Hereditary building right

Hereditary building right / Erbbaurecht

December 16, 2022

Land prices are rising in Germany. Another way to obtain a site for the construction of a house - whether residential or commercial - is to obtain a heritable building right. The relevant regulations can be found in the Hereditary building rights Act (ErbbauRG). The heritable building right is a so-called property-like right, i.e. it does not establish ownership of a property in the conventional sense, but something similar, which at least enables a comparable position of the right holder with regard to the associated rights and obligations. Thus, the heritable building right opens up the possibility of erecting a building on someone else's land. As a result, the holder of the heritable building right is granted a limited right in rem to the land of another, according to which the former may erect a building "on or under the surface of the land" (§ 1 I ErbbauRG). In return, a ground rent (similar to a rent) has to be paid.

How is a heritable building right established?

A prerequisite for the creation of a hereditary building right is that the purchaser of the hereditary building right (= hereditary building taker) and the owner of the land (= hereditary building giver) agree on the content of the hereditary building right and enter the hereditary building right in the land register.

There is one special feature that must be taken into account: In addition to the land register, the hereditary building right has a special land register sheet, the hereditary building land register. The content of the heritable building right is recorded in this land register. In contrast, the land register only shows that the property is encumbered with a heritable building right.

Content of the heritable building right (ground rent, duration and programme of obligations)

As compensation for the deprivation of possession of the land and its use, a ground rent - usually payable annually - is agreed in favour of the hereditary builder, see section 9 I ErbbauRG. However, an agreement on a one-time fee is also possible.

Although the law does not specify a minimum/maximum duration for the heritable building right, in practice a "perpetual" heritable building right is unusual. In most cases, the right is limited to a period of about 30 to 99 years. An extension of the hereditary building right is possible as long as the hereditary building right has not expired.

In addition, the parties can contractually determine each other's rights and obligations. For example, the landowner can reserve extensive (say in) rights by imposing a certain programme of obligations on the heritable building right holder. Conceivable here, for example, is: obligation to maintain, insure and/or use the structure for a specific purpose.

Termination: Reversion and extinction by lapse of time

As a rule, the heritable building right expires with the passage of time (the contract simply expires, section 27 ErbbauRG) or by legal agreement (section 26 ErbbauRG).

A distinction must be made between this and the so-called reversion. When exactly such a reversion occurs is to be determined by the parties in their heritable building contract.

For example, and not exhaustively, the following can be considered as grounds for reversion

• the leaseholder is in arrears with at least two of the annual rent payments (= payment arrears) or

• the leaseholder neglects the building or

• the owner of the heritable building right uses the building contrary to the agreement as a dwelling and not for his business.

If the owner of the land has effectively exercised the right of reversion, he is entitled to demand that the heritable building right be transferred to himself or to a third party. It is important to note that the heritable building right is only transferred (back) and, in contrast to termination by lapse of time, does not expire.

Consequence of termination

As a result, the hereditary building giver regains the land for free disposal. In addition, he acquires the corresponding building. In return, he must regularly compensate the hereditary building taker for the building. Corresponding provisions are thus regularly part of heritable building right contracts. However, this is not mandatory. It is also possible to transfer the land without compensation.

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