new house compared to the previous house is not recoverable and must be deducted from the claim. Thus, one must differentiate between the increase of value and the necessary and reasonable costs caused by the accident. These are difficult issues which usually involve a number of experts.

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The law firm Graf & Partners was established in 2003 and has many years of experience with British-German and US-German legal matters.The Anglo-German litigation lawyer team of GP Chambers is well equipped to advise and represent clients from the UK and other English speaking countries. If you wish us to advise or represent you in a German or cross border case, or if you need an expert report on German law, please contact German lawyer Bernhard Schmeilzl, LL.M. (Leicester), managing partner and head of the litigation department. Bernhard is also frequently asked by British and US Courts and Tribunals or by legal counsels to provide expert reports and legal opinions on German law.