We advise clients on the creation of heritable building rights (Erbbaurecht). This is a right under German law to construct a building on land owned by another person. If you want to build a house, you do not necessarily have to be the owner of the land (having the legal title) on which the house is to be built. This is where the heritable building right comes in. The following issues must be taken into account when ordering a heritable building right
- Leasehold instead of land acquisition
- Details of the law on heritable building rights
- Minimum legal content
- Private or commercial use
- Content of the heritable building right
- Details of maintenance, repair of the building
- Insurance, reconstruction
- Term of lease
- Ground rent
- Reversion
- Settlement
- Compensation
The landowner and the heritable building right holder can (and should) agree on details of the content of the heritable building right. This contractual content is effective in rem, i.e. it is covered by the agreement in rem (land register declaration) and is entered as such in the land register by reference to it. It is therefore valid vis-a-vis third parties, e.g. a new property owner, if the property is sold.
The contractual content includes regulations on the construction, maintenance and use of the building. It must also be clarified whether the heritable building right is also to apply to parts of the land that have not been built on. The following questions also arise: How should the building be insured and how should it be rebuilt in the event of destruction? Who is to bear the public and private burdens and charges? The agreement must also include an obligation on the part of the heritable building right holder to transfer the heritable building right to the owner of the land if certain conditions are met (reversion). The heritable building right holder may undertake to pay contractual penalties. The landowner may grant the leaseholder a priority right to renew the heritable building right after its expiry. Finally, the landowner may undertake to sell the land to the respective leaseholder.
We help our clients not to lose the overview in this thicket of regulations. Particularly because heritable building rights are often agreed for an entire generation, extreme care is required.