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

For whom and under what situations is leasehold rewarding? And which points should prospective clients definitely consider? You can listen to the interesting conversation about these and other subjects here now straight or review as a records in 'standard way'. We hope you enjoy it!

Podcast episode 'Erbbaurecht' - complete records

Moderator Petra Konradi:

You have currently read it in the title - in this episode we clarify compactly and to the point the most crucial questions on the topic of hereditary building rights. Because the arrive at which you construct your house does not necessarily have to come from you. The genetic building right makes it possible to lease a plot of land and pay the owner in return a yearly quantity, the so-called ground rent.But even if land rates continue to rise ... Is it worth it for you? And if so, under what circumstances? What is in fact behind the heritable building right? And what should you pay attention to? 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, lawyer and head of the legal department at VON POLL IMMOBILIEN:

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

At first glance, the heritable building right seems to be a cost-efficient alternative to buying land. However, it is suggested to weigh both alternatives and to consider some risks.

Mr. Wistokat, building on another person's land - how does that work?

Well, almost speaking, it's really easy initially. The grantor of the ground lease, i.e. the owner of the land, transfers to the leaseholder, i.e. the occupant of the land, a right to use the land in question. The latter might then construct a residential or commercial property on it or buy a residential or commercial property already located 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 sort of rent?

Yes exactly, we are discussing the yearly ground lease. Previously, it was likewise called hereditary lease, which is generally freely flexible in the amount. As a guideline, however, the amount of the ground rent has to do with 3 to 5% of the land worth.

The and hence likewise a point that ought to be considered thoroughly by the tenant: The ground lease can be changed every three years by the ground lease service provider.

What else should potential tenants think about?

In addition to the agreed payments, the celebrations must concur on maintenance and the possibility of making structural modifications to the existing residential or commercial property.

In addition, it needs to be clarified in advance whether the residential or commercial property may be sublet by the leaseholder. In order to record all arrangements in writing, the parties involved conclude a ground lease contract therefore 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 furthermore in an individually developed ground lease land register.

Can anyone give a heritable structure right?

In principle, yes.

In principle, anybody can grant a heritable building right. In practice, nevertheless, land is primarily leased by municipalities, churches, neighborhoods or companies. Especially the church frequently appears in Germany as a lessor of land, so regarding enable young households with less equity to purchase realty or develop a home.

The trick is typically in the details, even with genetic building rights?

Yes, I can verify that. As a guideline, the term of the ground lease is in 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 company. However, the latter need to then pay the leaseholder proper compensation for the structure and this is based on the current market price.

Even in the event of a sale or inheritance of the land or residential or commercial property, the genetic structure right does not expire as a right of use in rapid eye movement. Rather, the new owner of the land or property takes over the leasehold agreement in addition to its staying term. However, this does not mean that the agreed term is automatically renewed or extended. It is rather to be comprehended in the sense that a new start of the term can be worked out with the new owner. The more remaining term is left, the better the opportunities are, of course, when the residential or commercial property is resold.

What is it about the so-called reversion?

If the leaseholder does not meet his legal responsibilities or does not pay the agreed ground lease for at least 2 years, the proprietor can assert his right of reversion. In this so-called right of reversion, the leaseholder must return the ground lease to the landowner. The agreement is terminated prematurely and the ground lease service provider becomes the owner of the building. However, care needs to be taken here. In case of a reversion, the ground lease owner need to likewise compensate the leaseholder properly. Here, too, there is the possibility that the celebrations concur among themselves on a mutually acceptable extension of the contract.

In addition, although the ground lease grantor can give the ground lease holder a right of very 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, but still does not want to do without a home of their own, for which the heritable building right can be rewarding under particular scenarios, given that only the purchase price for the home, however not for the land must be raised. In this case, the total amount for real estate funding is naturally somewhat lower. Prospective buyers then pay in addition to the purchase cost for the residential or commercial property typically still the residential or commercial property tax, insurance coverage and maintenance expenses and the yearly ground lease.

Petra Konradi:

Firstly, the leasehold appears to be appealing for prospective buyers with only little equity. But a closer appearance reveals some not insignificant issues. Probably the biggest drawback: While the payment of a regular bank loan for a plot of land ends over time, the ground lease continues to run till completion of the contract. Especially in times of low rates of interest, standard financing typically shows to be more financially beneficial.

In addition, the ground lease can be adjusted every 3 years. Due to this, there is a possibility that the ground lease payments will go beyond the overall land expense over the years. Although a routine realty purchase usually seems more expensive in the acquisition, it typically proves to be less complicated and cheaper in the long run.

If you have any concerns about this or other subjects, please do not hesitate to contact our specialists or discover much more info on our website and in the VON POLL IMMOBILIEN - App. You can find the links in the show notes of our podcast.

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