Real Estate Law in Germany
The German real estate market is considered a solid and safe investment. Over the years, it has proven resilient even in times of economic crisis, which makes it an appealing option for people interested in buying a property in Europe. Buying or selling property is an important decision. Therefore, it makes sense to be well-informed about the legal implications of buying real estate. In this article we will outline everything you need to know about real estate law in Germany.
The German land registry
The German Land Registry (Grundbuch) is an official register that keeps records on all real estate properties in Germany. Prospective homebuyers need to confirm who is the lawful owner of a property before entering any negotiations to ensure the property is legal real estate. Therefore, consulting the land registry is part of the sale process. There is no single land register that covers land plots and properties all over the country. Instead, each district court keeps its own register. These property records include information about previous rights of land, property use, ownership history, debts, encumbrances, or mortgages on the property, and the prices paid for a property each time it changed hands.
However, under German real estate law, access to the property records in the land register is not readily available to the public. While it is possible to obtain this information, you can’t do so with a quick online search. Access to the land register is governed by the German Land Registry Act, which in section 12 establishes that only people with a legitimate interest can see the property records. To request access, you will need to file an application to the district court in the area where the property is located, accompanied by a cover letter. Alternatively, can request access through a lawyer or a notary public.
Title deeds vs deed of sale
Title deeds are official documents that confirm who is the current and lawful owner of a property. This property deed is an important part of the process involved in transferring ownership of a property, as it gives the prospective buyer complete assurance over the seller’s right to put their property in the market. Unlike in other countries, title deed insurance is not needed when buying real estate in Germany, since the accuracy and reliability of its content is guaranteed by the land register. Once title deeds are transferred to the property’s new owner, the transfer is documented in the land register. Those who are considering buying property in Germany should know that there is a difference between a title deed and deed of sale. The former confirms property ownership, whereas the latter is a binding agreement between buyer and seller. To offer legal security, this sale agreement must be in writing and notarised. Although the details of this agreement vary from transaction to transaction, it should contain the following information:
- The property’s unique identifying details, such as location and square footage.
- The contracting parties (i.e. seller and buyer).
- The agreed and final purchase price.
- Terms and conditions applicable to payment.
- Any conditions that must be met prior to payment, such as permits or confirmation that the property is free of encumbrances.
Real estate liabilities
German real estate law is based on many regulations, which range from federal or national laws to state-level ordinances. Real estate rights and liabilities are outlined in the following regulations:
- National laws like the Civil Code and the Notarization Act.
- Regulations concerning the Land Register.
- Building code regulations.
- Building ordinances issued by each state.
- German Broker and Property Developer Ordinance, which applies to newly constructed properties.
It’s also useful to note that property law in Germany applies to all real estate categories, whether they are industrial, commercial or residential. In practical terms, homebuyers are liable for covering additional costs involved in buying a property, including transfer taxes, notary fees, and commissions, and land register costs. Transfer tax rates (as well as property taxes) vary from state to state. Moreover and where applicable, the property owner is liable for declaring rental income (in the case of buy-to-let properties) and capital gains (if you sell a property in Germany).
Individual property vs jointly owned property
Property ownership laws in Germany outline two categories of real estate property: Individual property, which refers to any parts of a property whose alteration does not impact neighbours or the building exterior. This could include interior walls or décor fixtures. Jointly owned property, on the other hand, refers to any parts of a property that are shared between two or more property owners. For example, in an apartment building this could include entrance halls, floors and ceilings. Making renovations or alterations to jointly owned property requires the agreement between all owners affected; this is usually discussed during HOA meetings.