The law firm
The law firm
Since many years the law firm of Annette Krause-Thiel is providing legal advice and service for commercial clients, investors, developers, entrepreneurs and individuals in a variety of branches of law. Coming from a Common law system, clients often feel lost in the German law system – and not only for language reasons. The office leads you in English though the necessary steps of real estate and company affairs as well as through all affairs related to it.
The law firm of Annette Krause-Thiel will be your partner for drafting or negotiating real estate contracts.
The difference between the Common Law system and the German Continental Law system is notable. Hence, buying a property in Germany requires qualified assistance. In Germany real estates are registered with the owner’s name in the land register. No title research of previous owners is necessary. The registration of the current owner in the land register provides good faith. The transfer of title is not executed in a solicitor’s deed but based on a public notary’s deed.
The public notary under German law has completely different tasks than a public notary under Common Law. The German notary drafts, executes and registers the contract and is a neutral person between the seller and the purchaser. Whereas the purchase process under Common Law can be completed with the signature of the purchase contract in a relatively short time, the German process for the registration of the transfer of ownership in the land register might take weeks.
Buying an apartment in Germany passes through different steps. Usually it is the real estate agent who brings the parties together. The notary verifies the land register and drafts the contract. Very often not all parties are present on the day of signing. A party who is not present can either be represented in the deed by giving a notarial power of attorney to a proxy or by be represented in the deed by a third party who sign the deed without having a power of attorney. In the last case the contract will be valid as soon as the represented person has given his consent in a notarial form. Should he be represented by a proxy having a power of attorney the contract is immediately valid.
As soon as both parties have signed the notarial deed, the notary starts the execution of the deed. He registers the deed at different entities and he applies for the registration of a priority notice in the land register. The registration of a priority notice gives in a way a guarantee that the seller cannot sell the apartment to a third party. The priority notice blocks the land register; any person who has the right to do so, would see that a contract is in course.
The notary contacts the seller’s bank in case there is still an old mortgage registered in the land register which has to be deleted. The bank gives the notary the necessary documents for the cancellation and binds him with a fiduciary contract. The notary then is only allowed to delete the mortgage if he can guarantee that the remaining loan will be paid off. He sends as soon as all other preconditions are fulfilled, an official letter to the parties announcing that the purchase price is due and payable. The seller has to pay an eventually existing balance of the loan directly to the seller’s bank and the balance due directly to the sellers.
Most important is the housing manager’s consent which has to be also given in a notarial form. The housing manager is only allowed to refuse his consent if he knows that the new owner is not able to pay the condo charges.
As soon as all preconditions for a safe transfer of ownership are fulfilled, the notary will send a formal letter to the purchaser in which he informs him that the purchase price is due and payable. Should part of the purchase contract be needed to reimburse the seller’s loan, the notary will inform the purchaser how and what to pay to the seller’s bank. The balance, however, is to pay directly to the seller.
Once the purchaser has paid the purchase price the parties will arrange the handing-over. The will both read the meters and will sign a protocol about the handing-over of the keys. The seller from that day on is the possessor of the property. He is allowed to use the apartment or, if it is rented, to collect the rents. On the other side he is liable for the condo charges and the property taxes.
The seller has to inform the notary about the receipt of the purchase price. When all outstanding documents are in his file, particularly the tax assessment note for the land transfer tax, the notary will apply for the registration of the transfer of ownership in the land register. This is the last step in the process. The purchaser becomes the owner as soon as he formally registered in the land register.
Buying a house and a plot of land is similar to the purchase of an apartment.
For the party coming from a Common law system it is important to know that the German system generally provides freehold of property. Only in a few cases – if a plot belongs to the state, the church or to an individual owner – property has the character of a leasehold.
Once the notarial contract is signed from the parties, the notary applies for the registration of a priority notice in the land register. The registration of the priority notice gives evidence to a third party that the completion of a purchase contract is in course. Public and sometimes as well private pre-emptions rights have to be respected during this process. A pre-emption right gives a third party the right to enter into the contract.
In case a mortgage in favour of the seller’s bank is still registered in the land register, the notary applies for the bank’s consent of deletion. The bank will release such a document and will send it to the notary who has to take care that part of the purchase price will be paid in order to pay off the seller’s bank.
After the payment of the purchase price the parties will perform the handing over of the property. The notary will apply for the transfer of property in the land register.