ᐅ Condo Scams – The Property Developer Company Dissolution Trick
Created on: 24 Sep 2020 15:35
T
Tolentino
Dear all,
I’m not sure if I want to post this here without mentioning specific company names, but personally, I don’t have all the documents and don’t want to name anyone involved in the ongoing proceedings yet. I hope the thread will be approved anyway, as I find the topic interesting and it might help other property owners or potential buyers.
So, this is about my condominium unit. I bought it in 2015 from a developer (hereafter “the developer”). The completion was in 2016, when I moved in.
The purchase contract was with a limited liability company (GmbH) set up specifically for the project, which was a 100% subsidiary of a well-known large development firm. Actually, the parent company (hereafter “the parent company”) was responsible for planning and supervising all trades. The people we dealt with were all employed directly by the parent company (or possibly hired as freelancers?) and had, for example, email addresses with the parent company’s domain.
During the handover, a few minor defects were reported in my private property and most were corrected. What remained was not much (maybe about EUR 500 in value).
An independent expert was appointed for the handover of the common property (although commissioned by the developer/parent company), who found so many, partly serious defects (including the roof) that, according to his statement, will cause problems in the future, that the owners’ association refused to accept the handover.
This led to back-and-forth defect notifications, offers for discussions, lawyers etc. Meanwhile, the developer GmbH was dissolved, and now the second legal successor, an investment company, is our counterpart. Currently, there is a preservation of evidence procedure against this investment company, whose lawyer only used stalling tactics, and recently a mediation appointment ordered by the judge failed because the lawyer did not show up.
A court hearing is now scheduled (February 21), and it seems likely that our claim will be granted in absentia. Since the amount involved is over EUR 300,000 (about USD 330,000), it is assumed that the investment company will go bankrupt.
Our owners’ association as well as the supervisory board, which includes a real estate lawyer, say that nothing can be done.
I am wondering, if it is obvious that this developer GmbH and its legal successors existed mainly to avoid liability for warranty and defects, meaning that the liquidation and ultimately bankruptcy of these companies with outstanding claims were knowingly accepted or even intended, couldn’t one then hold the respective managing directors or founding shareholders personally liable for fraud?
What is your assessment? Does anyone have experience with this?
Thanks and regards
Tolentino
I’m not sure if I want to post this here without mentioning specific company names, but personally, I don’t have all the documents and don’t want to name anyone involved in the ongoing proceedings yet. I hope the thread will be approved anyway, as I find the topic interesting and it might help other property owners or potential buyers.
So, this is about my condominium unit. I bought it in 2015 from a developer (hereafter “the developer”). The completion was in 2016, when I moved in.
The purchase contract was with a limited liability company (GmbH) set up specifically for the project, which was a 100% subsidiary of a well-known large development firm. Actually, the parent company (hereafter “the parent company”) was responsible for planning and supervising all trades. The people we dealt with were all employed directly by the parent company (or possibly hired as freelancers?) and had, for example, email addresses with the parent company’s domain.
During the handover, a few minor defects were reported in my private property and most were corrected. What remained was not much (maybe about EUR 500 in value).
An independent expert was appointed for the handover of the common property (although commissioned by the developer/parent company), who found so many, partly serious defects (including the roof) that, according to his statement, will cause problems in the future, that the owners’ association refused to accept the handover.
This led to back-and-forth defect notifications, offers for discussions, lawyers etc. Meanwhile, the developer GmbH was dissolved, and now the second legal successor, an investment company, is our counterpart. Currently, there is a preservation of evidence procedure against this investment company, whose lawyer only used stalling tactics, and recently a mediation appointment ordered by the judge failed because the lawyer did not show up.
A court hearing is now scheduled (February 21), and it seems likely that our claim will be granted in absentia. Since the amount involved is over EUR 300,000 (about USD 330,000), it is assumed that the investment company will go bankrupt.
Our owners’ association as well as the supervisory board, which includes a real estate lawyer, say that nothing can be done.
I am wondering, if it is obvious that this developer GmbH and its legal successors existed mainly to avoid liability for warranty and defects, meaning that the liquidation and ultimately bankruptcy of these companies with outstanding claims were knowingly accepted or even intended, couldn’t one then hold the respective managing directors or founding shareholders personally liable for fraud?
What is your assessment? Does anyone have experience with this?
Thanks and regards
Tolentino
Tolentino schrieb:
Time is being used to maintain liquidity through salary payments.
This probably won’t work in our specific case, but maybe the mastermind behind it can somehow be tackled in the overall scheme?
I just find it shocking that this is so easily possible; in my opinion, it’s a legal loophole. In insolvency cases, it is also reviewed whether the insolvency was filed in a timely manner. If the insolvency trustee determines that the filing was delayed, the wages between the actual and declared insolvency date are treated as if the managing director had embezzled these funds – unfortunately, I am more familiar with this issue than I would like to be. I believe we have already discussed this topic here https://www.hausbau-forum.de/threads/bauunternehmen-stellt-arbeiten-trotz-ueberzahlung-ein.31945/ – the homeowners’ association should seek advice on whether it would be advisable to submit a third-party application for insolvency proceedings.
https://www.instagram.com/11antgmxde/
https://www.linkedin.com/company/bauen-jetzt/
I’m not sure if it counts as delaying insolvency when the insolvency threat only arises due to a pending proceeding...
My thought regarding the fraud issue is more along the lines that if the person can be held personally responsible, they should be made personally liable. The millions went somewhere, and I believe they’ve pocketed enough money to be able to fix some defects. If they then have to file for personal bankruptcy, everyone at least gets a share of the pie—which is a good outcome. More importantly, they get held accountable and can’t just continue as before.
But of course, it’s possible they actually don’t own anything and everything belongs to their partner.
My thought regarding the fraud issue is more along the lines that if the person can be held personally responsible, they should be made personally liable. The millions went somewhere, and I believe they’ve pocketed enough money to be able to fix some defects. If they then have to file for personal bankruptcy, everyone at least gets a share of the pie—which is a good outcome. More importantly, they get held accountable and can’t just continue as before.
But of course, it’s possible they actually don’t own anything and everything belongs to their partner.
Tolentino schrieb:
I’m not sure if it counts as delaying insolvency proceedings when the insolvency is only threatened by an ongoing legal process... [...] If they then have to file for personal bankruptcy, everyone gets a share of the assets – which is a good thing. Above all, they get held accountable and can’t just carry on as usual.
But of course, it could be that they actually own nothing and everything belongs to their partner. You mentioned the company’s assets, which could meanwhile be reduced by salary payments. I can (unfortunately) tell you that it can be worthwhile to discuss the timing of insolvency. And also that it may be advisable to initiate the clarification of this issue through a third-party application. Debts arising from so-called “delictual acts” (such as delaying insolvency proceedings, if criminally established) cannot be included in personal bankruptcy proceedings in Germany. However, with some detective work, it is certainly possible to determine when someone is the actual economic owner of assets held by so-called straw persons. If indications of money laundering arise (or even just suspicions of tax evasion, for example because funds are declared as belonging to their partner and thus taxed lower), it is quite possible to encourage the public prosecutor to carry out such investigations. Regarding acquaintances you might not always keep a close eye on, I have already commented here: https://www.hausbau-forum.de/threads/bauunternehmen-stellt-arbeiten-trotz-ueberzahlung-ein.31945/post-367833
https://www.instagram.com/11antgmxde/
https://www.linkedin.com/company/bauen-jetzt/
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pagoni202024 Sep 2020 19:59You are free to contact your local fraud investigation unit at the criminal police (and ONLY there—ideally in the nearest larger city) to present your case. They frequently deal with construction-related bankruptcies and typically have direct contact with a public prosecutor specialized in insolvencies to provide immediate information.
Since you at least suspect wrongdoing or feel you have been treated unfairly, they will offer you competent advice and may initiate proceedings if appropriate.
This is not directly related to compensation claims; initially, it is only about the possibility of criminally prosecuting the responsible individuals. Such a meeting does not cost you anything, and afterwards, you will have clarity on the criminal matter.
The additional context has already been explained by @11ant.
Since you at least suspect wrongdoing or feel you have been treated unfairly, they will offer you competent advice and may initiate proceedings if appropriate.
This is not directly related to compensation claims; initially, it is only about the possibility of criminally prosecuting the responsible individuals. Such a meeting does not cost you anything, and afterwards, you will have clarity on the criminal matter.
The additional context has already been explained by @11ant.
It is currently part of my overall financing and is therefore intended to be held and rented out for at least the next 10 years. Renting it out is likely to be relatively low-risk since it would be to close acquaintances or colleagues, so I am less concerned about rental defaults or similar issues. This is without considering any changes in personal relationships.
However, I have also thought about how this list of defects and the likely unsuccessful process (unsuccessful in terms of defect resolution or obtaining financial compensation) will affect the purchase price. On the other hand, several apartments have already been sold profitably under these circumstances, which are officially documented.
However, I have also thought about how this list of defects and the likely unsuccessful process (unsuccessful in terms of defect resolution or obtaining financial compensation) will affect the purchase price. On the other hand, several apartments have already been sold profitably under these circumstances, which are officially documented.