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Leasehold: VON POLL IMMOBILIEN – The Podcast

In encyclopedia episode 2 of the VON POLL IMMOBILIEN podcasts, Tim Wistokat, lawyer and head of the legal department at VON POLL IMMOBILIEN, and host Petra Konradi conduct an interesting interview on the significant topic of leasehold.

For whom and under what circumstances is leasehold worthwhile? And which points should potential consumers definitely think about? You can listen to the amazing discussion about these and other subjects here now straight or review as a records in ‘conventional manner’. We hope you enjoy it!

Podcast episode ‘Erbbaurecht’ – total transcript

Moderator Petra Konradi:

You have already read it in the title – in this episode we clarify compactly and to the point the most important questions on the topic of genetic building rights. Because the arrive on which you build your home does not always need to belong to you. The genetic structure right makes it possible to rent a plot of land and pay the owner in return an annual amount, the so-called ground rent.But even if land rates continue to rise … Is it worth it for you? And if so, under what circumstances? What is in fact behind the heritable structure right? And what should you pay attention to? 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 extremely much for the invitation.

At first glance, the heritable building right seems to be an affordable alternative to purchasing land. However, it is a good idea to weigh both options and to consider some risks.

Mr. Wistokat, building on somebody else’s land – how does that work?

Well, almost speaking, it’s extremely simple 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 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, but not the owner of the land.

In return, the occupant pays a kind of lease?

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

The special feature and hence also a point that should be considered carefully by the tenant: The ground rent can be changed every 3 years by the ground lease supplier.

What else should prospective occupants think about?

In addition to the concurred payments, the parties need to settle on maintenance and the possibility of making structural modifications to the existing residential or commercial property.

In addition, it should be clarified ahead of time whether the residential or commercial property might be sublet by the leaseholder. In order to tape all agreements in composing, the celebrations included conclude a ground lease contract 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 additionally in a separately developed ground lease land register.

Can anybody give a heritable building right?

In concept, yes.

In principle, anybody can give a heritable building right. In practice, however, land is primarily rented by municipalities, churches, neighborhoods or companies. Especially the church often appears in Germany as a lessor of land, so as to enable young households with less equity to buy property or develop a house.

The trick is often in the details, even with hereditary building rights?

Yes, I can verify that. As a guideline, 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 ends up being the residential or commercial property of the ground lease provider. However, the latter should then pay the leaseholder appropriate settlement for the building and this is based upon the present market worth.

Even in the event of a sale or inheritance of the land or residential or commercial property, the hereditary structure right does not expire as a right of usage in rapid eye movement. Rather, the brand-new owner of the land or realty takes control of the leasehold contract in addition to its remaining term. However, this does not indicate that the agreed term is automatically restored or extended. It is rather to be comprehended in the sense that a 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 fulfill his contractual commitments or does not pay the agreed ground lease for at least two 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 ended prematurely and the ground lease supplier ends up being the owner of the building. However, care must be taken here. In the occasion of a reversion, the ground lease owner must also 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 refusal on the residential or commercial property, the ground lease holder is not entitled to an agreement extension.

For whom is the ground lease beneficial?

Tim Wistokat:

Who has little equity, but still does not desire to do without a home of their own, for which the heritable structure right can be worthwhile under particular scenarios, since just the purchase rate for your home, but not for the land needs to be raised. In this case, the overall amount genuine estate funding is naturally rather lower. Prospective purchasers 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 costs and the yearly ground rent.

Petra Konradi:

Firstly, the seems to be appealing for prospective buyers with only little equity. But a closer look reveals some not irrelevant issues. Probably the greatest disadvantage: While the payment of a routine bank loan for a plot of land ends in time, the ground rent continues to run until completion of the agreement. Especially in times of low rate of interest, standard funding often shows to be more economically useful.

In addition, the ground lease can be changed every 3 years. Due to this, there is a possibility that the ground lease payments will surpass the total land expense for many years. Although a regular property purchase normally appears more costly in the acquisition, it usually shows to be less complex and less costly in the long run.

If you have any concerns about this or other topics, please feel totally free to contact our professionals or discover a lot more details 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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