Requirements and procedure for the acquisition of real estate

German law distinguishes between the legal transaction under the law of obligations, the purchase agreement, and the transaction in rem in the form of the transfer of ownership, also known as transfer of title.

Contract of sale

Conclusion of a purchase contract for a property and typical contractual obligations

The purchase of a property in Germany is subject to the general sales law provisions of Sections 433 et seq. of the German Civil Code (BGB). In a contract for the sale of a property, the seller undertakes, in accordance with Section 433 paragraph 1 sentence 1 BGB to transfer the property to the buyer and to procure ownership of the property for the buyer. The seller must provide the buyer with the property free of material defects and defects of title in accordance with Section 433 (1) sentence 2 BGB. The buyer undertakes to pay the agreed purchase price to the seller in accordance with Section 433 (2) BGB.

For a purchase agreement to be validly concluded, the contracting parties must agree on the essential points of the purchase agreement. essential points of the purchase contract . These include

• the object of purchase
• the purchase price
• the determination of the contracting parties

For a sufficient determination of the property, it is sufficient to specify the land register sheet . The prerequisite is that the property in question is registered on this sheet alone. In the case of a purchase contract for condominium ownership a distinction must be made as to whether the division of the building has already been completed in the land register or not. Pursuant to Section 1 (2) of the German Condominium Act (Wohnungseigentumsgesetz - WEG), condominium ownership is understood to mean the special ownership of a separate apartment in conjunction with the co-ownership share in the common property, i.e. the land and parts of the building. If an entry has already been made in the land register, it is also sufficient to refer to the corresponding page in the so-called residential land register . The inventory of the land register shows which co-ownership share is the object of purchase and to which special ownership it is connected. Further separate information on the number, type and location of the rooms and the size of the living space is not required for the purchase agreement to be effective. If the division into condominiums has not yet been completed in the land register, the deed of division can be used to determine the object of purchase. partition deed may be referred to.

The purchase contract is concluded by the offer of one contracting party and the acceptance of this offer by the other contracting party. The offer to conclude the contract may be made by the seller or the buyer. An offer must at least specify which property is to be the subject of the contract and the purchase price to be paid for it.

Requirement of notarization

Any contract by which someone undertakes to transfer or acquire ownership of a property must be notarized in accordance with § Section 311b paragraph 1 sentence 1 BGB must be notarized. The requirement for notarization serves to protect against the hasty and ill-considered conclusion of a contract and to clarify matters for the parties involved.

The fact that the parties involved have to visit a notary makes it clear that this is not just an ordinary everyday transaction. The notarization fulfils an advisory and protective function . This is not only intended to ensure that the contracts comply with the legal requirements and are effective, i.e. the so-called "guarantee of validity". Rather, the deed also provides unambiguous evidence of the agreements made, the so-called "evidentiary function". The notarization thus serves to avoid disputes and lawsuits and therefore also to relieve the courts. § Section 311b (1) sentence 1 BGB applies to all sale and purchase transactions relating to land and therefore also to non-material land shares, residential property and partial ownership.

The notarization obligation includes not only the payment of the purchase price and the sale of the property, but also all ancillary agreements. ancillary agreements which the parties intend to be part of the contract under the law of obligations. Such ancillary agreements may, for example, relate to agreements on the quality of the property within the meaning of Section 434 (1) sentence 1 BGB. Notarization should take place before the parties become legally bound. Therefore, the notarization requirement also extends to legal transactions that indirectly establish obligations to sell and purchase. Such transactions include, for example, the conclusion of reservation agreements with estate agents or the granting of irrevocable powers of sale or purchase.

Notarization is generally provided for as simultaneous notarization. This means that the seller and the buyer meet in one notarial appointment. notarial appointment before the notary and conclude the purchase agreement there by way of offer and acceptance. The declarations of both contracting parties are recorded by the notary in a transcript. The purchase agreement is effectively concluded when the notary concludes the minutes.

According to § 128 BGB it is also possible for the offer to conclude the purchase agreement and then the acceptance of the offer to be notarized by a notary. This means that the declarations of the contracting parties are notarized one after the other in two separate notarial appointments. With this type of notarization, the offer is first recorded in minutes.

Binding offer

The offer becomes effective when it is received by the party with whom the purchase agreement is to be concluded. A notarized offer is received when a copy of the minutes in which the offer was recorded is received. According to § 145 BGB the person who offers to conclude a contract with another person is bound by the effective offer for a certain period of time. offer if this commitment has not been excluded. The period within which the offer is to be valid can be extended in accordance with § 148 BGB by the person making the offer. If a deadline for the acceptance of the offer is not specified, the offer can only be accepted up to the time at which the party making the offer may expect to receive the response to his offer under normal circumstances (§ 147 BGB ). According to case law, this time period for real estate transactions is generally 4 weeks .

The offer expires according to § 146 BGB if it is rejected or not accepted in good time. Upon expiry, the offer ceases to exist so that acceptance of the offer is no longer possible. According to § 152 BGB the purchase contract is generally concluded when the acceptance is notarized if the offer has not yet expired at the time of acceptance. The delayed acceptance of an offer is deemed to be § 150 paragraph 2 BGB as a new application which, due to the § 311b paragraph 1 sentence 1 BGB cannot be tacitly accepted - for example by payment of the purchase price.

Procedure and instruction by the notary

For the purpose of preparing the contract, the notary will discuss the desired contents of the contract with the contracting parties, explain possible arrangements and point out existing risks and alternative arrangements. The notary will also typically prepare the draft purchase agreement in accordance with the wishes of the parties to the contract without incurring any additional costs. In addition, the notary will consult the land register before notarization in order to inform the buyer and seller of existing legal relationships (§ 21 Beurkundungsgesetz - BeurkG).

Procedure of the notarial appointment

As part of the notarization, the notary identifies the parties involved (§ 10 BeurkG ) and establishes their legal capacity (§ 11 BeurkG ). In addition, further due diligence measures are taken in order to rule out any risk of money laundering. The real estate purchase agreement is then read out in full to all parties present (§ 13 BeurkG ). Reading out is a mandatory part of the contract notarization, which cannot be waived. If a party to the contract cannot be present at the notarization, he or she may, in principle, be represented at the conclusion of the contract. The notary shall also explain the legal significance of the contents of the contract to the parties present and inform them of the legal consequences (§ 17 BeurkG ) and points out important aspects such as

existing approval requirements (§ 18 BeurkG ), the necessity of a clearance certificate from the tax office (§ 19 BeurkG ) and statutory pre-emption rights (§ 20 BeurkG ). Additions and amendments to the contents of the contract can also be made in this context following expert advice from the notary. At the end of the notarization, the real estate purchase contract is signed by all parties present and the notary and thus becomes legally effective and binding (§ 13 BeurkG ).

Real estate purchase agreement between companies and consumers

If, in addition to a company, a consumer is also involved in the real estate purchase contract, the notary must ensure that the legal declarations of the consumer are made by the consumer personally or by a trusted person in front of them. On the other hand, the notary should ensure that the consumer is given sufficient opportunity to deal with the subject matter of the notarization in advance. As a rule, the latter is done by making the intended text of the legal transaction available to the consumer two weeks before notarization (section 17 (2a) sentence 2 numbers 1 and 2 BeurkG ). The statutory period is intended to give the parties involved the opportunity to do so,

• to study the draft contract in detail
• to become clear about the value of the property and its suitability
• to examine the tax consequences
• to carry out structural investigations
• examine those matters that are not examined or accompanied by the notary in advance

With regard to the notary's duty to instruct, the splitting a real estate purchase contract into offer and acceptance is only permissible if there is a sufficiently weighty reason, as it can lead to a lack of instruction. If a split is objectively justified, the notary must generally structure the procedure in such a way that the offer is made by the parties more in need of instruction or more worthy of protection so that they receive the full extent of notarial advice with regard to both the offer and the contract offered.

Consequences of non-compliance with the notarization requirement

Failure to comply with the requirements of § 311b paragraph 1 sentence 1 BGB notarial form prescribed by § 125 sentence 1 BGB the consequence that the purchase contract is void is void. The contract does not establish any rights and obligations for the contracting parties. However, if the ownership of the property has been transferred from the seller to the buyer by conveyance and entry of the buyer in the land register, the nullity of the purchase contract is cured and the contract can be terminated in accordance with § 311b paragraph 1 sentence 2 BGB valid in its entirety. However, the curing of the formal defect does not go back to the time the contract was concluded.

Transfer of ownership to the buyer by conveyance of the property to the buyer and entry of the buyer in the land register

By notarizing the purchase contract as a sale transaction under the law of obligations, the buyer does not yet acquire ownership of the property. The transfer of ownership transfer of ownership to the buyer requires a transfer of ownership in rem, the validity of which is a prerequisite:

• the agreement of the contracting parties on the transfer of ownership of the property to the buyer (so-called conveyance), which must generally be declared before a notary public (§ 873 paragraph 1 , § 925 paragraph 1 BGB )
• the entry of the buyer as the owner of the property in the land register

The conveyance is usually notarized together with the purchase contract. In order for the buyer to be entered as the owner in the land register, the conveyance must be submitted to the land registry by means of a public or publicly certified deed (Section 29 (1) of the Land Register Code - GBO). Corresponding approvals under land register law (§ 19 GBO) must also be submitted in this form. As a rule, the notary is authorized and commissioned to execute the land register, in particular to declare the approvals and submit the necessary applications to the land registry.

Costs in connection with a real estate purchase agreement

According to the statutory regulation in § 448 paragraph 2 BGB the buyer of a property bears

• the costs of notarization of the purchase contract
• the conveyance
• the entry in the land register
• the costs required for registration

According to case law, the costs of notarizing the purchase agreement also include the land transfer tax, as this is inextricably linked to the acquisition process.

The seller must bear the costs of transferring the property in accordance with Section 448 (1) BGB.

The aforementioned statutory cost regulations are not mandatory. Deviating agreements between the parties in the purchase contract are therefore permissible.

Other professional groups that may be involved in a real estate purchase agreement

In addition to notaries, the following can also be involved Lawyers and solicitors can also provide legal advice to buyers or sellers as part of the transaction. Lawyers can also represent buyers and sellers. This is particularly relevant if the interests of one of the contracting parties are to be represented. Notaries are not representatives of just one party, but have the task of advising the parties involved independently and impartially.

Lawyers are independent organs of the administration of justice with the task of advising and representing clients in all legal matters. They are subject to a large number of professional regulations, in particular the Federal Lawyers' Act.

What kind of taxes should you pay when buying a property?

The purchase of a property is generally subject to real estate transfer tax .

Legal transactions in connection with domestic real estate are subject to real estate transfer tax if they are aimed at acquiring ownership of the real estate or a position similar to ownership. In particular, this includes purchase agreements and other legal transactions that establish a claim to the transfer of ownership of a domestic property. The tax rate is between 3.5 percent and 6.5 percent, depending on the federal state. Certain transactions are exempt from taxation, e.g. the purchase of property by the seller's spouse or partner.

What kind of taxes should I pay when selling a property, including on capital gains?

When a property is sold as part of pure asset management, the private proceeds of the sale may be subject to income tax. This is the case if the period between purchase and sale does not exceed 10 years.

If the property constitutes business assets, the profit made from the sale is subject to income - and also trade tax. If the seller is a corporation, the profit is subject to corporation tax. corporation tax and, if applicable, trade tax.

What kind of taxes should you pay for owning the property?

Property tax, income tax on rental and leasing income or second home tax may be payable while owning a property.

The property tax is levied on real estate. This includes land including buildings as well as agricultural and forestry businesses. It is generally paid by the owners. In the case of rentals, the property tax can be passed on to the tenants via the operating costs. The Federal Constitutional Court has declared the previous system of property tax assessment to be unconstitutional. It also ruled that a new statutory regulation was required. However, property tax can continue to be levied in its current form on a transitional basis until December 31, 2024.

From January 1, 2025, property tax will then be levied on the basis of the new law.

If the property is let or leased out, the income from letting and leasing is subject to income tax. income from letting and leasing is subject to income tax or the corporation tax and, if applicable trade tax .

Some municipalities levy a second home tax for the possession of a second home in the municipal area. second home tax r is levied. The second home tax is a local expense tax. To levy and structure the second home tax, the municipalities issue bylaws, which in turn have their legal basis in the municipal tax laws of the federal states.

• § 433 paragraph 1 sentence 1 BGB
• § Section 311b (1) sentence 1 BGB
• § 128 BGB
• § 145 BGB
• § 148 BGB
• § 147 BGB
• § SECTION 146 BGB
• § SECTION 152 BGB
• § Section 150 (2) BGB
• § Section 311b (1) sentence 1 BGB
• § 21 Notarization Act - BeurkG
• § 10 BeurkG
• § 11 BeurkG
• § 13 BeurkG
• § 17 BeurkG
• § 18 BeurkG
• § 19 BeurkG
• § 20 BeurkG
• § 13 BeurkG
• § Section 17 (2a) sentence 2 numbers 1 and 2 BeurkG
• § Section 311b (1) sentence 1 BGB
• § Section 125 sentence 1 BGB
• § Section 311b (1) sentence 2 BGB
• § Section 873 (1)
• § Section 925 (1) BGB
• § 448 paragraph 2 BGB