Berlin Estate – Court of Appeal finally confirms the validity of the Israeli agreements in ground breaking ruling

There have been reports in the media for years about the “Berlin Aspire” or “Berlin Estate” group and its activities on the Berlin real estate market (already on our website here). After approx. 3.5 years, Gelbart Legal was finally able to obtain a (main) decision of the Berlin Court of Appeal on 12 Mar. 2024 (- 21 U 142/22 -), which fully confirms the validity of the Israeli agreements and the groups’ obligation to submit purchase contract offers on the basis of the Israeli agreements as well. As a result, many affected Israeli real estate investors can now have justified hope for a successful end to their legal proceedings.

The business model of Berlin Estate consists of the purchase of so-called “junk real estate” in Berlin, the subsequent creation of residential property and its sale in Israel to inexperienced, small Israeli investors at overpriced purchase prices, which are to be paid in advance by the buyers. To this end, the buyers were presented with private written agreements for signature – without a German notary and without any securities. According to Berlin Aspire’s former homepage, approx. 1,500 apartments on approx. 170 plots of land were sold in this way.

The companies then used the down payments on the purchase price to acquire new properties in Berlin, and (probably) also to pay the buyers the monthly yield promised in the Israeli agreements (approx. 3-5% of the purchase price p.a.). However, when “Berlin Estate” ran into financial difficulties in March 2023, whereupon the then owner Adi Avraham Keizman sold the group to the Israeli lawyer Moshe Bar Shilton, the Israeli agreements were no longer fulfilled and thus, the business model collapsed. Hundreds of small investors were threatened with the loss of their investments, which often amounted to their entire life savings or retirement savings.

Gelbart Legal was now able to successfully enforce the claims of the Israeli investors in court.

The Berlin Court of Appeal ruled that the Israeli agreements signed in Israel are valid even though signed without a German notary. Thus, the buyers are entitled to demand that “Berlin Estate” concludes notarized German purchase agreements and transfers ownership of the apartment, too. The Court of Appeal found that Israeli law is to be applied due to a choice of law in the Israeli agreements. For this reason, the written form of the agreements was sufficient and the companies must accept responsibility for the agreemtens, as they approved the agreements by paying the monthly yield agreed therein.

Furthermore – and this was the special feature of this case – the companies must also accept credit for advance payments made to other companies of the group, if an off-set was agreed in the Israeli agreements. In court, “Berlin Estate” had argued that it was not allowed to agree to an off-set without the involvement of the company that received the money originally, and thus, the off-set must be invalid. For this reason our clients were obligated to pay the purchase price once again, so they argued. Surprisingly, the Berlin Regional Court had followed this (absurd) argumentation in the first instance. But based on the appeal of Gelbart Legal, the Berlin Court of Appeal corrected this error now while clarifying that our clients may demand a notarized German purchase contract without having to pay again. In addition, our clients were awarded a contractual penalty of 10% of the purchase price as well as outstanding yield payments agreed in the Israeli agreement. Thus, a success across the board.

This decision of the Berlin Court of Appeal of 12 Mar. 2024 has immense significance. Many questions regarding the validity of the Israeli agreements, the offsetting of payments and difficult allocation issues, which have been negotiated in numerous court proceedings, have now been clarified in favor of our clients. The investors who allowed themselves to be misled into concluding Israeli agreements – which were ineffective under German law due to sec. 125, 311 lit. b) para. 1 German Civil Code (“BGB”) – and into down-paying the purchase prices without any securities, can now breathe a sigh of relief. Our clients will now receive the consideration they were promised – an apartment in Berlin – and  financial compensation as well. The decision of the Court of Appeal finally puts an end to the unethical methods of “Berlin Estate” and should send a warning signal to companies currently using a similar business model on the German real estate market.

Gelbart Legal will be happy to assist you with any questions regarding your investment in the German real estate market. As the first law firm to successfully enforce claims for the acquisition of real estate located in Germany on the basis of private Israeli agreements concluded in Israel under Israeli law, we are convinced that we can help you in the best possible way with our expertise and commitment in every real estate related undertaking.

Attorneys-at-law (Israeli purchasers):

Christoph Stoye and Stephan Bauch-Caspari (both lead),

Moshe Shlezinger