Leasehold: VON POLL IMMOBILIEN - The Podcast

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


For whom and under what circumstances is leasehold rewarding? And which points should potential clients absolutely think about? You can listen to the interesting conversation about these and other subjects here now straight or read through 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 important questions on the topic of hereditary structure rights. Because the arrive at which you construct your house does not always have to come from you. The genetic building right makes it possible to lease a plot of land and pay the owner in return an annual amount, the so-called ground rent.But even if land prices continue to increase ... Is it worth it for you? And if so, under what scenarios? What is really behind the heritable structure right? And what should you pay attention to? We now clarify these concerns with Tim Wistokat. He is an attorney 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 invite.


At very first look, the heritable building right appears to be an affordable alternative to purchasing land. However, it is a good idea to weigh both choices and to think about some pitfalls.


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


Well, practically speaking, it's extremely 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 use the land in question. The latter may 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 becomes the owner of the residential or commercial property, but not the owner of the land.


In return, the renter pays a type of lease?


Yes precisely, we are speaking about the annual ground rent. Previously, it was likewise called genetic lease, which is basically easily flexible in the quantity. As a guideline, nevertheless, the quantity of the ground rent is about 3 to 5% of the land value.


The unique function and therefore also a point that must be thought about thoroughly by the occupant: The ground rent can be adjusted every 3 years by the ground lease company.


What else should prospective renters consider?


In addition to the concurred payments, the parties need to settle on upkeep and the possibility of making structural changes 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 arrangements in writing, the parties included conclude a ground lease contract and so that this is legally 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 a separately established ground lease land register.


Can anyone offer a heritable structure right?


In principle, yes.


In concept, anyone can approve a heritable building right. In practice, however, land is primarily leased by municipalities, churches, neighborhoods or business. Especially the church frequently appears in Germany as a lessor of land, so as to make it possible for young households with less equity to purchase property or develop a home.


The trick is frequently in the information, even with genetic structure rights?


Yes, I can confirm that. As a rule, the regard to the ground lease is between 50 and 99 years. After the expiration of the ground lease, the ground lease expires and the residential or commercial property ends up being the residential or commercial property of the ground lease company. However, the latter need to then pay the leaseholder proper payment for the structure and this is based on the current market price.


Even in the occasion of a sale or inheritance of the land or residential or commercial property, the genetic building right does not expire as a right of usage in rem. Rather, the brand-new owner of the land or realty takes control of the leasehold agreement as well as its staying term. However, this does not imply that the agreed term is immediately restored or extended. It is rather to be understood in the sense that a brand-new start of the term can be worked out with the new owner. The more remaining term is left, the 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 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 needs to return the ground lease to the landowner. The contract is terminated too soon and the ground lease supplier becomes the owner of the building. However, care must be taken here. In case of a reversion, the ground lease owner need to likewise compensate the leaseholder appropriately. Here, too, there is the possibility that the amongst themselves on a mutually acceptable extension of the contract.


In addition, although the ground lease grantor can approve 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 beneficial?


Tim Wistokat:


Who has little equity, however still does not want to do without a home of their own, for which the heritable building right can be rewarding under certain situations, because only the purchase cost for your home, however not for the land must be raised. In this case, the total quantity for genuine estate financing is naturally somewhat lower. Prospective buyers then pay in addition to the purchase rate for the residential or commercial property normally still the residential or commercial property tax, insurance and maintenance expenses and the annual ground lease.


Petra Konradi:


To start with, the leasehold seems to be appealing for prospective buyers with only little equity. But a closer look exposes some not unimportant issues. Probably the most significant downside: While the repayment of a regular bank loan for a plot of land ends in time, the ground lease continues to run up until the end of the contract. Especially in times of low rate of interest, conventional funding frequently proves to be more financially advantageous.


In addition, the ground rent can be changed every three years. Due to this, there is a possibility that the ground rent payments will exceed the overall land cost throughout the years. Although a regular genuine estate purchase normally seems more pricey in the acquisition, it generally shows to be less complicated and less costly in the long run.


If you have any concerns about this or other subjects, please feel free to contact our experts or discover even more information on our website and in the VON POLL IMMOBILIEN - App. You can discover the links in the show notes of our podcast.


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