The actual and legal conditions for the purchase of real estate in Germany differ considerably from those in other countries. The transfer of title takes place in two steps: The conclusion of the purchase contract and the registration of the transfer of title in the property registry.

The property registration

The Land Registry (Grundbuch) is managed by the Property Registry at the particular Local Court. The function of the Property Registry is to inform the public about the legal relations with respect to a specific parcel of land. Although it is a public record, it is only accessible to people who can demonstrate a justified interest, for example banks and other creditors, notaries public, real estate agents and potential buyers.

In order to review the legal situation, each potential buyer is advised to demand an actual extract from the land registry. It is a basic feature of German real estate law that property transfers are effected by transcribing the title in the land registry. Any natural person named in the registry is always and automatically the legitimate owner of the property. Due to its publicity, public faith and credit is attributed to the content of the sheets. As a result, everyone can rely on its accuracy and there is no need to do further research on the title held by the seller. me

Each property has to be recorded on a separate sheet. Land Registry officials erase past entries on the sheets by underlining them in red. The files attributed to each sheet contain all the relevant facts of the present or future registrations in the registry.

Each sheet is divided into an inventory list (Bestandsverzeichnis) and three subsections (Abteilung). The inventory list identifies the cadastral district (Flur) and unit (Flurstueck) of the property and its size. The first section names the owner of the farm and the legal basis for its acquisition (purchase/inheritance, etc.). The second section shows all encumbrances related to the inheritance such as easements on real property or personal easements, hereditary building rights, pledges or claims for recurring payments or services, usufruct, priority notifications, limitations of the owners regarding the right to have your title. The entries in the third section document whether the property has been used as collateral before. This information is important to any prospective buyer because, regardless of who owns the property, each real property lien holder has the right to auction the real property to enforce their claim for money.

The Purchase Agreement and its protocolization

A purchase contract must stipulate at least the following issues:

Name of the parts

Description of the object of purchase

Transfer of ownership/Priority of transfer notice (important because it blocks further entries in the property registry)

purchase price

change of ownership

Warranty

Purchase costs and their distribution

The purchase of real estate is subject to mandatory notarial registration. Contrary to the legal situation in most other countries, unless the contract is notarized, any agreement is not valid. Therefore, any buyer must take care that the entire agreement that he has made with the seller is presented to the notary (Notar) and included in the public deed. As the costs of the notary are normally borne by the buyer, it is customary for the buyer to decide who will carry out the registration. It is the notary’s duty to convert the mutual agreement of the parties into a set of efficient and legally binding rules. As a specialized and impartial lawyer, he advises the parties from an independent point of view on the rights and obligations arising from the sales contract. Consequently, his main task is to identify contractual gaps and prepare the draft. In addition, notaries offer to take and hold the purchase price in a notary trust account until all conditions for a granted transcript are met (approval by the municipality, payment of property purchase taxes, entry of a notice of priority in favor of the buyer in the Land Registry). As the costs of the notary are normally borne by the buyer, it is customary for the buyer to decide who will carry out the registration. As the deed is written in German, the notary would be obliged to call a sworn translator unless the parties waive this requirement and call someone who can translate for them.

During the notarization ceremony, the notary public reads the document aloud to the parties before they sign the deed. Notaries have to explain the details of the contract to the parties if questions arise, but they are prohibited from giving advice in favor of one of the parties. The notarial certification can be done in English or in any other language if the notary is fluent. As purchase contracts can be complicated, any buyer must study the draft and personally join the notary certification. However, each party may also be represented by an authorized representative. After the notarial certification, the notary manages the necessary entries in the land registry. The transcription of the title is done after the application. six months. However, the basic contractual obligations (payment, priority notification entry, transfer of possession, benefits and the responsibility for public charges) are fulfilled within one month from the notarial registration.

Notary fees and Land Registry fees are accounted for according to a schedule provided for in the Tax Law (Kostenordnung). They usually add up to 1.5% of the purchase price. The commission for real estate agents is usually 3% plus VAT for both parties. The tax rate on the purchase of real estate is 3.5%. In Berlin it is 4.5%.

Buying from a property developer

According to this contractual scheme, the buyer agrees to buy a house or an apartment and makes the payment ready at the time the construction of the building has not been completed. Such contracts (Bautraegervertrag) generally stipulate the purchase of real estate without further developing the developer’s obligation to construct a building on it. The predominant conflict of interest between the developer of the building and the buyer concerns the timing and method of payment.

3 of the Building Agents and Developers Decree (Makler und Bautraeger Verordnung) defines partial payment as the legal mode of payment. In addition, the property developer is bound by several preconditions before being able to claim any payment from the buyer. Finally, 3 sec. 2 of the Building Agents and Developers Law establishes maximum percentage quotas of the purchase price that the developer can claim on the performance of particular steps of the construction.
Therefore, the developer is not entitled to receive any payment unless…

– a valid construction contract has been concluded,
– a notice of priority of transfer has been registered in the land registry (as a second step, the transfer requires the registration of the buyer in the land registry),
– The release of the property from previous encumbrances created by the contractor to obtain financing for the project has been secured. This is usually done by obtaining a pledge note issued by the developer’s bank. As a condition for rewarding that bill, the bank requires that the purchase price be paid into a particular account. Only upon receipt of the funds does the bank have to clear the record. The law will establish the particular requirements of said promise note. It will also apply in case the building is not carried out; instead of this, the bank may reserve the right to return the funds, not more than the current value of the property)
– a building permit has been granted for the house and
– finally any right of the contractor to terminate the contract has ceased.

Despite the promise note given, there are substantial uncovered risks in the event of the insolvency of the building developer because, in that case, the purchase price still outstanding is normally not sufficient to complete the building. In addition, the buyer may be liable to their bank for a prepayment penalty if the bank that issued the note pays them back.

Instead of granting the aforementioned measures to guarantee the buyer’s credits, the promoter can also provide a directly demandable guarantee issued by a bank. The guarantee covers the full amount of claims for reimbursement of the buyer’s funds.

The MaBV establishes that the purchase price is paid in up to seven installments as stipulated in the contract that make up these elements:

– 30% after the ground movement
– 28% after the completion of the structure, including carpentry work
– 5.6% for tiling the roof and fixing the rain gutter
– 2.1% for the preliminary installation of the heating system
– 2.1% for the preliminary installation of the electrical system
– 2.1% for the preliminary installation of sanitary facilities
– 7% for windows
– 4.2% for the interior plaster
– 2.1% for floor paving
– 2.8% for the tiling of toilets
– 8.4% after the building is ready to move in and possession is delivered to the buyer
– 2.1% for the work on the building’s façade
– 3.5 after full completion

The financing of the purchase must be clear at the time the contract is concluded. The insolvency of the buyer at a later date has no effect on the execution of the contract because the mortgage has already been paid.

Own-responsibility land development – the Baugruppe as an alternative to commercial building development

The Baugruppe is an association of convenience whose aim is to circumvent the developer of commercial buildings. Partners are free to choose and plan their building concept. The savings that can be achieved compared to using a professional building developer can amount to 20% of construction costs.

A Baugruppe is based on harmony and communication between partners and their willingness to compromise in problematic situations. At least one partner besides the architect must be able to account for the costs that arise in the construction process. Since everything is subject to the mutual consent of the group and must be organized by the partners, a lot of free time must be devoted to the project. The partners must have a common vision but also an estimate of what can realistically be achieved. The architect must be able to temper the construction fantasy of the partners.

The Baugruppe is usually organized as a private company. The contract provides for the joint and several liability of the partners even in the event of the death of one of them.

Unlike the contract with a promoter, there are no fixed prices. Therefore, the architect’s contract must consider the unforeseen costs for the increase in raw materials, therefore a buffer of 10% of costs in individual financial planning. Legal protection insurance is also advisable if increased costs are caused by careless craftsmanship. For negotiations with craft companies, construction companies, etc., a lawyer should be hired from the beginning. Insurance should be taken out to protect against the insolvency of craft and construction companies that have already been paid money for raw materials and against theft and damage that may occur during the construction process.

Banks are generally skeptical about financing projects started by a Baugruppe. Mortgages and perhaps even promised wages can serve as collateral. With regard to obtaining adequate financing, adhering to green standards may make government subsidies available.