Leasehold

Another special form of real estate purchase agreement is the leasehold purchase agreement. Here you acquire the right to use the land and a property built on the land (owner-occupied home or condominium and part-ownership). The land encumbered with the heritable building right remains with the landowner. The owner receives compensation for the use of the land, known as ground rent. The property is recorded in a separate land register.

The building (single-family house or condominium and partial ownership) is entered in a separate land register, the so-called hereditary building register. The ground rent reallast is recorded there in section II, which secures the ground rent to be paid. The amount of the ground rent and its valuation is contained in the underlying contract on the establishment of the leasehold, as well as the duration of the leasehold, the conditions for the reassignment of the leasehold to the landowner, restrictions on disposal, approval requirements and the other rights and obligations of the respective leaseholder.

As a rule, any sale of the heritable building right or parts of the heritable building right and its encumbrance with mortgages, permanent residential and usage rights or real charges requires the written consent of the respective landowner. Furthermore, the landowner must participate in changes to the content of the heritable building right and the real charge created to secure the ground rent.

The acquisition or encumbrance of a leasehold is therefore more costly and time-consuming than a land purchase agreement or purchase agreement for regular residential property, as the respective property owner must submit the declarations of consent in a form suitable for the land register.

Issuers of heritable building rights are mainly church or municipal communities. However, they can also be legal entities and even - in rare cases - private individuals.

Until the consent of the owner entered in the land register (issuer of the leasehold) to the sale or encumbrance of the acquired leasehold in the prescribed form has been received by the certifying notary, the contract is pendingly ineffective. Consent is mandatory for the final execution of the deed.

If possible, it should be ensured in advance that the landowner/land lease issuer will give its consent to the sale of the leasehold and, if applicable, to the encumbrance with a mortgage. Otherwise, this consent may have to be replaced by lengthy legal proceedings. It is therefore advisable to clarify the content of the contract with the landownerbefore signing the purchase agreement and creating the land charge, particularly with regard to any pending adjustment of the ground rent or the amount of the land charge to be registered.

If the issuer of the leasehold is also a private or legal person, it is also advisable to deposit the agreed purchase price in a notary escrow account. This serves to protect the parties to the contract and to ensure the secure execution of the purchase contract. This is because there is a possibility that a new or further landowner may be added between payment of the purchase price and the planned transfer of legal ownership of the leasehold to the buyer and the contract will remain pending and ineffective until this new or further landowner has also given their consent to the sale in a form suitable for the land register. Ideally, the purchase price should only be paid after the change of ownership has been entered in the heritable building register for the buyer.

The costs incurred for setting up the notary escrow account can be shared equally by the parties to the contract; a different distribution is also possible.

As there are a large number of leaseholds in Monheim am Rhein in particular, we can draw on many years of extensive experience in the drafting, execution and handling of leasehold purchase agreements and their encumbrances, as well as in dealing with the relevant leasehold issuers, and will be happy to take all the necessary steps for you in advance and afterwards to make the purchase or encumbrance process as smooth as possible for you.