DTZ - Investor Guide Europe

PROPERTY LAW

Types of ownership

Sole ownership (Freehold)

• Sole ownership (Alleineigentum) is the most common form of

freehold title in land. Subject to general restrictions imposed

by law or rights of third parties such as tenants, neighbours

etc. the sole owner has full control of the land and any

buildings on it. This includes in particular the right to use the

land and its buildings in the most absolute manner, to receive

the benefits of them, to encumber them and to dispose of

them.

Co-ownership and joint ownership

• A freehold title in an undivided part of land can be held by

more than one person as co-owners (Miteigentümer). Each

co-owner is entitled to separately dispose of its share of land.

• Several persons can also hold an undivided part of land in

joint ownership (Gesamthandseigentum), e.g. in the event

that they are organized as a civil law partnership or as an

association without legal capacity such as a community of

heirs. Each of the joint owners is entitled to a share of the

jointly held property; however, the joint owners can only

dispose of the property jointly.

Condominium ownership and part-ownership

• Under the German Condominium Act

(Wohnungseigentumsgesetz, WEG), separate absolute

ownership of a self-contained unit in a building may be

acquired, either in the form of condominium ownership

(Wohnungseigentum) where residential premises are

concerned, or as part-ownership (Teileigentum) where

premises are not used for residential purposes. Such

ownership consists of individual absolute ownership with

regard to the self-contained unit and proportional ownership

with regard to those parts and installations of the building

that are not subject to individual ownership, such as the

foundations, external walls, staircases, etc.

Hereditary Building Rights (Leasehold)

• In accordance with the German Hereditary Building Rights Act

(Erbbaurechtsgesetz, ErbbauRG), land may be encumbered

in such a way that the beneficiary acquires the alienable and

hereditary right to own a building on or below the surface of

the land. This form of legal estate in land is called a hereditary

building right (Erbbaurecht).

• Hereditary building rights can be granted by the owner of the

land. Such hereditary building rights are usually granted for

long terms between 30 and 99 years. Usually the beneficiary

of the hereditary building right has to pay a ground rent

(Erbbauzins) to the owner of the land. Upon termination of the

hereditary building right, ownership of the buildings reverts to

the land owner who must generally pay compensation to the

beneficiary of the hereditary building right.

Cadastral map and land register

• The cadastral map (Flurkarte) indicates the location and the

size of real estate property which is defined by its plot section

number.

• Except for the federal state of Baden-Württemberg, where the

land register (Grundbuch) is kept with the notary of a district,

the land register is kept at the district courts. It creates a

secure basis for legal transactions concerning plots of land

and rights in rem. All legal relationships considered significant

for a plot of land, and all legal changes, must be clearly

evident from the land register. The land register is subdivided

into an index and three sections. The index lists the cadastral

references of a plot of land, section I mentions the name

of the owner(s), section II lists encumbrances such as

easements etc. and section III lists charges such as mortgages

or land charges.

• Hereditary building rights are registered in a separate land

• In German law there is a presumption that the land register is

correct. If there is an incorrect registration in the land register

or if a registration has been mistakenly omitted, all parties

relying on the land register in good faith are granted full

protection.

Encumbrances and charges

Easements and other encumbrances

• Under German law a real estate property may be affected by

the following encumbrances which need to be registered in

section II of the land register of the encumbered property:

–– Hereditary building rights (Erbbaurechte) encumbering

the land;

–– Ground easements (Grunddienstbarkeiten) by virtue of

which the owner of one plot of land may use another plot

of land or demand that certain activities or rights are not

exercised on the other plot of land;

–– Usufructs (Nießbrauchrechte), enabling the beneficiary to

derive profit or benefit from a property;

–– Limited personal easements (beschränkte persönliche

Dienstbarkeiten) entitling a certain person to use the

encumbered property for certain purposes;

–– Rights of pre-emption (Vorkaufsrechte);

–– Conveying rights to recurrent payments or services

(Reallasten), granting a right to recurring payments or

services to the beneficiary.

Property charges

• Real estate property may be encumbered by mortgages

(Hypotheken) and land charges (Grundschulden) which have

to be registered in section III of the encumbered property’s

land register. A mortgage encumbers land by allowing the

mortgagee recourse against the land as a security for an

existing or future debt based upon an underlying personal

claim of the mortgagee. A land charge encumbers the

land by allowing the land charge holder recourse against

the land in principle independently of any underlying

personal claim. As a land charge is independent from the

underlying claim (but only connected to a specific claim

by contract – the so-called security purpose agreement

(Sicherungszweckvereinbarung)), land charges are the

preferred collateral in real property financing. Both mortgages

and land charges may be granted in either certificated or non-

certificated form.

Public building encumbrances

• Public building encumbrances (Baulasten) are provided

in favour of the public. Public building encumbrances

are generally not registered in the land register itself

but in a special public building encumbrances register

(Baulastenverzeichnis) which is maintained by the local

Investors Guide to Europe 2015