Notarial Real Estate Purchase Model Contract with explanations

Part I. Model Real Estate Purchase Contract (1)

Use of this model sales contract

Notary´s note: Our Model Real Estate Purchase Contract represents a simple standard case. The following explanations of the Purchase Contract are intended to make the “legalese” (legal language) of a real estate purchase contract more understandable for you. Our explanations offer a rough orientation for the standard case, they are not conclusive or complete legal information. The explanations do not replace your personal questions to the notary, which you can also ask during the notarisation hearing. In addition, or in a different (shorter) form of presentation, youwill find explanations in our Leaflet-for-buyers and Leaflet-for-sellers, which are available and can be downloaded as a PDF on our homepage under leaflets.

Model in the form of the so-called direct payment variant (i.e. without notary escrow account) (2)

Formation of purchase contract via so-called direct payment or via notary’s escrow account?

Notary´s note: Nowadays, payment of the purchase price to a so-called notary’s escrow account is no longer regularly agreed and, as a rule, this would also no longer be legally permissible, even if all parties wished to do so. Instead, almost every notarial real estate purchase contract provides – in accordance with the legal requirements – for the buyer to transfer the purchase price directly to the seller himself or to any creditors/ banks of the seller to be redeemed (so-called direct payment). Direct payment is regularly just as secure as via a notary’s escrow account, because a direct payment will be initiated only after written “release” and instructions from the notary. This also saves the parties the notary’s additional fee (custody fee) that would otherwise be incurred. The use of notary escrow accounts is nowadays regarded by the legislator as a “gateway” for money laundering to be prevented. Many years ago, however, the use of notary escrow accounts was still widespread in notarial practice.

In-depth knowledge

appeared today: (3)

Particularities if a party cannot appear in person at the notarisation appointment

Notary’s note: Ideally, all sellers and all buyers should appear in person at the notary’s office for notarisation of the purchase contract. However, this is unfortunately not always possible, e.g. if the residence of one party is locally distant.

Then there are various ways in which a party can be represented by another person. A trusted person should be chosen as the representative. In particular, there are the following possibilities for representation:

In-depth knowledge 

Those present identified themselves by means of valid official photo identification. (4)

What documents do you need to bring to the notarisation?

Notary’s note:
Valid photo ID in the original
Please bring your valid passport to the notarisation. A valid identity card is sufficient instead for all EU citizens, citizens of Switzerland and citizens of the European Economic Area (Norway, Iceland, Liechtenstein). Mere copies or documents such as driving licences are not sufficient.

Tax identification numbers of seller and buyer („steuerliche Identifikationsnummer“)
In addition, please inform us of your German tax identification number (consisting of 11 digits) – preferably by e-mail – ideally before the notarisation date (you will find this, for example, on the annual tax certificate from your tax office). Please do not confuse this with your income tax number. If you forget to give us the number before or at the time of notarisation, you can give it to us later. Until then, however, the notary is prohibited from providing any party with certified copies of the purchase contract.

In-depth knowledge

If applicable (in the case of foreign participants): The appeared person … assured that he was fluent in the German language, of which the notary was personally convinced by having a short conversation. (4a)

Required German language skills:

Notary’s note:
All persons appearing at the notarisation must be fluent in German. According to case law, each party must be able to express his or her thoughts “clearly and distinctly” in German.  Since the deed may otherwise be invalid, the notary must make sure of this before notarisation if there are signs of a foreign reference (e.g. a foreign passport). Please inform us in advance of a notarisation if a party does not have sufficient German language skills.

If a representative appointed by a party to the purchase contract (authorised/powerless) appears instead of the party to the purchase contract (see in-depth knowledge for explanation (3)), only the language skills of this representative are relevant.

Example for insufficient German language skills:

Only the wife of two buying spouses speaks fluent German.  However, she explains to the notary that her husband understands everything because she translated and explained everything to him before the notarisation. She will also answer his questions during the notarisation and translate for him if necessary. And… her husband also understands „some“ German.

What is the procedure if a party does not speak German fluently?

In-depth knowledge

§ Article 1 (12-14) of the Money Laundering Act (GwG) (5)

Money laundering obligations

Notary’s note: What many people might not know: for some time now, every notary is legally obliged, similar to banks, to classify every real estate purchase contract into money laundering risk classes and to “report” certain purchase contracts to the so-called Financial Intelligence Unit (FIU), without being allowed to inform the parties involved. For an obligation of he notary to report it is sufficient, for example, if a party resides in a certain (money laundering risk) country. In cases of higher money laundering risk, the notary is obliged to collect information on the source of funds/income etc. from all parties involved (seller and buyer) by questionnaire and to clarify this further if necessary. These are obligations of all parties involved and of the notary. The notary himself is liable to a fine if he does not collect this information from you in the specified cases and does not document this properly in his files. Therefore, please understand if notaries should ask you these questions. If you are interested, you can read the details in the so-called GwGMeldV-Immobilien and in the GwG (Geldwäschegesetz – Money Laundering Act) – both of which are available on the internet.

Since 1st April 2023, the parties must immediately prove to the notary under the MLA (money launderinf act, „GwG“)  that the purchase price was paid “non-cash”, otherwise this may lead, among other things, to a “secret” suspicion of money laundering by the notary to the competent anti-money laundering office FIU (cf. explanation [44b]).

All contracting parties declare that they do not conclude the purchase contract in the exercise of a commercial or independent professional activity, but as consumers within the meaning of § 13 BGB. (6)

Are the parties acting as consumers or as entrepreneurs?

Notary’s note: As a rule, natural persons always act as “consumers” („Verbraucher“) within the meaning of § 13 BGB when concluding a purchase contract. The same regularly applies to civil law partnerships (GbR), unless the group of partners also consists of a company (e.g. a GmbH). On the other hand, legal persons and trading companies (GmbH, OHG, KG, GmbH & Co. KG etc.) always act as “entrepreneurs” (§ 14 BGB – „Unternehmer“). Why is this distinction important?

In-depth knowledge

§ 1 Current situation (7)

Current situation: in § 1, the land register data on the property, including land register encumbrances, are reproduced.

Notary’s note:… as they are entered in the land register, i.e. it is more or less a copy from the land register. The notary will have taken a current look at the electronically kept land register at the time of notarisation.

Serial no. … – Plot …, Parcel …, Size: sqm, Building and open space/traffic area … (8)

Type of use

Notary’s note:  The “type of use” („Nutzungsart“) of the property stated in the land register is generally not of decisive importance.

In-depth knowledge

According to information provided by the parties, the object of purchase does not include any shares in private roads, etc. (which may still be to be sold), which have been entered on another land register Folio. (9)

Is the property (exceptionally) only accessible via a private road? 

Notary’s note: Some properties are only accessible via privately owned paths or roads. As a rule, these are co-owned by all owners of adjoining properties, who can only gain access to their property via this path. Each adjoining owner is then only co-owner of a certain fraction (e.g. 3/100ths) of such common areas. The sentence in the model purchase contract is merely intended to prevent the contracting parties from forgetting to transfer such fractional ownership of private paths to the buyer as well. Without reference by the parties, the notary cannot know about the existence of such a private path if the path is not recorded in the land register of the actual purchase property (but in another land register).

Section II: (10)

Encumbrances in Section II of the land register

Notary’s note: In section II of the land register all possible encumbrances are entered, with the exception of mortgages (mortgages, land charges and annuity debts), the latter are entered in section III. .

In-depth knowledge

Section III:  (11)

Encumbrances in section III of the land register

Notary‘s note: Only mortgages (mortgages, land charges and annuity debts) are entered in section III of the land register. All other encumbrances in the land register are entered in section II. How ist he procedure if mortgages from the seller’s banks are still entered in section III of the land register?

In-depth knowledge

The Seller sells the object of purchase to the Buyer, in the case of several to each at identical shares.(12)

Buyer majority

Notary’s note: If several persons are acting as buyers, they can specify here the percentage shares (fractions) („Bruchteile“) in which they would like to acquire the property, whereby an acquisition at identical shares is usually desired, i.e. in the case of two buyers in 1/2 each. Please let us know if the buyers wish to purchase at different shares (e.g. buyer 1 at 3/10 and buyer 2 at 7/10 etc.).

In the case of a majority of buyers, acquisition by fractional shares is almost always the chosen and simplest form of acquisition. Other forms of acquisition (e.g. acquisition in the form of a new or existing limited liability company or acquisition in the form of a new or existing civil law partnership) are of course possible, but should only be chosen after consultation with the respective tax advisor. If desired, supplementary provisions can be included in the purchase agreement in the event of acquisition by several purchasers in fractional shares.

In-depth knowledge

If applicable (only if the parties expressly wish to be recorded):
Included in the sale (13)

What is actually included in the sale of the property?

Notary’s note: Also sold together with the property, even without separate mention, are all the buildings standing on it as well as the items permanently attached to the building or the property (e.g. central heating system, awnings, floor coverings, flowers/shrubs/trees planted in the property, fencing, sanitary facilities, carport, blinds, cooker, generally also fitted kitchen, built-in cupboards, spotlights, lighting attached to the ceiling/wall) and the statutory accessories pursuant to § 98 BGB (e.g. existing oil stocks for heating). A vendor may therefore not remove the aforementioned items after notarisation of the purchase contract, i.e. dismantle sinks, dig up plants, etc.

Other objects are not included in the sale unless a co-sale is expressly agreed in the contract of sale (this applies, for example, to garden furniture, garden equipment, sandpit, swing, lamps that serve more as furnishings, furniture, curtains, washing machine, dishwasher, etc.). If you would like to sell such movable objects, please send us a list of the objects in advance of the notarisation, which can then be taken as an attachment to the purchase contract.

In-depth knowledge 

The parties also estimate the value of these objects vis-à-vis the real estate transfer tax office at € ……….. . (14)

What part of the purchase price is attributable to the movables sold along with the goods?

Notary’s note: Even though the tax offices usually do not make any objections, if the purchase price portion shown on the movable objects does not exceed 10 % of the total purchase price: No value may be used here that is higher than an approximate realistic market value of the used objects also sold. It is true that some parties are tempted to use a particularly high value here in order to save as much land transfer tax as possible (there is no land transfer tax on the movable property). But be careful: Please note that the value of the movable property sold with the purchase must then be stated by all parties in the purchase contract for the purpose of forwarding it to the tax office. In your own interest (avoiding involvement in tax fraud!), only state realistic market values that take into account the age and condition of the items. 

Any event of default relating to the purchase of the movable objects shall have  no effect on the Purchase Agreement for the Property. (15)

Contractual disturbances relating to the co-sale of movable property

Notary’s note: This merely means that the sale of the real estate will continue even if, contrary to expectations, disputes between the parties subsequently arise only with regard to the movable objects sold along with the real estate.

§ 3 Purchase price and due date for payment (16)

Purchase price and due date for payment

Notary’s note: § 3 primarily regulates that the purchase price is only to be paid by the buyer after the notary has certified that the prerequisites for a “secure payment” have been met. This will usually be the case approx. 5-10 weeks (property located in Berlin) or approx. 7-12 weeks (property located in Potsdam/Leipzig) after notarisation; the notary generally has no decisive influence on the duration.

€ (in words: Euro …) (17) 

Purchase price

Notary’s note : The determination of the purchase price is the sole responsibility of the parties. The notary does not check the appropriateness of the purchase price and the profitability of the transaction.

Only in the case of the purchase of rented real estate / listed real estate („Denkmalschutz“) it might perhaps make sense in individual cases, for purely tax reasons, to split the purchase price in the purchase contract between the land and building portions.

In-depth knowledge

The notary shall notify the Buyer (with a copy to the Seller) in writing (18)

Notarial purchase price due date notification

Notary’s note: We send this so-called notarial purchase price due date notification to the buyer by registered letter and, as a rule, also by e-mail in advance (provided we have the e-mail data). The seller also receives notification by e-mail or post. The notice is sent a few weeks after notarisation, see explanation [22].

The priority notice of conveyance (19) 

Priority notice of conveyance (“Eigentumsvormerkung”) in favour of the buyer

Notary’s note: The transfer of ownership in the land register to the buyer is only initiated after payment of the purchase price (“property for money”). However, as a “preliminary stage” to the transfer of ownership, the notary arranges for the buyer to be entered in the land register (Section II of the land register) as the “preregistered future owner” after the purchase contract has been notarised (i.e. before the purchase price has been paid), cf. § 7. How quickly this preregistration is entered depends primarily on the speed of the respective land registry office/legal administrator (Berlin: usually 5-10 weeks).

With the registration of the priority notice of conveyance, the buyer acquires a protected legal position / expectation of acquiring ownership of the property with the promised freedom from encumbrances in the land register. Also, the seller can then no longer successfully resell the same property to another buyer. The land register then shows that the property has already been sold to the buyer.

For security reasons, the actual entry of the priority notice in the land register must be awaited before payment of the purchase price. Sometimes parties wish to change the contract insofar as a mere notary’s certificate that the entry will “certainly” be made shortly (so-called “Sicherstellung”) shall suffice, because the parties are interested in a quick occurrence of the due date. This would not sufficiently protect the buyer due to the legal “gap in protection”.

In-depth knowledge  

The notary has been provided with all approvals and negative clearance certificates that may be required for the effectiveness and execution of this agreement, with the exception of the tax clearance certificate. (20)

Availability of all approvals and negative certificates required for the effectiveness and execution of the purchase contract, with the exception of the tax clearance certificate.

Notary’s note: A wide variety of approvals and negative certificates may be required for the effectiveness and execution of the purchase contract, depending on the specific case. After notarisation, the notary automatically obtains the necessary documents, i.e. writes to the competent authorities. This includes (except in the case of condominium purchase contracts, as there are generally no state pre-emption rights there) as standard also obtaining the confirmations of the competent state authorities that no state pre-emption right exists/is exercised (negative certificate); this is usually only a “formality”. Supplementary information on the documents to be obtained and the so-called tax clearance certificate („steuerliche Unbedenklichkeitsbescheinigung“):

In-depth knowledge  

c) The notary has been provided with all documents on the discharge of encumbrances which are registered in the land register with a higher rank, or with the same rank, as the priority notice, and which are not to be taken over by the Buyer. (21) 

Encumbrance release documents/cancellation permits

Notary’s note: It is even the rule (unobjectionable for a buyer) that, at the time of sale, mortgages for the seller’s banks are still entered in section III of the land register. Such land register encumbrances are regularly not taken over by the buyer, but are cancelled by the notary within the scope of the notarial execution of the purchase contract. How this works in practice in detail can be read under In-depth knowledge in explanation [11].

Before the purchase price is made due for payment, the notary further ensures that other land register encumbrances, which the buyer does not have to take over according to the purchase contract, are also deleted (e.g. if a right of residence or a usufructuary right for the parents of the seller should still be entered in section II of the land register).

The purchase price shall be due for payment after expiry of two weeks from the receipt by the Buyer of the above notification from the notary. (22)

Purchase price due date notification of the notary

Notary’s note: The purchase price is not to be paid already two weeks after notarisation, but only two weeks after the notary has sent the so-called purchase price due date notification to the buyer.

Before the buyer pays the purchase price, he must be assured that he will also become the owner of the property upon payment, without any undesired encumbrances in the land register. This protection of the buyer does not come into effect with the notarisation of the purchase contract. Rather, the notary only arranges the necessary security steps with the competent authorities after the date of notarisation. If a contracting party was not present at the notarisation meeting, but a representative without power of attorney was present on his behalf, the notary initiates the necessary safeguarding steps only after receipt of the approval oft the represented party in due form.

The security is only given as soon as the notary certifies to the buyer the occurrence of the due date prerequisites listed in § 3 (2) (so-called due date notification of the notary – „notarielle Fälligkeitsmitteilung“), only then “the traffic light for secure payment is green”.

As a rule, the parties are interested in a quick occurrence of the due date so that the seller receives the purchase price and the buyer in return receives possession of the property. A time period of approx. 5-10 weeks after notarisation (or after receipt of the approvals in the case of notarisation with representatives without power of attorney) is within the completely regular range and cannot regularly be accelerated. The time taken is essentially not within the notary’s sphere of influence, but rather that of the offices/authorities contacted by him (e.g. land registry office, property administrator in the case of condominium sales, public authorities, the seller’s banks to be redeemed).

Please refrain from sending interim status enquiries to the notary’s office during the regular processing times mentioned above (what is taking so long?). Which specific due date requirements are still missing?) so that we can bundle our capacities for effective support of all contracts notarised with us. As soon as all requirements are met, we automatically notify the parties without delay anyway.

In-depth knowledge

If applicable: However, the purchase price shall not be due for payment prior to … (23)

Agreement of a payment date

Notary’s note: All agreed payment dates must always be subject to the proviso that the notary has sent the notarial due date notification by then and thus a secure payment directly to the seller has become possible at all by the desired payment date. However, since it can never be predicted with certainty by when the notary will be able to send his due date notification, it is not possible to agree on a latest payment date (i.e. irrespective of whether the payment prerequisites listed in § 3 (2) have occurred by then). In addition, the buyer’s financing banks would probably not be willing to pay out the financing loan at that point.  If payment is desired as quickly as possible, the parties therefore regularly leave it at a due date of 2 (or 1) week(s) after receipt of the notary’s due date notice.

If, on the other hand, the purchase price is not to be due as soon as possible, but in any case not before a certain date – earliest desired payment date – (e.g. because the seller can only move out of the property in a few months and the purchase price is to be paid to him only shortly before), this can be regulated (“The purchase price is due for payment two weeks after receipt of the notarial due date notification by the buyer, but at the earliest on ……”).

Payments shall be made by bank transfer and in such a way that the purchase price is credited not later than on the due date, otherwise the Buyer shall be in default of payment. (24)

What rights does the seller have in the event of non-payment of the purchase price?

Notary’s note:In the event that a buyer fails to pay the purchase price on time, the seller may, on the basis of the submission to compulsory enforcement in § 4 (1), quite quickly initiate enforcement measures with the help of the bailiff(„Gerichtsvollzieher“) for the purpose of collecting the purchase price. The other existing rights in case of default of payment are comprehensively regulated by law (BGB). The inclusion of further provisions on this in the purchase contract is therefore usually superfluous. What are my rights under the law? May I then ask the notary for advice/help?

In-depth knowledge

The Buyer shall first pay the purchase price to redeem the encumbrances in favour of beneficiaries with real rights which are not taken over, at the requested sum, i.e. the Buyer shall not pay this part of the purchase price tot he Seller, but directly  to the beneficiaries to be redeemed, in accordance with the written notification from the notary yet to be issued (which will contain both the sums tob e redeemed and the recipients` account data). (25)

Redemption of the beneficiaries in rem still entered in the land register (= usually the seller’s financing banks).

Notary’s note: You can read in detail how the redemption of the seller’s mortgages still registered in the land register in section III works in practice under In-depth knowledge in explanation [11].

The notary pointed out the prohibition of cash payments and that only a bank transfer of money of the purchase price has a fulfilment effect. (26)

Prohibition of cash payments 

Notary’s note: Since 1st April 2023, “cash payments” (payments with cash, crypto values, gold, platinum or precious stones) are prohibited by law according to § 16a GwG (money laundering act) and no longer have a fulfilment effect, i.e. they do not reduce the purchase price debt. This also applies to cash down payments that may have been made before notarisation. The parties involved must also prove to the notary that the purchase price was not paid in cash (cf. § 8 or explanation[44b]).

Submission to enforcement proceedings (27)

Subjection to execution

Notary’s note: § 4 helps the seller if the buyer does not pay the purchase price on time. § 4 enables the seller to then enforce payment of the purchase price without the need for protracted court action against the buyer with the help of the bailiff(„Gerichtsvollzieher“). This possibility is in addition to the possibilities then available under the law anyway (cf. explanation [24]).

In the same way, here (in the case of real estate occupied by the seller himself), the seller’s submission to execution can also be included (because of his obligation to hand over the real estate after payment of the purchase price). How does enforcement work with the help of the enforcement clause in the purchase contract?

In-depth knowledge

Possession (28),

Transfer of possession

Notary’s note: Transfer of possession: The buyer can demand the transfer of possession from the seller concurrently with the crediting of the purchase price (one day later). The seller has to make sure himself that the money has been received in full, e.g. by checking his account online or by contacting the bank to be redeemed. The notary does not check this and consequently does not issue any confirmations or the like as to whether the purchase price has been paid in full or when a handover is to take place.

The obligation to “hand over” (granting of actual control over the property) always includes (a special mention in the purchase contract is superfluous) the handing over of all existing keys, the removal of all movable property not sold with the property and the leaving of the rooms in a “broom-clean” (roughly cleaned) condition. Essential components of the property and movable property sold with the property may not be removed (for these terms see explanation [13]). Some parties draw up a handover protocol to be signed upon handover, in which they record the day of handover of possession, the consumption meter readings and the keys handed over. However, there is no obligation to do so.

If it is to be agreed that the property is to be handed over to the buyer before the purchase price has been credited (e.g. because the buyer is in urgent need of a new “place to stay”), this requires special provisions in the purchase contract in order to protect the seller from an otherwise “unsecured advance payment”. Talk to the notary about this in good time. It is often advisable to deposit the purchase price in advance in a notary’s escrow account. Only the payment to the seller will then be made later, namely as soon as the conditions for payment are met (they correspond to the due date conditionsin § 3 (2)).

With possession (§ 5), legal ownership (§ 8) does not yet pass to the buyer at the same time. What does this mean?

In-depth knowledge

benefits (29)

Transition of benefits („Nutzungen“)

Notary’s note:Transfer of benefits: on the transfer date, the “economic ownership” is transferred to the buyer, i.e. all advantages granted by his use/possession, e.g. the right to rent out for his own account.

risk (30)

Transition of risks („Gefahr“)

Notary’s note: Transfer of risks: any accidental deterioration of the property is at the risk of the buyer from the day of handover (e.g. flood/fire damage).

charges (31)

Transfer of charges („Lasten“)

Notary’s note: Transfer of charges: From the day of transfer, the buyer has to bear the “charges” of the property. This includes, above all, the payment of property tax, premiums for building insurance (e.g. against fire, flood and pipe damage), waste disposal, rainwater and sewage charges and, in the case of the sale of condominiums, the monthly housing allowance (= “house money” – „Wohngeld“).

Usually the seller has already partially paid such regularly recurring charges in advance for the future, i.e. also for a period in which (with handover) the seller is no longer responsible for such payments but the buyer (in the internal relationship). From the day of handover onwards, he can demand pro rata reimbursement from the buyer in accordance with § 103 BGB and will then approach the buyer independently (the notary is not responsible for this). Reimbursement of costs therefore takes place insofar as the property tax/premium/housing allowance etc. paid in advance by the seller relates to the period from the transfer date (§ 103 BGB).

Example: the seller has paid the property tax for the full calendar year in advance in January. The transfer date is 1 July. The seller can therefore demand reimbursement from the buyer of half of the property tax paid (i.e. insofar as it relates to the period 01.07.-31.12.).

and duties of care and liability for the Property (32)

Transfer of duties of care and liability fort he property („Verkehrssicherungspflicht“)

Notary’s note: Transfer of duties of care and liability fort he property: From the day of handover, the Buyer shall be responsible for clearing and gritting public footpaths etc. in place of the Seller.

The Property shall be handed over to the Buyer free of any actual use or rights of use of the Seller or third parties (33)

Transfer free of rights of use

Notary’s note: This means, above all, that the seller guarantees that the property will be handed over unrented and unleased.

Within 2 weeks after the transfer date, the Seller shall hand over to the Buyer all documents in his possession relating to the Property (34)

Documents to be handed over

Notary’s note: This includes, for example, building plans, floor plans, building permits, operating instructions for the heating system, etc. that are still available to the seller. These are usually documents/file folders for which the seller no longer has any use after the transfer of the property. Since the seller is only obliged to hand over such documents that he still has in his possession, this obligation to hand them over does not constitute a risk for him. If, on the other hand, in individual cases it is particularly important to a buyer that he definitely receives very specific documents, then he should clarify with the seller before notarisation whether these documents are still available and then the parties can ask the notary to list these documents very specifically in the contract (then we need – preferably by e-mail – a specific list in which the documents are described very precisely, e.g. by date, issuing authority, file number, etc.).

The energy certificate („Energieausweis“), on the other hand, must be handed over earlier according to mandatory statutory law. It is an obligation under public law that is subject to a fine (it is not possible to waive this in the purchase contract) that the seller must hand over a valid energy certificate for the building to the buyer in the original or as a copy at the latest immediately after conclusion of the purchase contract, § 80 para. 4 sentence 1 GEG (Building Energy SavingAct – „Gebäudeenergieeinspargesetz“). Exceptions apply, for example, to properties that are listed buildings.

The Seller shall bear development contributions and other resident contributions for building work (35)

Development and other resident contributions („Erschließungs- und Anliegerbeiträge“)

Notary’s note :This regulation only covers construction and redesign measures carried out by the state that take place outside the sold property, namely on public areas (road land, pedestrian walkway, etc.). If the sold property is already fully developed with a road, pavement, etc. and connection to the public supply and disposal network (this is the case with most sales), then the short-term incurrence of such fees is probably not to be expected and this regulation in the purchase contract is then of no significance.

In-depth knowledge

The Seller owes the transfer of ownership of he Property free of encumbrances, except in as far as the Buyer has cooperated in the creation of such encumbrances or if provided for otherwise in this contract, however, the Seller ist not obligated to transfer the Property free from any easements and obligations to build and maintain which are not registered in the land register. (36)

Encumbrances to be assumed, defects of title

Notary’s note: § 6 (1) conclusively regulates whether and, if so, only which encumbrances entered in the land register the buyer must take over. The seller is liable to the buyer for ensuring that all other encumbrances entered in the land register can be deleted. Furthermore, the seller is already liable by law for the property being free of defects of title (§ 433 (1) sentence 2 BGB).  This means his obligation to ensure that third parties cannot assert any rights or only the rights assumed by the buyer under the purchase contract with regard to the sold property (§ 435 BGB).

A legal defect would be given, for example, if the property would be rented out contrary to the information in the purchase contract or if a land register encumbrance not assumed by the buyer could not be deleted.

In-depth knowledge

(The Buyer has inspected the object of purchase in detail and is buying it in its current age-relatedcondition; all rights of the Buyer due to a material defect in the Property and any movable property sold with it are excluded (not, however, for such material defects that arise between notarisation and the transfer date, provided they are not based on normal wear and tear). (37)

Material defects

Notary’s note: It is common practice in purchase contracts for second-hand real estate to exclude the seller’s liability for material defects. However, the seller still has to remedy at his own expense any defects that arise in the period between notarisation and handover. Buyers should inspect the property thoroughly before the date of notarisation.

The seller is nevertheless legally liable if he did not disclose relevant material defects known to him (or thought possible by him) without being asked before conclusion of the purchase contract (“fraudulent intent”). However, in the event of a dispute, the buyer would have to prove to the court that the seller was aware of the defects or that he had at least considered them possible. In practice, this proof is often not possible.

In addition, the seller is liable if he has “guaranteed” certain things in the purchase contract or if the parties have agreed in the purchase contract that the property must have certain features as a mandatory quality (so-called quality agreement, „Beschaffenheitsvereinbarung“).

If defects should occur after notarisation, then the notary may not provide either the seller or the purchaser with information about which legal options now exist, but must abstain (principle of neutrality of the notary, cf. In-depth knowledge on explanation [24].

Exclusions or limitations of liability in this purchase contract do not apply to any quality agreements or guarantees/warranties contained in this document and not in the case of culpable injury to life and limb and not otherwise in the case of gross negligence or intent by a contractual party, its legal representatives or vicarious agents. (38)

Exception to the exclusion of liability in case of culpable injury to life and limb

Notary’s note: It is stipulated by law that the provisions in § 6 (4) must be included in any case in such contracts in which (only) one/several seller person(s) is/are a legal entity (e.g. GmbH) or an entrepreneur within the meaning of § 14 BGB or, if for other reasons the purchase contract is a so-called general terms and conditions („allgemeine Geschäftsbedingungen“) of the seller. The reason is that the legislator has determined in § 309 no. 7 BGB that the seller’s liability for material defects cannot otherwise be effectively excluded (if this wording, which is also printed in essence in the law in any case, is not included in the purchase contract). However, hardly any practical examples can be found for the injuries to life and limb mentioned in the content; they are probably almost exclusively of a theoretical nature.

Subject to the condition precedent of the day of handover, the Seller shall assign to the Buyer accepting this all possible claims against third parties (e.g. property insurers, contractors) to which the Seller is (or will be) entitled on account of defects or damage to the object of purchase, but not insofar as these occur between the conclusion of the purchase contract and the day of handover. (39)

Transfer of residential buildings insurance

Notary’s note: By law, the buyer becomes a party to the seller’s existing residential building insurance (not: household contents insurance) upon transfer of ownership (not yet upon transfer of possession) (§ 95 para. 1 VVG). The assignment of the insurance claims agreed in the purchase contract also secures the buyer for possible damage claims that occur in the period between transfer of possession and transfer of ownership in the land register. The buyer must notify the insurance company of the sale without delay after the transfer date, otherwise the insurance company will be released from its obligation to pay benefits (§ 97 para. 1 sentence 2 VVG).

If the buyer does not wish to take over these insurances, he has a special right of termination vis-à-vis the insurance company, which he can only exercise within 1 month after the transfer of ownership in the land register (§ 95 para. 2 VVG). In the case of the sale of condominiums, there is no need for these assignments, because the buyer always automatically enters into the protection of the existing building insurance (the contractual partner of the building insurance is and remains only the condominium owners’ association as such, of which the buyer becomes a member).

§ 7 Priority notice of conveyance (40)

Priority notice of conveyance („Eigentumsvormerkung“ = “Auflassungsvormerkung”)

Notary’s note: The registration of a priority notice („Eigentumsvormerkung“ = “Auflassungsvormerkung”) in the land register is an essential prerequisite for the payment of the purchase price (cf. § 3 (2) a) of our model purchase contract, cf. explanation [19]). The land register then shows that the property has already been sold to the buyer. The buyer thus acquires a protected legal position/expectation of acquiring ownership of the property with the promised freedom from encumbrances in the land register and is protected against a subsequent insolvency of the seller. If undesired further entries of encumbrances in the land register should occur after the registration of the priority notice (this cannot be prevented even by a priority notice, as it cannot effect a “land register block”), then the buyer, as holder of the priority notice, can also demand the cancellation of these encumbrances directly from the entitled parties (section 888 (1) BGB).

The Buyer approves of the deletion upon registration of the change in title of the priority notice entered for his/her benefit, provided that no lower -ranking entries continue to exist in the registration of which she/he has not participated. (41)

Cancellation of the priority notice with transfer of ownership

Notary’s note: As soon as the buyer is registered as owner in the land register after payment of the purchase price, i.e. acquires the full right, he no longer needs the “preliminary stage” of the merely “noted” future owner (the priority notice of conveyance) and the priority notice can then be deleted.

Only in exceptional cases does the notary ensure that the priority notice continues to exist despite the transfer of ownership to the purchaser: namely, if its protective effect (explanation [40]) is still needed against new encumbrances that have been undesirably entered in the land register after the purchase contract has been certified.

The notary shall be irrevocably requested by all parties to bring about the occurrence of the resolutary condition (42)

“Resolutary condition” of the priority notice on title

Notary’s note: What is a priority notice „subject to a resolutary condition“? This means that the priority notice is automatically”dissolved” again in the land register (i.e. deleted) if the notary applies for this at the land registry. Such a possibility to “dissolve” the priority notice is required to protect the seller if he has withdrawn from the purchase contract due to non-payment of the purchase price. § 7 does not regulate when or under which conditions the seller is entitled to such a right of withdrawal or how he has to exercise it, this is rather regulated by law (BGB) and the seller has to observe the legal requirements, cf. in-depth knowledge on explanations [24]).

Rather, § 7 (2) only gives the seller (in the event of a withdrawal in accordance with the legal requirements) the supplementary option of having the notary delete (“dissolve”) the buyer’s priority notice blocking “his” land register. As long as the priority notice is not deleted, the seller will in fact not be able to sell the property to a third party. The seller must then write to the notary (with the seller’s signature) in compliance with the exact wording of § 7 (2) in order to have the priority notice cancelled.

The assignment of the claim to transfer of ownership of the Property is excluded. (43)

Exclusion of assignment

Notary’s note: The agreed exclusion of assignment ensures that the seller himself only has to transfer ownership to the buyer known to him (and not to other persons named by the buyer after the purchase contract has been notarised). Initially, therefore, the buyer is entered in the land register as owner in any case. However, a resale of the property by the buyer remainspossible of course.

§ 8 Agreement on the transfer of ownership (conveyance) (44)

Conveyance

Notary’s note: The agreement declared by the parties in § 8 (conveyance = „Auflassung“) is a first prerequisite for the buyer to beregistered in the land register as the new legal owner. However, the transfer of ownership may not take place before the purchase price has been paid. For this reason, the contracting parties do not yet make all declarations required for the transfer of ownership (land register approval and land register application) in the purchase contract. Rather, they authorise the notary, who only makes these declarations after he has received proof of the credit entry of the purchase price (cf. explanation [44a]) and proof of a non-cash payment (cf. explanation [44b]).

This procedure of authorising the notary doesnot trigger any “extra” notarial costs in comparison to other contract-forming options for withholding the transfer of ownership.

For this purpose, (i) the Seller undertakes to immediately confirm the crediting of the purchase price in writing (44a)

Proof of the crediting of the purchase price

Notary’s note: Proof shall be furnished by written confirmation of the seller to the notary that the full purchase price has been credited. The seller is obliged to provide this confirmation immediately after receipt of the purchase price.

“Written” confirmation requires a letter signed by all sellers, which can also be sent to the notary as a PDF/photo. Mere e-mail without signature is not sufficient. The sellers will receive a form for the purchase price receipt confirmation from us with the dispatch of the due date notification.

If parts of the purchase price do not go directly to the seller but to his banks to be redeemed (cf. § 3 (3)), it is the seller’s task and duty to inform himself by immediate consultation with his banks about the complete payment of the purchase price and then to confirm this to the notary. The seller does not fulfil his duty if he confirms to the notary only those purchase price instalments which he himself has received, he himself has to confirm the “full purchase price receipt”.

If a seller does not fulfil his obligation, the buyer can prove to the notary that the credit entry has been made, if necessary as a substitute, by submitting a so-called execution confirmation („Ausführungsbestätigung“) from his bank(which must then be commissioned from his bank for a fee). Mere bank statements („Kontoauszüge“) are not sufficient for this proof according to general opinion, as they cannot prove the succesful crediting of the recipient’s account.

Since 1st April 2023, the transfer of ownership according to the Money Laundering Act (GwG) additionally requires proof of the “non-cash” purchase price payment, which can also be provided by mere bank statements (explanation [44b]). Please note that one proof does notmake the other superfluous, but both proofs (purchase price credit note and “non-cash” payment) are always required to effect the transfer of ownership.

and (ii) the Buyer undertakes to immediately submit the bank statements or bank confirmations showing a non-cash purchase price payment in full  (44b)

Proof of “non-cash” purchase price payment

Notary’s note: Whereas in the past the seller’s confirmation of receipt of the purchase price was sufficient to initiate the transfer of ownership, since 1st April 2023 the parties are additionally obliged pursuant to § 16a Money Laundering Act (Geldwäschegesetz) to send the notary (unsolicited) initially conclusive evidence of the complete”non-cash” purchase price payment (i.e. not by cash, crypto values, platinum, gold or precious stones). This obligation is assumed by the buyer in the internal relationship between the parties to the purchase contract. According to the law, the seller remains additionally entitledand obliged to this proof. The notary does not take care of the procurement of this evidence, this is the sole unsolicited task and duty of the parties, especially of the buyer.

The proof of the non-cash purchase price payment cannot be provided by mere confirmation of the parties involved, but by sending (electronic) bank statementsand/or by transfer confirmations of the transferring or receiving banks to the notary. These proofs must add up to the full purchase price (at most with the exception of an amount of up to € 10,000.00).

If the buyer has to make several transfers of the purchase price (e.g. parts directly to the seller and parts to a bank of the seller for release from encumbrances), proof is required for each payment.

If part of the purchase price is not paid by the buyer himself but by a third party (e.g. the buyer’s financing bank), the buyer should ensure in advance that his bank provides him or the notary with the necessary proof of non-cash payment for these payments in a timely manner.

Should the parties involved violate their obligation to provide this evidence in a timely manner (or the prohibition of cash payments), the notary may – in addition to withholding the transfer of ownership – be obliged to “secretly” report suspicions of money laundering to the competent public anti-money laundering office (FIU).

§ 9 Authorisation for Buyer to encumber the Property (45)

Authorisation for buyer to encumber the property

Notary’s note: § 9 (1) enables the buyer to raise the purchase price through a loan from his financing bank. The seller authorises the buyer to record a so-called (financing) lien (usually a land charge) for the financing bank before the notary and to have it recorded in the land register before the purchase price is paid. The common wording printed in italics in § 9 (1) ensures that the seller does not suffer any damage as a result. The mere inclusion of the regulations (encumbrance power) in § 9 (1) does not trigger any additional notarial costs, but only the later notarisation of the mortgage itself.

A financing bank of the buyer regularly makes the disbursement of the loan dependent on the prior notarial certification and registration (alternatively: notarial confirmation) of a so-called mortgage (land charge/mortgage) in the land register (section III) of the seller.

In-depth knowledge

All of the above powers of attorney in § 9 are granted with exemption from the restrictions of § 181 BGB (insofar as the acting parties can be exempted from them), beyond the death (46)

Powers of attorney beyond death

Notary’s note: If one of the contracting parties should die after the notarisation of the purchase contract, the execution of the purchase contract is not affected by this, and the powers of attorney granted to the notary and his notarial staff remain in force in the event of death. In this case, only the heirs of the deceased take over the position of the deceased, and they are irrevocably bound to all obligations in the purchase contract in the same way as the deceased himself. 

§ 10 Costs and taxes (47)

Costs and taxes

Notary’s note: It is customary for the buyer to bear the costs of the land transfer tax as well as the notary and land registry costs for the purchase contract. As a rule, the seller only bears those costs that are necessary in order to bring about the promised deletion of encumbrances in the land register. If a party is represented without a power of attorney, it bears the costs of the necessary signature certification. The parties can theoretically make agreements deviating from this (matter of negotiation), but this is unusual in practice. § 10 is an internal cost allocation agreement between the parties.

When will the buyer receive which invoices from whom? What are the costs at the notary, land registry, public authorities and tax office (land transfer tax)?

In-depth knowledge

– the statutory rights of first refusal and the approvals and negative clearance certificates to be obtained in respect of this contract;(48)

Statutory pre-emption rights, approvals to be obtained and negative certificates

Notary’s note: See here In-depth-knowledge to explanation [20].  In the case of the sale of condominiums, there is no need for this passage due to the lack of existence of state pre-emption rights in this case.

– that the transfer of ownership to the Buyer requires, among other things, the existence of the tax clearance certificate, which the tax office sends directly to the notary after payment of the real propertytransfer tax; (49)

So-called tax clearance certificate („steuerliche Unbedenklichkeitsbescheinigung“)

Notary’s note : The notary notifies the tax office – real estate transfer tax office – of the sale after the deed of sale has been notarised. The tax office then sends the buyer the notice of costs for the real estate transfer tax (real estate transfer tax notice – „Grunderwerbssteuerbscheid“) within 2-10 weeks after the purchase contract becomes effective, with a payment deadline of one month after receipt of the notice. After payment, the tax office sends the notary an official confirmation of payment(“tax clearance certificate” – „steuerliche Unbedenklichkeitsbescheinigung“). The land registry requires this clearance certificate for the transfer of ownership of the property to the buyer (no legal acquisition of ownership before payment of the land transfer tax).

– the legally mandatory joint and several liability of all parties for costs of this contract and its execution (50)

Joint and several liability of all parties for costs 

Notary’s note: All contracting parties are always personally liable to the notary and the land registry for the payment of all fees. The notary is (mandatory by law and not changeable) free to choose which party he claims for his costs. In doing so, however, he will regularly adhere to the internal cost distribution agreement of the parties in § 10, otherwise the parties must compensate each other accordingly.

– the nature of the register obligations to build and maintain, which he has not reviewed; (51)

Register of building encumbrances

Notary’s note: See here In-depth knowledge to explanation [36].

– that the parties should point out to the notary (on the basis of special regulations that may then be mandatory) in good before notarisation if the purchased building/apartment was newly built or comprehensively (comparable to a new building) extended or (core) renovated less than five years ago; the parties declare that this is not the case here; (52)

Massive refurbishment or new construction carried out less than 5 years ago

Notary’s note: The case law, which is hardly comprehensible for laypersons (and lawyers) in this respect, fakes (in very simplified terms) that structurally existing buildings/flats have not yet been erected! This applies to buildings/flats that were newly constructed or substantially (!) (core-)renovated less than 5 years ago (in the case of vacant properties) or less than 3 years ago (in the case of occupied properties). Please inform the notary about this immediately when commissioning the draft purchase contract so that he can draft your purchase contract properly. Such a draft is time-consuming, so that notarisation appointments cannot usually be made at very short notice.

In-depth knowledge

– that all agreements must be correctly and completely notarised, otherwise the whole contract may be null and void; (53)

Ancillary agreements of the parties to the purchase contract

Notary’s note: The parties must have all agreements that are essential for at least one party included in the text of the purchase contract. Otherwise this may lead to the invalidity of the entire purchase contract. Example: the parties agree on a higher purchase price or the co-sale of furniture outside the purchase contract, cf. in-depth knowledge on explanation [13].

– that he has not given tax advice and generally advises the use of a tax advisor before notarisation. (54)

Tax topics relevant to practice, no tax advice by the notary

Notary’s note: The notary generally does not advise on tax issues and does not know the individual tax constellations of the parties involved.

As a rule, the following cases can be relevant from a practical tax point of view, which the party concerned will then clarify in detail directly with its tax advisor:

*   If a seller sells a property (not used exclusively for own residential purposes) within 10 years of its purchase, he has to pay tax on the profit, § 23 para. 1 no. 1 EStG (so-called speculative profit). The beginning and the ending of the 10-year period are usually determined by the effectiveness of each of the purchase contracts.

*   If a seller sells a total of more than 3 (non-inherited) properties within 5 years, this may constitute so-called commercial property trading for tax purposes. Depending on the amount of the profit, the tax office then assesses not only income tax, but the municipality also assesses trade tax. Depending on the specific individual case, the sale of less than 3 properties can also lead to commercial real estate trading.

(1) In the event that a statutory right of first refusal is validly exercised, both parties shall be entitled to withdraw from the contract; claims for damages shall be mutually excluded in this respect. (55)

Right of rescission if the state should exercise a statutory right of first refusal

Notary’s note: See here for more detailed knowledge on explanation [20].

(2) Should individual provisions of this deed be invalid, the remaining provisions shall remain valid. (56)

So-called severability clause

Notary’s note: Should it turn out after notarisation that any provision in the purchase contract is invalid, it would be presumed according to the legal rule of doubt – far from practice – that the invalidity of the entire purchase contract was intended for this case (§ 139 BGB). This presumption should regularly be reversed in sales contracts by the so-called severability clause. In many (not all) cases, this can “save” the validity of the rest of the purchase contract.

This one sentence in the purchase contract is sufficient to bring about this result.

(3) Amendments, supplements and the cancellation of this contract must be made in writing in order to be effective, unless this purchase contract expressly permits text form or unless they are required to be notarised by law. (57)

Changes after notarisation of the purchase contract

Notary’s note: In practice, some time after notarisation, the parties sometimes agree that they wish/need to subsequently change certain contents of the purchase contract. Often such changes can be agreed privately by the parties themselves without the involvement of the notary, but sometimes they have to be notarised. If necessary, ask the notary. Even in the case of a privately written draft amendment, however, additional notary fees will be incurred if you ask the notary to check the content of your draft or to draw up a draft. More complex amendments should be drawn up by a professional (lawyer/notary). According to § 16a GwG, the parties are obliged to send the notary a copy of the signed amendment deed if the purchase price is affected. What can a private amendment agreement look like (sample)?

In-depth knowledge

… Folio no. …   (60)

Folio number of the flat, creation of condominium ownership

Notary’s note: A separate flat land register Folio (with its own folio number) is created at the land registry for each flat.

How is condominium ownership created? What is the meaning of the terms “declaration of apportionment”(„Teilungserklärung“), “community regulations” („Gemeinschaftsordnung“), “partition/division plans”(„Aufteilungspläne“) and “certificate of separation” („Abgeschlossenheitsbescheinigung“)?

In-depth knowledge

combined with the sole ownership („Sondereigentum“) of condominium/apartment no. ….(61)

Condominium ownership consists of sole ownership and common property

Notary’s note: The special feature of condominium ownership is that there are both common areas and facilities on the property to which all condominium owners are jointly entitled (each in fractions) (so-called common property – „Gemeinschaftseigentum“, e.g. land, central heating, façade, staircase, etc.) and the apartment itself, which is in the sole ownership of the respective condominium owner (so-called special property, „Sondereigentum“).

With the sale of the respective co-ownership share, the flat connected to it is always automatically sold as well; an isolated sale of only the flat or only the co-ownership share is not possible.

The larger the flat, the larger the associated co-ownership share in the common property. As a rule, both the amount of the monthly house charge for the flat and the voting rights in owners’ meetings are based on the size of the co-ownership shares and thus on the size of the flat. Only very rarely is this stipulated differently in the community regulations.

How is condominium ownership created? What is the meaning of the terms “declaration of apportionment” („Teilungserklärung“), “community regulations” („Gemeinschaftsordnung“), “partition/division plans” („Aufteilungspläne“) and “certificate of separation” („Abgeschlossenheitsbescheinigung“)? (see in-depth knowledge on explanation [60])(See in-depth knowledge for explanation [60])

combinded with condominium no. … are the special rights of use („Sondernutzungsrecht“) to cellar room no. … as well as to parking space no. … and garden no. … (62)

 Cellar rooms, parking spaces etc., special rights of use

Notary’s note: The allocation of cellar rooms, parking spaces, garden areas etc. for the sole use of the respective owner of a flat may be regulated differently.

(1) It may be special property (sole ownership, „Sondereigentum“) (rather rare). In this case, these areas/rooms are not marked as “special right of use” in the land register or in the purchase contract (Part II. § 1 (1)), but as “special property” (e.g. “special property in flat no. 12 including cellar”).

(2) It may be a so-called reified („verdinglichtes“) right of special use („Sondernutzungsrecht“). This can be recognised by the fact that the allocation to the flat is noted directly in the land register and thus also in the contract of sale (§ Part II. § 1 (1)). Unfortunately, such a note is not always printed in the land register itself. Alternatively, a look at the so-called community regulations can show whether a real allocation of these special rights of use to the flat is stipulated there. “Special right of use” means that only the condominium owner in question is entitled to the permanent right of use of areas/rooms in the common property. It gives a strong legal position, hardly differs in effect from “sole ownership” (condominium ownership) and can also be sold in isolation (without a flat), but only to other condominium owners.

(3) In practice (especially in old buildings), however, basement rooms or parking spaces are usually neither in the special ownership nor has a reified right of special use been allocated to certain flats according to the land register/community regulations. Rather, they have been used for exclusive use – often for decades – on the basis of mere allocation by the property administrator or on the basis of mere condominium owner resolutions. One also speaks of “special rights of use (only) under the law of obligations” („schuldrechtliche Sondernutzungsrechte“) /”usage regulations” („Gebrauchsregelungen“). In these cases, the legal continuity of an exclusive right of use is never ensured, so that a seller will not vouch for it in the purchase contract. In actual practice, however, no one is likely to question such sole rights of use that have been lived with for years (even by the buyer as the new owner) if there is a cellar room or parking space etc. for each flat. In this case, all other flat owners also have an interest in the exclusive use of cellar rooms.

Property administrator consent is/is not required. (63)

Consent of the property administrator

Notary’s note: The property administrator („Wohnungseigentumsverwalter“ or „Verwalter“) is the legal representative of the condominium owners’ association. He takes care of the administration of the common property (not of the respective sole property = special property), which is co-owned by all condominium owners, including the conclusion of necessary insurances, maintenance, collection of the monthly house payments. The property administrator („Wohnungseigentumsverwalter“) is not to be confused with a so-called special property administrator(„Sondereigentumsverwalter“): each condominium owner may additionally voluntarily commission any special property administrator only with the administration of his or her special property (flat) for the purpose of taking care of an existing residential tenancy.

In most cases, the community regulations stipulate that the sale of flats requires the consent of the property administrator. This will be noted in the condominium land register and is stated in the purchase contract in Part II, § 1 (1). The administrator is regularly obliged to give this consent, so it is usually only a “formality”.

The administrator may only refuse consent if there is an “important reason” in the person of the buyer. For example, if it is known that the purchaser has already failed to pay his house payments in other condominium owners’ associations, etc. On the other hand, any arrears in house payments on the part of the seller do not justify a refusal of consent.

After notarisation of the purchase contract, the notary automatically writes to the administrator and asks him to send his consent together with his administrator’s certificate, each in an authenticated form. The contract of sale only becomes effective with the granting of consent, the purchase price may only then be made due by the notary (and only after additional proper presentation of the administrator’s certificate). How long may the administrator take with this?

In-depth knowledge

(1) The Buyer submits to immediate enforcement of this deed against the Seller on account of its obligation to pay the purchase price plus default interest pursuant to section 288 (1) of the German Civil Code (Bürgerliches Gesetzbuch – BGB) therefrom from the date of issue of the enforceable copy, and on account of its obligation to pay the housing allowance (house money) up to the amount of 18 times the current monthly housing allowance of € …… ….. against the condominium owners’ association to the immediate enforcement of this deed. (64)

Housing allowance, compulsory submission to the condominium owners’ association

Notary’s note: Each condominium owner bears proportionately (usually in proportion to the size of his co-ownership shares and thus in proportion to the size of his flat) the ancillary costs („Nebenkosten“) of the condominium owners’ association (such as costs for electricity, central heating, waste disposal, caretaker, gardening, water, sewage, administration, maintenance). Once a year, the condominium owners’ meeting decides in the so-called economic plan („Wirtschaftsplan“) which monthly advance payments on the expected ancillary costs are to be paid in the coming year, including a precautionary monthly maintenance reserve – „Instandhaltungsrücklage“ (together called “housing allowance” or”hous money” = „Wohngeld“ = „Hausgeld“). For each year, the condominium manager then prepares a so-called annual statement („Jahresabrechnung“). This shows the actual costs incurred for the year, which are offset against the advance payments (hosing allowances) already made. After the annual settlement, owners either receive a refund or they have to make an additional payment (if the house money already paid was not sufficient to cover the costs).

What is this amount/subjection to enforcement against the condominium owners’ association about?

The compulsory enforcement regulated here with regard to the housing allowance only becomes significant if the buyer (!) does not pay the monthly house money owed by him in the future. On the other hand, the clause does not mean that the seller is in debt for the house money. With the help of this clause, the condominium owners’ association can collect/enforce the buyer’s possible future house money debts quite quickly – similar to a court judgement – i.e. without having to take him to court for a long time.

However, the amount of this simplified collection option is limited to housing allowance debts for a maximum of 18 months. If the buyer does not pay the housing allowances for more than 18 months, the condominium owners’ association would have to sue for these additional housing costs in court. The clause in the purchase contract does not change the fact that house money is still only owed in monthly instalments (i.e. not the housing costs for 18 months “in one go”).

For good reason, condominium owners’ associations usually require that each (future) condominium owner notarise such a submission to compulsory enforcement of the housing allowances. Such an obligation may arise from the community regulations („Gemeinschaftsordnung“) or from condominium owners’ resolutions („Eigentümerbeschlüsse“), so that such a clause should regularly be included in the purchase contract as a precaution. If this is forgotten, the administrator is entitled to refuse his consent to the sale (disputed), cf. on administrator consent Explanation [63]. All co-owners have an interest in a quickly realisable collectability in the case of defaulting house money debtors. As long as house money debts are not collected, all other co-owners must bear them instead.

(2) The Buyer shall enter into all rights and obligations associated with the Property with effect from the transfer date, in particular the declaration of apportionment and community regulations, the binding resolutions and the property administrator’s agreement. (65)

Entry of the buyer into rights and obligations from the declaration of apportionment, community regulations, resolutions, administrator’s contract

Notary’s note: Already from the date of transfer (of possession), the parties put themselves in such a position as if the buyer had already become a condominium owner; legally, the change of ownership then occurs with the entry as the new owner in the condominium land register.

In addition to the Condominium Act (“WEG”), the rights and duties of a condominium owner are essentially derived from the declaration of apportionment and the community regulations, cf. on these terms in-depth knowledge on explanation [60].

In addition, a purchaser must, above all, accept all resolutions passed by the condominium owners’ meeting in the past. The administrator keeps a so-called collection of resolutions („Beschlusssammlung“) and must give each condominium owner or a third party authorised by the condominium owner access to the collection of resolutions (§ 24 (7), sentence 8 WEG).

He undertakes to impose the obligations assumed by him pursuant to the preceding sentence, together with the obligation to submit to compulsory enforcement vis-à-vis the condominium owners’ association on account of the then current housing allowance amount for 18 months, on his purchaser in the event of a resale of the object of purchase and to oblige the purchaser in turn to impose them on further future purchasers with an obligation to pass them on. (66)

Obligation to pass on this contractual passage in the event of future resale by the buyer 

Notary’s note: If the buyer wishes to resell the purchased flat at a later date, he must ensure that the aforementioned obligations are also passed on to the purchaser.  For this purpose, he can simply have the same contract components included in the later purchase contract by the notary then commissioned.

Reimbursements concerning business years prior to the transfer date are in the internal relationship solely due to the Seller, who also has to make any subsequent payments concerning such business years.(67)

Internal compensation obligation of the parties of back payments and refunds

Notary’s note: This contractual passage ensures a fair settlement in the event that the condominium owners’ association has to make additional payment claims or refunds. For example, the seller alone is to be responsible if there are reimbursement payments (e.g. overpayment of house money) or additional claims (e.g. obligation to make additional contributions because the costs were higher than the house money received) for previous years.

The Seller warrants that there are no unpaid special contributions („Sonderumlagen“) decided upon in relation to the object of purchase. Future extra contributions shall be borne by the Seller insofar as they are due before the transfer date, otherwise they shall be borne by the Buyer. (68)

Special contributions

Notary’s note: Special contributions („Sonderumlagen“) are sometimes decided by the owners’ meeting if there is a need for liquidity for common tasks because the house funds or the maintenance reserve are not sufficient. This can be the case, for example, if major renovation work/acquisitions are pending. A special contribution („Sonderumlage“) is an agreed obligation of the condominium owners to pay a certain amount to the condominium owners’ association (in addition to the monthly house money owed). The amount of the payment and the payment date (due date) are determined in the special contribution resolution.

The seller and the buyer agree between themselves in the purchase contract that the buyer shall only be responsible for such special contributions which are only decided after the date of notarisation and, moreover, only become due for payment after the transfer date (Part II. § 5 (1)). The Seller shall indemnify the Purchaser against any other special contributions.

(The Seller authorises the Buyer with effect from the transfer date to exercise the rights of a special owner of the object of purchase (especially voting rights in owners’ meetings). (69)

Authorisation 

Notary’s note: According to the law, the buyer could only participate in owners’ meetings and vote after the transfer of legal ownershipin his name in the land register. Through this authorisation, the time is brought forward to the day of transfer(of possession).

The maintenance reserve („Instandhaltungsrücklage“) attributable to the object of purchase amounts to € ….. according to the information provided by the Seller/annual statement at …… . (70)

Maintenance reserve

Notary’s note: The inclusion of this provision in a purchase contract is now superfluous.

The maintenance reserve („Instandhaltungsrücklage“) is the amount accumulated by the condominium owners’ association for possible future maintenance needs of the common property (part of the monthly owed house money). In the past, a buyer did not have to pay real estate transfer tax on the purchase price in the amount of the existing maintenance reserve, so the amount was usually stated in the purchase contract. However, since a court ruling of the Federal Fiscal Court of 16 September 2020, it is no longer necessary to state this in the purchase contract, according to which it is no longer possible to save land transfer tax in this respect.

The maintenance reserve “sticks” inseparably to the sold condominium and is automatically transferred to the buyer with it; it cannot be “taken out” by the seller. No provisions on the transfer of the maintenance reserve are required in the purchase contract. The maintenance reserve is part of the so-called association assets of the condominium owners’ association, into which every buyer enters with the purchase of the condominium.