Purchase of Real Estate in Germany
Posted by admin under: Auction Schedule Apr 26
The actual and legal conditions for a real estate purchase in Germany differ considerably from those in other countries. The transfer of title is carried out in two steps: The conclusion of the purchase contract and the entry of the transfer of title into the land register.
The Land Register
The land register (Grundbuch) is administrated by the Land Registry at the particular Local Court. The function of the Land Register is to inform the public about the legal relationships in regard to a specific parcel of land. Albeit being a public register only such individuals gain access to it who can demonstrate a justified interest, e.g. banks and other creditors, public notaries, estate agents and potential purchasers.
In order to review the legal situation, each potential buyer is well advised to demand an actual extract of the land register. It is a basic feature of the German real estate law that transfers of ownership are accomplished as soon as they have been entered into the land register. Due to this constitutive effect of the transcription, any individual who is nominated in the register is always and automatically the lawful owner of the property. Due to its publicity, the contents of the sheets are ascribed public faith and credit. As a consequence, everyone can rely on their accuracy and further research regarding the title held by the seller need not to be carried out.
Each property has to be registered on a separate sheet. Past entries in the sheets are deleted by the officers of the Land Registry by underlining them in red. The files attributed to each sheet contain all relevant deeds regarding present or future entries in the register.
Every sheet is divided into an inventory listing (Bestandsverzeichnis) and three sub-sections (Abteilung). The inventory listing identifies the cadastral district (Flur) and unit (Flurst?ck) of the real estate and its size. The first section nominates the owner of the estate and the legal ground of his acquisition (purchase/ inheritance etc.). The second section shows all encumbrances in regard to the estate such as easements on the real estate or personal easements, heritable building rights, pledges or claims for recurrent payments or services, usufruct, priority notices, the owner?s limitations regarding the right to dispose of his title. The entries in the third section document if the real estate has been used before as a collateral security. These informations are important for any potential purchaser because irrespective of the individual who owns the property, each bailee of a lien on the real property is entitled to put the real estate onto auction in order to enforce his money claim.
The Purchase Contract
A purchase contract should provide stipulations about the following issues at least:
? Name of the parties
? Description of the purchase object
? Conveyance of property/ Priority notice of conveyance
? Purchase price
? Change of possession
? Warranty
? Costs of the purchase and their distribution
The purchase of real estate is subject to a mandatory notarial recording. Unless it is notarized any agreement is invalid. Therefore, any purchaser should take care that the complete agreement is presented to the notary (Notar) and included in the official deed. A German notary is a specialized lawyer. As the costs for the notary are usually born by the purchaser it is custom that the purchaser decides who shall effect the recording. It is the notary?s duty to convert the parties? mutual agreement into an efficient and legally binding set of rules. He advises the parties from an independent point of view about rights and obligations arising of the purchase contract. Consequently, it is his main task to identify contractual loopholes and to prepare the draft. Moreover, notaries offer to take and keep the purchase price in a notary trust account until all conditions for a vested transcription are met (approval by the municipality, payment of the estate purchase taxes, entry of a priority notice in favour of the purchaser in the land register).
During the notarization ceremony the notary reads the document out loudly to the parties before they sign the deed. Notaries have to explain the contract details to the parties if questions arise but they are prohibited to give advice in favour of one party. The notarization may take place in English or any other language if the notary is fluent. As purchase contracts may be complicated any purchaser should study the draft and join the notarization personally. However, each party may also can be represented by an authorised representative. After the notarization the notary manages the necessary entries in the land register. The transcription of title is accomplished after app. six months. However, the basic contractual obligations (payment, entry of priority notice, transfer of possession, benefits and the liability for public charges) are performed within one month since the notarial recording.
Costs
The notary fees and the fees of the Land Registry are accounted according a schedule as provided in the Fee Act (Kostenordnung). They usually add up to 1,5 % of the purchase price. The commission for estate agents usually amounts to 3 % plus VAT for both parties. The tax rate on the purchase of real estate is 3,5 %. In Berlin it is 4,5 %.
The purchase from a building developer
The purchaser obligates himself to buy a house or an apartment and effects payment at a time when the construction of the building has not been completed. Such contracts (Bautr?gervertrag) usually stipulate a purchase of undeveloped real estate plus the obligation of the developer to construct a building on it. Such contracts involve a conflict of interest between the building developer and the purchaser regarding the mode of payment. ? 3 of the Agents-And-Building-Developers-Decree (Makler und Bautr?ger Verordnung) defines the progress payment as the legally binding mode of payment. However, the building developer is bound to several preconditions before he can claim any payments from the purchaser. Furthermore, ? 3 Sec. 2 of the Agents-And-Building-Developers-Act provides maximum percentage installments of the purchase price which the developer can claim upon the accomplishment of particular steps of the construction.
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Thursday, April 26th, 2012 at 7:17 pm and is filed under Auction Schedule. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.