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 perform an amazing interview on the significant subject of leasehold.

For whom and under what circumstances is leasehold beneficial? And which points should prospective clients absolutely think about? You can listen to the amazing discussion about these and other subjects here now directly or check out as a records in 'traditional manner'. We hope you enjoy it!

Podcast episode 'Erbbaurecht' - total records

Moderator Petra Konradi:

You have already read it in the title - in this episode we clarify compactly and to the point the most essential questions on the topic of genetic building rights. Because the arrive at which you build your house does not always have to belong to you. The hereditary building 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 costs continue to rise ... Is it worth it for you? And if so, under what scenarios? What is in fact behind the heritable structure right? And what should you focus on? 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, attorney and head of the legal department at VON POLL IMMOBILIEN:

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

At very first look, the heritable structure right seems to be a cost-effective option to buying land. However, it is a good idea to weigh both alternatives and to consider some mistakes.

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

Well, virtually speaking, it's very easy at 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 concern. The latter might then construct a residential or commercial property on it or acquire 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, however not the owner of the land.

In return, the tenant pays a type of rent?

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

The unique feature and therefore also a point that should be considered thoroughly by the renter: The ground rent can be changed every 3 years by the ground lease company.

What else should prospective renters consider?

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

In addition, it should be clarified ahead of time whether the residential or commercial property may be sublet by the leaseholder. In order to tape-record all contracts in writing, the parties involved 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 an individually developed ground lease land register.

Can anybody offer a heritable structure right?

In principle, yes.

In concept, anyone can grant a heritable building right. In practice, however, land is mainly leased by municipalities, churches, communities or business. Especially the church frequently appears in Germany as a lessor of land, so regarding allow young families with less equity to purchase property or construct a house.

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

Yes, I can validate that. As a guideline, 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 becomes the residential or commercial property of the ground lease provider. However, the latter need to then pay the leaseholder appropriate 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 building right does not end as a right of usage in rapid eye movement. Rather, the brand-new owner of the land or real estate takes over the leasehold agreement along with its remaining term. However, this does not imply that the agreed term is automatically restored or extended. It is rather to be understood in the sense that a new start of the term can be worked out with the brand-new owner. The more remaining term is left, the better the opportunities are, obviously, when the residential or commercial property is resold.

What is it about the so-called reversion?

If the leaseholder does not fulfill his contractual obligations or does not pay the agreed ground lease for at least 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 too soon and the ground lease provider becomes the owner of the building. However, care should 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 celebrations agree among themselves on an equally agreeable extension of the agreement.

In addition, although the ground lease grantor can give the ground lease holder a right of very first refusal 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, however still does not desire to do without a home of their own, for which the heritable structure right can be worthwhile under certain scenarios, given that just the purchase rate for your house, but not for the land needs to be raised. In this case, the total quantity for real estate financing is naturally rather 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 yearly ground rent.

Petra Konradi:

Firstly, the leasehold seems to be appealing for prospective buyers with only little equity. But a closer look exposes some not irrelevant concerns. Probably the biggest disadvantage: While the repayment of a routine bank loan for a plot of land ends over time, the ground lease continues to run up until completion of the agreement. Especially in times of low interest rates, standard financing typically shows to be more economically 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 expense throughout the years. Although a routine genuine estate purchase typically appears more pricey in the acquisition, it usually shows to be less complicated and less costly in the long run.

If you have any concerns about this or other subjects, please do not hesitate to call our experts or find even more information on our site and in the VON POLL IMMOBILIEN - App. You can find the links in the show notes of our podcast.

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