Cash ban on German property purchases

What exactly is prohibited

§ 16a(1) sentence 1 GwG says that in legal transactions aimed at the purchase or exchange of domestic real estate, the consideration owed can be discharged only by means other than cash, crypto-assets, gold, platinum or gemstones. Sentence 2 extends the same rule to the acquisition of shares in companies whose assets directly or indirectly include domestic real estate; a buyer who holds a property through a company cannot sidestep the ban by buying the shares.

Payment by bank transfer is the ordinary lawful route. So are payments through a notary’s escrow account (see below). The statute is about the consideration, not about everything that touches the purchase, but the notary’s documented checks are built around the price.

What happens if someone pays in cash anyway

The person who hands over cash, gold, platinum or gemstones, or transfers crypto-assets, as consideration can demand them back under the Civil Code rules on unjust enrichment, and the usual bars to restitution for illicit transactions (§§ 815 and 817 sentence 2 BGB) do not apply (§ 16a(1) sentence 3). The ban works as a civil-law consequence, not only as a reporting duty. I found no fine stated in the section itself; for the consequences of a particular case ask a lawyer.

The notary as gatekeeper

Three duties sit with the parties and the notary.

1. Proof. The parties must show the notary who files the registration application that the consideration was paid by means other than those listed. Payment confirmations from credit institutions involved on the seller’s or buyer’s side are named as suitable evidence (§ 16a(2)).
2. Check. The notary examines the proof for plausibility (Schlüssigkeit) and may file the registration application only when satisfied or when, after the due date and a fruitless request within a reasonable time, the parties did not provide a plausible proof (§ 16a(3)). Where the notary has a duty to report a suspicion under § 43(1), the report must have been made and the transaction may not be executed earlier than the fifth working day after it was sent.
3. Later payments. If the price falls due partly after the application was filed, the notary reviews the proof within a reasonable time after each due date, can wait up to a year for several instalments, and the duty ends for amounts due later than a year after filing (§ 16a(4)). Contract changes affecting the price after the transfer agreement became binding must be disclosed through matching statements by the parties (§ 16a(2) sentence 3).

The consequence for timing: the buyer’s registration, and with it ownership under the Civil Code (see the foreigner’s purchase guide), waits until the notary is satisfied about the payment. For a clean sequence, see also priority notice and the notary’s role.

Exceptions and thresholds

Paragraphs 2 to 4 (the proof and checking duties) do not apply if the consideration owed is €10,000 or less, or to the extent it is paid through the escrow account (Anderkonto) of the notary who files the registration application (§ 16a(5) sentence 1). Also, proof is treated as complete if the notary lacks proof only for a value of not more than €10,000 of the consideration (sentence 2). Paragraph 4 does not apply where, given the contract design, it appears excluded that deferred payment results from proceeds of crime or links to terrorist financing (sentence 3). The first exception removes the notary’s checks, not the ban itself: the prohibition in § 16a(1) has no threshold in the text read.

Related duties for foreign buyers

The ban is one of several anti-money-laundering rules. The notary must identify the parties before the transaction (§ 11(1) GwG) and the buyer must supply the information and documents (§ 11(6)); the notary must also report to the Financial Intelligence Unit, regardless of the amount, any facts indicating that an asset derives from a criminal offence or relates to terrorist financing (§ 43(1)). The purpose of these rules is not to single out foreigners, but a foreign buyer often has more to document: where the money came from, in which currency, and through which bank.

A worked illustration

On a €400,000 home paid by transfer from a bank, the notary asks for the bank payment confirmation. If the buyer wanted to pay €50,000 in banknotes, § 16a would forbid it, and the €50,000 could be recovered.

Which professional to consult

The notary in charge of the deed is the one who checks the proof; a lawyer can advise if a payment arrangement is unusual; the bank handling the transfer provides the confirmation. Payotte does not rank notaries.