Loan agreement with fixed date for special repayment
August 1, 2011 | 25,00 EUR | answered by Dr. Dr. Danjel-Philippe Newerla
Hello,
In 2007, a loan of €200,000 was transferred from Bank A to Bank B. The background was the internal family sale of the house. A new loan agreement was signed with Bank B in August 2007. This amounted to €200,000 with a special repayment of €160,000 from the sale of the house to the son by December 30, 2007. The remaining amount of €40,000 was to continue. Loan term of 8 years.
The loan agreement states: Quote:
"By December 30, 2007, a special repayment of €160,000 from the planned sale of the residential property will be made on the loan. For the remaining loan of approx. €40,000, the annuity rate will be reduced to €500 monthly from January 30, 2008."
Due to various obstacles and the real estate crisis, the sale of the property has been postponed until 2011. The loan is now to be repaid with the proceeds. However, the bank is now demanding a very high compensation on the grounds that the scheduled special repayment was not made at that time, resulting in not €50,000 of loan amount, but nearly €200,000 of loan amount by 2011 serving as the basis for the compensation calculation.
The bank did not inform the borrower by December 30, 2007, that the total amount of €200,000 was fixed for 8 years. The bank also did not give the borrower the opportunity to negotiate conditions through information. The borrower missed the deadline and as a result, the bank bound the entire loan amount of €200,000 for 8 years without separate information to the borrower.
My questions are:
1. Is the bank obligated to provide information and is implicit behavior permissible in this case?
2. Should the borrower not be explicitly informed by the bank about the consequences of a repayment default (8 years commitment) in the case of a "house sale," which it can be assumed would happen shortly, as otherwise the transfer of the loan would not have been necessary?
3. Shouldn't the bank allow the borrower to amend the loan agreement accordingly, for example, by making a special repayment through a second short-term loan, as otherwise a compensation claim to the bank would be the logical consequence?
We want to completely avoid making a payment. What arguments can we bring to the table? The bank is willing to make a small concession, but we want to repay the originally agreed amount, as we have already paid an unattractive interest rate for €200,000 for half of the term, and the interest income from it far exceeds the originally calculated interest income of the bank (if the contract had been implemented as planned)!
Thank you.
Dear Inquirer,
Thank you for your inquiry. I would like to answer it as follows:
1. Is the bank obligated to inform and is implicit action permissible in this case?
Based on your description, you would like to know if the bank is required to inform you that after December 30, 2007, repayment at the specified conditions is no longer possible.
The contract states the following:
"Until December 30, 2007, a special repayment of €160,000 from the planned sale of the residential property will be made on the loan."
This clause should not only be understood as a possibility to make a special repayment by December 30, 2007, but also as an obligation, which does not seem to have been fulfilled here.
In my opinion, it could have been made clearer that a special repayment is no longer possible after December 30, 2007. However, this contract clause can be interpreted to mean that a special repayment is no longer possible after that date.
In case of dispute, a judge would ultimately have to decide on this question based on the entire contract. There is some legal uncertainty here, so you should initially argue that it is not explicitly stated in the contract that a special repayment is no longer possible thereafter.
As mentioned earlier, in my opinion, an interpretation could likely lead to this result.
2. Does the borrower need to be explicitly informed by the bank about the consequences of a default in repayment (8 years binding) in case of a "house sale" that is assumed to occur shortly, as otherwise the loan transfer would not have been necessary?
I agree that there should have been an explicit mention of this. Often, such a notice does not directly appear but can be indirectly inferred from the contractual context.
To determine if there has been a breach of information obligations, the entire contract would need to be examined.
3. Does the bank not have to allow the borrower to modify the loan agreement accordingly, e.g. by making a special repayment through a second short-term loan, as otherwise compensation to the bank would be the logical consequence?
No, the bank is not generally obligated to do so.
4. We want to avoid making a payment in full. What arguments can we use? The bank is willing to make a small concession, but we want to repay the originally agreed amount, as we have already paid an unattractive interest rate for €200,000 for half of the term, and the interest income from it far exceeds the originally calculated interest income for the bank (if the contract had been implemented as planned)!
You should first engage a colleague experienced in contract law to thoroughly review the contract.
Only then can it be finally assessed whether there have been breaches of information obligations or if there are other legal objections.
In any case, you should argue that you were not explicitly informed about the consequences of the deadline expiration.
I hope this provides you with an initial legal orientation and wish you success and all the best!
I would like to point out the following to you:
The legal advice I have provided is based solely on the factual information you have provided. My response is only an initial legal assessment of the situation and cannot replace a comprehensive review of the facts. Adding or omitting relevant information can lead to a completely different legal assessment.
I hope my explanations have been helpful. Feel free to contact me through the follow-up option.
I wish you a pleasant Monday afternoon!
Kind regards from the North Sea coast,
Dipl.-Jur. Danjel-Philippe Newerla, Attorney-at-law
Stresemannstr. 46
27570 Bremerhaven
kanzlei.newerla@web.de
Fax. 0471/140244
Tel. 0471/140240 or 140241
