From the acquisition or sale of a condominium or a single family home, the establishment and division of joint ownership property, to the acquisition or sale of a portfolio of commercial properties, transfer and encumbrance (mortgages, easements, servitudes), establishment and transfer of hereditary building rights.
Private individuals, in particular, should give some thoughts to the ownership structure for acquiring real property. If structured appropriately transfer of the real property to the next generation will be facilitated. If you operate your own business, if you are a professional (e.g. medical practitioner, pharmacist, tax advisor, attorney) or own a company, you need to consider in addition on how to separate your family assets from your commercial activities and the liability risks associated therewith.
When acquiring real property it is also important to understand how the property is encumbered. Such encumbrances may be registered in the land register (“Grundbuch”), such as land charges or mortgages securing the payment of a certain sum of money, or easements and servitudes. In addition, however, the property may be encumbered by rights not registered in the land register, such as liability of the property for public property infrastructure charges and for property tax. Information as to the existence of such charges may be obtained from the respective township or municipality in which the property is located. In addition, the property may be encumbered with old rights (so-called “altrechtliche Dienstbarkeiten”) originating from times prior to 1 January 1900, the date on which the German Civil Code (Bürgerliches Gesetzbuch) became effective.
Finally, sight should not be lost of public easements. Public easements are used by the public authorities to oblige property owners to perform, decease from, or tolerate certain actions with respect to their property. Public easements are not reflected in the land register but in a special public easement register (“Baulastenverzeichnis”). Such public easement register is usually maintained by the relevant building authority for the specific property concerned.
Hereditary Building Rights increase in importance. Many towns and municipalities no longer transfer title to their properties but grant rights of possession to real property only in such a way that the acquirer may hold title to the building erected on the property but not title to the piece of land on which the building is built.
International investors take a continued and increasing interest in the German property market. As contracts regarding transfer of title or encumbrance of a property must be submitted to the landregister, they must not only be recorded in the foreign language, but also in the German language. Naturally, the notary must be in command of the necessary vocabulary in the foreign language. But knowing the words is not the whole story. It is even more important, to be able to explain to the parties the meaning of the terminology used. It is important to understand, whether the domestic law of the foreign national part of the property transaction has a corresponding legal concept – quite possible in property matters – use totally different concepts.