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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 carry out an amazing interview on the significant subject of leasehold.

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

Podcast episode 'Erbbaurecht' - complete records

Moderator Petra Konradi:

You have currently read it in the title - in this we clarify compactly and to the point the most important concerns on the subject of genetic structure rights. Because the arrive at which you develop your home does not necessarily need to come from you. The hereditary structure right makes it possible to lease a plot of land and pay the owner in return a yearly 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 situations? What is really behind the heritable structure right? And what should you take note of? We now clarify these concerns with Tim Wistokat. He is a lawyer 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 really much for the invitation.

Initially glance, the heritable structure right appears to be an economical alternative to purchasing land. However, it is advisable to weigh both choices and to think about some mistakes.

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

Well, virtually speaking, it's really simple at 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 concern. The latter may then build a residential or commercial property on it or purchase a residential or commercial property currently found on the land. Thus, the ground lease holder ends up being the owner of the residential or commercial property, however not the owner of the land.

In return, the tenant pays a type of lease?

Yes precisely, we are talking about the annual ground lease. Previously, it was also called genetic lease, which is generally freely flexible in the amount. As a rule, nevertheless, the quantity of the ground lease is about 3 to 5% of the land value.

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

What else should potential occupants think about?

In addition to the agreed payments, the celebrations need to agree on upkeep and the possibility of making structural changes to the existing residential or commercial property.

In addition, it needs to be clarified ahead of time whether the residential or commercial property may be sublet by the leaseholder. In order to tape all arrangements in composing, the celebrations included 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 furthermore in an individually developed ground lease land register.

Can anyone provide a heritable building right?

In principle, yes.

In principle, anybody can give a heritable building right. In practice, however, land is mostly leased by towns, churches, neighborhoods or companies. Especially the church frequently appears in Germany as a lessor of land, so as to make it possible for young families with less equity to buy property or build a house.

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

Yes, I can confirm that. As a rule, the term of the ground lease is in between 50 and 99 years. After the expiration of the ground lease, the ground lease expires 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 suitable compensation for the building and this is based upon the existing market price.

Even in the occasion of a sale or inheritance of the land or residential or commercial property, the hereditary structure right does not end as a right of usage in rapid eye movement. Rather, the brand-new owner of the land or realty takes over the leasehold contract along with its staying term. However, this does not suggest that the agreed term is immediately renewed or extended. It is rather to be understood in the sense that a brand-new start of the term can be negotiated with the brand-new owner. The more remaining term is left, the much better the possibilities 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 commitments or does not pay the agreed ground rent for a minimum of 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 ended too soon and the ground lease service provider becomes the owner of the structure. However, care must be taken here. In case of a reversion, the ground lease owner must likewise compensate the leaseholder appropriately. Here, too, there is the possibility that the parties concur amongst themselves on an equally acceptable extension of the contract.

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

For whom is the ground lease worthwhile?

Tim Wistokat:

Who has little equity, but still does not wish to do without a home of their own, for which the heritable structure right can be beneficial under particular circumstances, considering that only the purchase rate for the house, however not for the land needs to be raised. In this case, the total amount genuine estate funding is naturally rather lower. Prospective buyers then pay in addition to the purchase price for the residential or commercial property generally still the residential or commercial property tax, insurance coverage and maintenance expenses and the yearly ground rent.

Petra Konradi:

First off, the leasehold seems to be tempting for potential buyers with only little equity. But a closer appearance exposes some not unimportant issues. Probably the most significant downside: While the repayment of a regular bank loan for a plot of land ends over time, the ground lease continues to run until the end of the contract. Especially in times of low rates of interest, traditional funding frequently proves to be more economically useful.

In addition, the ground lease can be adjusted every 3 years. Due to this, there is a possibility that the ground rent payments will exceed the total land cost over the years. Although a regular property purchase generally seems more costly 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 topics, please do not hesitate to contact our specialists or find a lot more information on our site and in the VON POLL IMMOBILIEN - App. You can find the links in the program notes of our podcast.

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