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 carry out an amazing interview on the major topic of leasehold.

For whom and under what circumstances is leasehold rewarding? And which points should prospective customers definitely think about? You can listen to the interesting conversation about these and other subjects here now directly or go through as a records in 'standard way'. We hope you enjoy it!

Podcast episode 'Erbbaurecht' - complete 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 subject of hereditary structure rights. Because the arrive on 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 amount, the so-called ground rent.But even if land rates continue to increase ... 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 take notice of? 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, attorney and head of the legal department at VON POLL IMMOBILIEN:

Hello Ms. Konradi, thank you really much for the invitation.

In the beginning look, the heritable building right seems to be an affordable option to buying land. However, it is advisable to weigh both alternatives and to consider some risks.

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

Well, virtually speaking, it's very easy 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 utilize the land in question. The latter might then construct a residential or commercial property on it or buy a residential or commercial property currently 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 kind of rent?

Yes precisely, we are speaking about the annual ground rent. Previously, it was also called genetic lease, which is generally freely negotiable in the quantity. As a guideline, however, the amount of the ground rent has to do with 3 to 5% of the land value.

The unique function and thus likewise a point that must be considered carefully by the occupant: The ground lease can be adjusted every three years by the ground lease service provider.

What else should prospective tenants consider?

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

In addition, it must be clarified in advance whether the residential or commercial property may be sublet by the leaseholder. In order to tape-record all agreements in writing, the parties involved conclude a ground lease agreement 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 anybody give a heritable structure right?

In principle, yes.

In concept, anyone can approve a heritable building right. In practice, nevertheless, land is mainly leased by municipalities, churches, neighborhoods or business. Especially the church often appears in Germany as a lessor of land, so as to make it possible for young families with less equity to buy genuine estate or construct a home.

The trick is typically in the information, even with hereditary building rights?

Yes, I can validate 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 becomes the residential or commercial property of the ground lease company. However, the latter should then pay the leaseholder proper payment for the building and this is based on the present market worth.

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 new owner of the land or genuine estate takes control of the leasehold agreement along with its staying term. However, this does not suggest that the agreed term is automatically renewed or extended. It is rather to be comprehended 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 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 a minimum of 2 years, the property owner 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 prematurely and the ground lease provider ends up being the owner of the structure. However, care should be taken here. In the event of a reversion, the ground lease owner need to also compensate the leaseholder appropriately. Here, too, there is the possibility that the parties agree amongst themselves on a mutually acceptable extension of the contract.

In addition, although the ground lease grantor can grant the ground lease holder a right of first refusal 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, however still does not wish to do without a home of their own, for which the heritable building right can be beneficial under certain circumstances, considering that just the purchase price for your home, however not for the land needs to be raised. In this case, the overall quantity for real estate funding is naturally somewhat lower. Prospective buyers then pay in addition to the purchase cost for the residential or commercial property normally still the residential or commercial property tax, insurance coverage and upkeep expenses and the annual ground lease.

Petra Konradi:

First off, the leasehold seems to be tempting for prospective purchasers with only little equity. But a closer look reveals some not irrelevant concerns. Probably the greatest disadvantage: While the repayment of a regular bank loan for a plot of land ends in time, the ground lease continues to run until the end of the agreement. Especially in times of low interest rates, conventional funding frequently proves to be more economically beneficial.

In addition, the ground rent can be adjusted every three years. Due to this, there is a possibility that the ground lease payments will exceed the overall land expense throughout the years. Although a routine realty purchase generally appears more costly in the acquisition, it generally proves to be less complicated and less costly in the long run.

If you have any concerns about this or other topics, please feel complimentary to call our professionals or discover even 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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