Potential public pre-emptive rights in connection with the acquisition of real estate are regulated by a variety of German Laws. The so-called municipal pre-emptive right (Gemeindliches Vorkaufsrecht) in accordance with Sec. 24 of the German Building Code (Baugesetzbuch) seems to be the most frequent one. A municipal pre-emptive right is generally linked to the acquisition of real estate by way of Asset Deal. Consequently, the municipality is to be notified of and provided with all asset purchase agreements. Deviating from this, the acquisition of real estate by way of Share Deal in general does not trigger the municipal pre-emptive rights and there is currently no general obligation to notify the competent municipality. However, in individual and rather rare cases, the Federal Court of Justice (Bundesgerichtshof ) has previously ruled that an acquisition of real estate by way of Share Deal may trigger a municipal pre-emptive right. The Administrative Court (Verwaltungsgericht) of Berlin has now followed up on these previous rulings in its accelerated decision (Eilentscheidung) dated 13 December 2019.
The applicant acquired the majority of shares in two companies in April 2019. The relevant companies, among others, are legal title holders of real estate located in Berlin and subject to an environmental protection area (Milieuschutzgebiet). After the District Office (Bezirksamt) became aware of the transaction, it ordered the applicant to submit the relevant documentation, in particular the sale and purchase agreement. According to the District Office, the acquisition of the companies may trigger the municipal pre-emptive right. By way of accelerated proceedings (Eilrechtsschutzverfahren), the applicant defended itself against such order to submit the relevant documentation arguing that a Share Deal in general does not trigger a municipal pre-emptive right. However, the Administrative Court of Berlin ruled that the requirements to order submission of the relevant documentation were indeed fulfilled. According to the Administrative Court, the order by the District Office was based on the public interest to determine the potential basis for the existence of a municipal pre-emptive right. Furthermore, the Administrative Court ruled, that it was conceivable that, under certain circumstances, a Share Deal may provide for a so-called circumvention transaction (Umgehungsgeschäft) and that it was in the public interest to clarify whether a Share Deal may provide for such contractual arrangements.
Effects on Practice
It should be noted that, for the time being, the Administrative Court of Berlin did not deal with the question whether the requirements for the existence of a municipal pre-emptive right were fulfilled. It "only" dealt with the preliminary question whether submission of the documentation in connection with a Share Deal may be ordered by the municipality. The Higher Administrative Court (Oberverwaltungsgericht) of Berlin- Brandenburg, as the relevant court of appeal (Beschwerdegericht), may (if at all responsible) deal with the question whether the requirements of a municipal pre-emptive right are fulfilled.
However, the accelerated decision of the Administrative Court of Berlin is in line with the overall tight housing market in Germany. In the light of the political objective to secure housing spaces in Germany, the municipal pre-emptive right has increasingly come into focus. This has already been demonstrated (among others) by recent proposals to change the relevant public laws regarding pre-emptive rights. Against this background, further developments in case law and practice remain to be seen. If, in fact, a public law tendency was to be developed according to which Share and Asset Deal were to be treated equally, further changes regarding civil pre-emptive rights (e.g., regarding heritable building rights) may follow.
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