In encyclopedia episode 2 of the VON POLL IMMOBILIEN podcasts, Tim Wistokat, attorney and head of the legal department at VON POLL IMMOBILIEN, and host Petra Konradi carry out an exciting interview on the major topic of leasehold.

For whom and under what situations is leasehold worthwhile? And which points should potential consumers absolutely think about? You can listen to the amazing conversation about these and other topics here now straight or review as a records in 'traditional manner'. We hope you enjoy it!

Podcast episode 'Erbbaurecht' - total transcript

Moderator Petra Konradi:

You have currently read it in the title - in this episode we clarify compactly and to the point the most essential concerns on the topic of hereditary structure rights. Because the land on which you build your home does not always have to belong to you. The genetic building right makes it possible to rent a plot of land and pay the owner in return an annual quantity, the so-called ground rent.But even if land costs continue to increase ... Is it worth it for you? And if so, under what scenarios? What is actually behind the heritable structure right? And what should you focus on? We now clarify these questions with Tim Wistokat. He is a legal representative and head of the legal department at VON POLL IMMOBILIEN.

My name is Petra Konradi, I am the host of the podcast. Welcome.

Tim Wistokat, legal representative and head of the legal department at VON POLL IMMOBILIEN:

Hello Ms. Konradi, thank you quite for the invitation.

Initially glimpse, the heritable structure right seems to be a cost-efficient alternative to buying land. However, it is recommended to weigh both options and to consider some risks.

Mr. Wistokat, building on somebody else's land - how does that work?

Well, virtually speaking, it's very simple initially. The grantor of the ground lease, i.e. the owner of the land, transfers to the leaseholder, i.e. the renter of the land, a right to utilize the land in concern. The latter might then build a residential or commercial property on it or buy a residential or commercial property already found on the land. Thus, the ground lease holder ends up being the owner of the residential or commercial property, but not the owner of the land.

In return, the tenant pays a kind of rent?

Yes exactly, we are speaking about the yearly ground rent. Previously, it was likewise called genetic lease, which is basically easily flexible in the amount. As a rule, nevertheless, the quantity of the ground lease is about 3 to 5% of the land worth.

The unique feature and thus likewise a point that must be thought about carefully by the renter: The ground rent can be adjusted every three years by the ground lease provider.

What else should potential tenants consider?

In addition to the agreed payments, the celebrations ought to settle on upkeep and the possibility of making structural modifications to the existing residential or commercial property.

In addition, it ought to be clarified in advance whether the residential or commercial property may be sublet by the leaseholder. In order to record all agreements in composing, the parties involved conclude a ground lease agreement and so that this is lawfully binding, it is notarized by the notary.

Followed by the registration of the ground lease in the land register of the residential or commercial property and additionally in an individually developed ground lease land register.

Can anybody provide a heritable structure right?

In principle, yes.

In concept, anyone can grant a heritable building right. In practice, nevertheless, land is mostly leased by municipalities, churches, neighborhoods or companies. Especially the church frequently appears in Germany as a lessor of land, so regarding make it possible for young families with less equity to buy property or build a home.

The technique is typically in the information, even with genetic building rights?

Yes, I can confirm that. As a guideline, the term of the ground lease is between 50 and 99 years. After the expiration of the ground lease, the ground lease ends and the residential or commercial property becomes the residential or commercial property of the ground lease provider. However, the latter need to then pay the leaseholder appropriate payment for the structure and this is based on the existing market value.

Even in case of a sale or inheritance of the land or residential or commercial property, the genetic building right does not expire as a right of use in rem. Rather, the new owner of the land or realty takes control of the leasehold agreement as well as its remaining term. However, this does not imply that the agreed term is instantly restored or extended. It is rather to be understood in the sense that a brand-new start of the term can be negotiated with the new owner. The more remaining term is left, the much better the possibilities are, obviously, when the residential or commercial property is resold.

What is it about the so-called reversion?

If the leaseholder does not satisfy his contractual obligations or does not pay the agreed ground rent for a minimum of 2 years, the property manager can assert his right of reversion. In this so-called right of reversion, the leaseholder needs to return the ground lease to the landowner. The agreement is terminated prematurely and the ground lease provider becomes the owner of the structure. However, care must be taken here. In case of a reversion, the ground lease owner should also compensate the leaseholder properly. Here, too, there is the possibility that the parties agree amongst themselves on a mutually reasonable extension of the agreement.

In addition, although the ground lease grantor can give the ground lease holder a right of first rejection on the residential or commercial property, the ground lease holder is not entitled to an agreement extension.

For whom is the ground lease rewarding?

Tim Wistokat:

Who has little equity, however still does not wish to do without a home of their own, for which the heritable structure right can be beneficial under particular situations, since just the purchase rate for your house, however not for the land should be raised. In this case, the total quantity genuine estate financing is naturally somewhat lower. Prospective purchasers then pay in addition to the purchase cost for the residential or commercial property generally still the residential or commercial property tax, insurance and maintenance costs and the annual ground rent.

Petra Konradi:

First off, the leasehold appears to be tempting for prospective buyers with only little equity. But a closer look reveals some not insignificant issues. Probably the greatest downside: While the payment of a routine bank loan for a plot of land ends over time, the ground rent continues to run up until the end of the contract. Especially in times of low interest rates, conventional funding typically shows to be more financially advantageous.

In addition, the ground lease can be changed every 3 years. Due to this, there is a possibility that the ground lease payments will go beyond the total land expense throughout the years. Although a routine property purchase generally seems more pricey in the acquisition, it generally shows to be less complicated and more economical in the long run.

If you have any questions about this or other subjects, please do not hesitate to call our specialists or discover a lot more details on our site and in the VON POLL IMMOBILIEN - App. You can discover the links in the show notes of our podcast.

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