Ground lease in Germany: buying a home with an Erbbaurecht

What the right is

Section 1 of the Erbbaurechtsgesetz (ErbbauRG) describes a charge on a plot in favour of the holder, who may keep a building on or under its surface, and the right is both saleable and heritable. It cannot cover only a storey or part of a building (§ 1(3)), and it cannot be made to end automatically on a condition (§ 1(4)). The holder is the Erbbauberechtigter; the landowner is the Grundstückseigentümer.

A purchase is formal in the same way as a normal property sale: a contract to create or acquire the right needs notarial form, because § 11(2) ErbbauRG applies § 311b(1) BGB. The right has its own land register sheet, the Erbbaugrundbuch, and the landowner is told of each entry (§ 17). For tax, building rights are equated with plots: § 2(2) GrEStG, so the transfer tax of the state applies to the sale of the right (see the guide on real estate transfer tax).

What the contract can regulate

Section 2 lists what may be part of the content of the right. The terms that most affect a buyer are:

• how the building must be kept, insured and rebuilt after destruction;
• who bears public and private charges and levies;
• the reversion (Heimfall): an obligation to transfer the right back to the landowner when set conditions occur;
• contractual penalties;
• a priority to renew the right when it expires;
• an obligation of the landowner to sell the plot to the holder of the right.

If you want to be able to buy the land one day, look for the last item. It exists only if the deed contains it.

Consent to sell and to mortgage

Under § 5 ErbbauRG the deed may provide that the holder needs the landowner’s consent to sell the right, and separately to charge it with a mortgage, land charge or annuity charge. If the deed says so, a bank cannot register its security without that consent, so a mortgage plan depends on it. Ask the seller for the deed and the consent clauses first, and have the notary check them. The mortgage calculator only works out instalments, so confirm with the lender that it accepts the deed.

Ground rent: what can change it

Where the building is used for housing, § 9a limits clauses that allow the ground rent to be changed. An increase is owed only to the extent that it is not unreasonable in all the circumstances, and it is normally regarded as unreasonable if it goes beyond the change in general economic conditions since the contract was made. Changes in the value of the land are left out of account, subject to stated exceptions, and an increase may be claimed at the earliest three years after the contract or the last increase. Pay close attention to the indexation clause in your deed.

Arrears matter too. Late payment can give the landowner a right of reversion only if you are behind by at least two annual amounts (§ 9(4)). Ground rent is a Reallast (land charge for recurring payments), so the landowner’s claim follows the plot (§ 9(1) and (2)). The deed may also provide that this charge survives a forced sale of the building right (§ 9(3)).

Expiry and compensation

When the right ends because time has run out, the landowner must pay the holder compensation for the building (§ 27(1)). The deed may fix the amount, the payment terms or even exclude it. If the right was created to meet the housing needs of low-income groups, compensation must be at least two thirds of the building’s value at expiry, and the landowner cannot rely on a lower figure (§ 27(2)). The landowner can avoid paying by extending the right for the building’s likely lifespan; if you refuse the extension, the claim lapses (§ 27(3)).

Compensation, and the term still to run, drive the price you should accept. A short remaining term with no compensation means the house returns to the landowner. The same deal can be reasonable with a long term, a generous compensation clause or a renewal priority.

Other costs and rules

The holder, not the landowner, pays access charges (Erschließungsbeitrag) when a plot carries a building right (§ 134(1) BauGB). The municipality has no statutory pre-emption right on building rights (§ 24(2) BauGB). A sale of a building needs an energy certificate; the Act names the creation or transfer of a building right (see energy certificate).

Which professional to consult

A notary explains the deed and the consent clauses. A property valuer can value the building right, including the remaining term and compensation. A mortgage broker can ask whether lenders accept the deed.