Use the Lexology Navigator tool to compare the answers in this article with those from other jurisdictions.

Rights and registration

Rights

What types of holding right over real estate are acknowledged by law in your jurisdiction?

German civil law distinguishes between sole ownership and co-ownership. A sole owner may – within the limits of the law – dispose of the property at its discretion, excluding others from exerting any influence. In the case of co-ownership, a distinction is made between co-ownership by fractional shares and a community of joint owners. Co-ownership by fractional shares means that a property is owned by several persons (a community of part owners) in terms of a certain share ratio (fraction). Each part owner may independently dispose of its own share of the common title. In contrast, in a community of joint owners, although the property is owned by several persons, no share ratio applies. In other words, a community of joint owners (eg, a community of heirs or a partnership under the Civil Code) may dispose of the common property only jointly.

Are rights to land and buildings on the land legally separable?

In principle, ownership of a plot and any buildings erected on it cannot be split. However, one peculiarity is a community of condominium owners, where the purchaser acquires ownership of one flat in a property and also joint ownership of a portion of the plot. Moreover, there is the possibility of creating a ‘heritable building right’ – that is, a right in rem entitling its holder to erect a building on a plot of land owned by a third party, and is typically created for 99 years. Above all, cities, municipalities and churches offer such plots for construction.

Which parties may hold and exercise rights over real estate? Are there restrictions on foreign ownership of property?

Both natural and legal persons may acquire plots of land in Germany, regardless of the person‘s origin or nationality. However, just as for a domestic purchaser, the formal prerequisites (eg, notarisation of the purchase contract) must be met. This applies to purchasers of all nationalities.

How are rights, encumbrances and other interests over real estate prioritised?

Real collaterals (eg, land charges) are created for a property. Such rights must be registered in the relevant Land Register and are effective against all parties. The rights and encumbrances in regard to a property derive from Sections 2 and 3 of the Land Register. The registered encumbrances, easements and liens on property are to be classified according to their order of precedence. The order of entries in a given section is decisive for their ranking. For entries in two different sections, the respective dates of entry in the Land Register are decisive for their ranking. Rights registered on the same day are of equal rank.

Registration

Must real estate rights, interests and transactions be registered in your jurisdiction? What are the legal effects of registration?

Any changes to the rights in a property must be registered in the Land Register. According to registry law, the local courts in their capacity as land registries are responsible for any property within their circuit. On the purchase of a property, ownership will not be transferred to the acquirer until the latter has been registered in the Land Register. The Land Register enjoys public faith. It is thus theoretically possible that ownership can be acquired from an unentitled person.

What are the procedural and documentary requirements for entry into the national real estate register(s)? Can registration be completed electronically?

Typical prerequisites for registration include:

  • an application;
  • an entry permit;
  • the pre-registration of the person whose right is affected by the entry; and
  • compliance with certain formal requirements.

Entries into the Land Register cannot be made electronically, but may be inspected electronically through a notary or the land registry. 

What information is recorded in the national real estate register(s) and to what extent is such information publicly available?

The Land Register is a public register divided into three sections:

  • Section 1 – ownership rights;
  • Section 2 – encumbrances and easements on the property; and
  • Section 3 – liens on property.

Inspection is granted only to persons with a legitimate interest therein. As well as the owner, a potential buyer may have a legitimate interest, which is strictly examined by the land registries. Therefore, an intention to buy must be substantiated by way of a letter of intent or an attestation by a real estate agent. 

Is there a state guarantee of title?

There is no state guarantee of title, but the Land Register enjoys public faith in the correctness of its entries. Pursuant to Section 892 of the Civil Code, the acquirer of a property may rely on the fact that the seller is the actual owner of the property if the seller is registered as such in the Land Register. Thus, acquisition of property is possible even if the seller is not entitled to perform the transaction. The correctness and completeness of the Land Register are notionally construed in favour of the good-faith purchaser.

Click here to view the full article.