Germany: Real Estate

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This country-specific Q&A provides an overview to technology laws and regulations that may occur in Germany.

It will cover real estate law as well as the author’s view on planned future reforms of the commercial real estate regime.

This Q&A is part of the global guide to Real Estate. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/real-estate

  1. Overview

    The Federal Republic of Germany consists of sixteen states (Laender) each of them being subject to individual state legislation plus the federal legislator. As a consequence, German real estate law mainly has the following different sources:

    • Civil law: The regulations regarding the ownership and transfer of real estate, mortgages, encumbrances etc. and the contractual aspects of construction, leases, purchase and sale can be found in the German civil code which can be considered as the main source for civil real estate laws in Germany, which is subject to the competence of the federal legislator. German Civil Law is mainly based on the German Civil Code (BGB) and it is applicable in the whole Federal Republic of Germany.
    • Federal public law: The federal legislator also has the competence in the area of planning law. Hence public planning law is applicable all over Germany.
    • Public law of the states (Laender): Each of the 16 German states has the competence regarding building law, as a result sixteen different building laws are in place in Germany. The applicable building law for a piece of real estate is the state, where the real estate is located,.
    • Public law of the European Union: The legislation of the EU has impact on the German real estate law, albeit in a narrow ambit (safety of buildings, planning and environment are the most important topics)
    • Last, but not least there are various taxes applicable to German Real Estate which are based on federal and state tax laws.

    The German Civil Code (BGB) has come into effect as of on 01.01.1900 and has seen just one major reform. Especially in the area of ownership it has strong influences of Roman law.

    The written law is the main source of German real estate law, however court decisions may have influence to the interpretation of those sources. Nevertheless court decisions are not binding, since the concept of stare decisis is not enshrined in the German law system.

  2. How is ownership of real estate proved?

    The ownership of real estate is generally proved by an excerpt from the Land Register which should be up to date and taken from a reliable source or be certified.

    The Land Register, which is kept at the district courts of the various states, is divided into the Index and three Sections. The Index lists cadastral references to a plot of a land or condominium. The ownership of the real estate is established in Section I, in case of co-ownership, also the shares of the co-owners are entered here.

    Section II of the Land Register lists the existing encumbrances of the real estate which are subject to registration, for example, easements, rights of pre-emption, priority rights, heritable building rights, whereas in Section III mortgages and land charges are registered.

    A change of ownership of the real estate needs to be registered in the Land Register to be valid.

    However, certain changes of the ownership such as succession, take place outside the Land Register and it therefore is possible that there is a difference between the formal land registry entry and the legal ownership. Thus the register is not definite but particularly reliable. Therefore an entry within the land register is not a proof, but a strong indicator for ownership.

    This applies in particular, as the trust of a purchaser in the entries of the land register is proprietary and for that reason the purchase bona fide is possible.

  3. Are there any restrictions on who can own real estate?

    There are no specific restrictions – e.g. everybody can own real estate, persons, legal entities, closed-end and open-end property funds, public law bodies and foreign companies. Also minors and incapacitated persons are eligible to own real estate, however they are not granted the power of disposition.

  4. What types of proprietary interests in real estate can be created?

    See below.

  5. Is ownership of real estate and the buildings on it separate?

    In general, ownership cannot be established upon single buildings. In a nutshell: the owner of the land owns the buildings built on it subject to the below.

    Further there is no real equivalent to the concept of proprietary interest enshrined in Common law existing within German law. However there are institutes existing which can be described as "proprietary interests", the most important are the following:

    • Absolute Ownership: An absolute owner of a plot of land has the property rights regarding the surface and the space above and below. Further he has the property rights concerning all buildings erected on his land. The absolute ownership can be exercised by several people as co-ownership.
    • Condominium Ownership: For a condominium ownership it is necessary that an apartment or another definable unit of a building has been declared as a Condominium under the Condominium act. In that case an absolute ownership upon the Condominium can be awarded. The owners of the condominiums in a building are sharing the ownership of common used areas.
    • Heritable building rights: The absolute owner of a plot of land can grant such a right to a third person under the Heritable Building Rights Act up to 99 years. The person then is entitled to erect a building on the land and is owner of the building, thus the owner of the land remains in his position.
  6. What are common ownership structures for ownership of commercial real estate?

    Commercial real estate can be held directly by individuals or through entities, although it is more common for high value commercial asset to be held through specifically created structures which are, depending on the ultimate owner, formed in- or outside of Germany or by open-ended or closed-ended funds as well as REITs.

    Common ownership structures include:

    • limited liability companies or corporations;
    • limited liability partnerships; and
    • REITs or Open Ended Funds.

    Limited liability companies: Limited liability companies, formed specifically for the purpose of holding the real estate in question, are a common holding structure and may be based in Germany or outside Germany. Corporate vehicles offer limited liability, which allows investors to ring-fence assets and liabilities, and they can also provide tax advantages for some classes of investors (for instance with respect to trade tax and capital gains). Corporate vehicles are also used in order to provide privacy and anonymity for investors.

    Limited liability partnerships: Limited partnerships are also a common holding structure for German property. German limited liability partnerships have a legal personality and are typically transparent for most tax purposes. Limited partnerships are a very flexible structure from a governance perspective, without many of the rules and restrictions that apply to corporate vehicles. German limited liability partnerships are registered in the commercial register and usually have a general partner with unlimited liability which in turn is a limited liability company.

    REITs, Open-Ended and Closed-Ended Funds:

    The G-REIT is a real estate investment trust formed as a stock corporation. They have a number of key tax advantages. However, they are subject to relatively strict governance rules (e.g. minimum distribution rules, minimum number of shareholders, minimum capital and leverage rules). They are subject to the laws of the German Stock Corporation Act (AktG) as well as the REIT Act (REITG) and may only hold ownership in real estate (except for existing residential real estate) as well as participations in real estate companies.

    The German open-ended fund is a mutual fund issuing units and regulated by fund rules and is managed by the KVG as asset management company. It does not have a legal personality but its assets are owned by the KVG on behalf of the open-ended fund. The KVG needs authorisation of a management company for UCITS or as an AIFM. The open-ended fund has various tax advantages.

    German closed-ended funds are managed by an asset management company which has authorisation as an AIFM.

  7. What is the usual legal due diligence process that is undertaken when acquiring commercial real estate?

    For asset sales of commercial registered real estate, the buyer's lawyer will typically:

    • review the title documents (i.e. a copy of the Land Register for the property, any encumbrances on title, the building charges register and any other public charges and confirmations from the relevant authorities regarding certain public law issues and outstanding charges or contamination);
    • where the property is subject to leases, review the leases (though the extent of this review will depend heavily on the nature of the property and why the buyer is buying the property);
    • raise enquiries and make document requests to the seller, which ask about disputes, boundaries etc., and through bespoke enquiries arising from the buyer's lawyer's wider due diligence; and
    • request information from public bodies to ascertain issues arising from the location of the property including contamination, planning approvals etc.

    The buyer's lawyer's due diligence process can take several weeks (particularly as some of the key searches can take a number of weeks to be produced) and is expensive as sellers do not generally give buyers warranties regarding the state of the property or on compliance of laws. In certain cases (such as where the seller is selling complex or numerous properties via a competitive bid process), the seller may decide to instruct its lawyers to prepare a due diligence pack including searches in order to speed up the sale process or to avoid numerous bidders having to carry out the same due diligence.

    Where a property is sold by way of a transfer of the entity or structure through which it is held, the process is typically the same but with additional due diligence in respect of the relevant entity or structure. In transactions of this type, the seller will typically only give relatively limited warranty protection on the entity or structure and little or no protection in respect of the property itself.

    Where the purchase of a property is financed by external debt, the lender will usually require a standard industry form of report from a law firm on which it may rely.

  8. What legal issues (if any) cannot be covered by usual legal due diligence?

    There are some land interests that bind a buyer even though the interest is not registered in the Land Registry.

    In addition, the buyer's lawyers do only cover to a limited extent planning approval and zoning laws (as most of this will depend on factual questions of the as-built property) as well as superstructures (for the same reason) and they will not cover technical issues and defects, building control, health and safety or environment issues as part of the legal due diligence. Specialist surveyors and experts can be employed to deal with these issues.

  9. What is the usual process for transfer of commercial real estate?

    Transaction Steps

    Seller

    Buyer

    Comments

    Heads of terms ("HoT")

    ·  Prepare and negotiate HoT

    ·  Produce sales pack comprising title documents and property information (e.g. if property let, leases, tenant arrears and service charge details)

     

    ·    Negotiate HoT

    ·    For leasehold property where landlord's consent required, collate relevant information about buyer and any guarantor, such as accounts and references  and provide to seller

    ·   HoT not binding save for agreed exclusivity and confidentiality provisions

    ·   Most sale packs are hosted on virtual data sites

     

    Preparation of sale agreement

    ·  Prepare draft property purchase agreement

    ·  Prepare any ancillary documents (e.g. standard annexes, transfer and assignment of leases and rent deposits and, if property new building, assignment of construction documentation)

    ·  Negotiate agreement

    ·  Prepare release mechanism with financing banks

    ·    Carry out legal due diligence (see Q7)

    ·    Buyer will arrange a valuation and structural survey

    ·    Negotiate agreement and ancillary documents

    ·         Prepare new financing

    ·   No prescribed form of agreement but industry standard terms depending on market and formally described form 

    ·   Land purchase agreement requires notarisation in front of a German notary

    ·   Under certain circumstances cartel clearance is required to effect the sale (depending on income from the property and revenues of the buyer)

    Signing to closing

    ·  Satisfy any seller's conditions to closing

    ·  Agree redemption statement and arrangements with current lender for discharge of mortgage on closing including execution of Land Registry discharge form

    ·  Receive any public law approvals (such as statutory pre-emption right which applies for most real estate transactions)

     

    ·         Payment of a deposit if agreed at or shortly following signing

    ·         Arrange funding including third-party debt and agree on a land charge on the property to secure such financing

    ·         Pay land transfer tax incurred by purchase (percentage related to purchase price, depending on German state where property is situated)

    ·   A deposit may be required on signing, which will be forfeited if the buyer fails to complete sale (unless failure was due to the seller)

    ·   Deposit will typically be paid to notary's trust account

     

    Closing

    ·  Use price to pay off existing debt

    ·  Automatic closing

     

    ·    Pay balance of price (e.g. minus any deposit)

    ·    Satisfy buyer's lender's loan conditions precedent

    ·    Automatic closing is typically  provided in the purchase agreement, e.g. upon payment of the purchase price beneficial title will pass automatically with legal title to be registered thereafter, which might take up to some months. In the interim the purchase is secured via a priority notice, which is registered in the land register in favour of the buyer, such registration being a condition to completion.

    ·         Notary will handle the process to registration of legal ownership which will be set forth as a standard in the purchase agreement.

    ·   Loan condition precedents will also require a Land Registry priority search with at least 20 working days priority from closing

     

    Post-closing

    ·  True up property charges and service charges

    ·  Send rent authority letter to tenants with new payment instructions

    ·  Transfer tenants' rent deposits to buyer

    ·         Hand over other relevant documents.

     

    ·         Have new insurance in place

    ·         True up for property and service charges

     

     

  10. Is it common for commercial real estate transfers to be effected by way of share transfer as well as asset transfer?

    Yes. As noted in Q6, real estate is commonly held through specially formed entities or structures and there is frequently a tax advantage to transferring the interests in those entities or structures rather than the underlying real estate (for example, there may be a transfer tax advantage under certain circumstances for the buyer and a trade tax advantage for the seller).

  11. On the sale of interests in land does the benefit of any occupational leases and income automatically transfer?

    Yes – no formalities are required beyond the registration of the sale itself (see Q9 above for more details). However, as transfer of title only occurs some weeks or months following closing, the lease assignment is provided as of closing.

  12. What common rights, interests and burdens can be created or attach over real estate and how are these protected?

    A wide variety of rights, interests and burdens can be created over or attached to real estate and there are complex rules governing the creation of such rights, which are registered as rights in rem on the property. Such rights may generally only be deleted by the person who has created them, which sometimes causes some issues, in particular with respect to ancient registrations. Some of the key interests are:

    • Easements: for example, rights of way over a property, tenancy easements;
    • Restrictive covenants: for example, an agreement to build a certain property on a plot of land, not lease the property to certain parties etc.;
    • Land charges/mortgages;
    • Options to purchase, priority notices, pre-emption rights;
    • Usufruct rights;
    • Rights of permanent use, condominium rights;
    • Heritable building rights (forming its own sub-register, the heritable building rights register).

    All of the above rights and interests must be registered in the Land Register in order to be protected and, generally, their rank follows the timing of registration. In case of bank mortgages, the banks will insist to either receive a certain rank for their mortgage or to make sure that pre-ranking easements are immaterial or comply with mortgage bond rules (VDP Standard) as applicable.

  13. Are split of legal and beneficial ownership of real estate (ie Trust structures) recognised?

    Generally, it can be said that only the legal owner is registered as owner in the land register and, strictly speaking, German law does not foresee beneficial ownership. An exception can be seen in the open-ended fund structure, where the KVG as legal owner holds the property on behalf of the Fund, which does not have a legal personality.

    A person dealing with registered proprietors can generally assume and trust they have unlimited power to dispose of the property, unless there is a restriction or other entry in the register limiting their powers.

  14. What are the main taxes associated with commercial real estate ownership and transfer of commercial real estate?

    Ownership: Land tax is payable to the local authority. Taxes vary depending on where the property is situated as land tax is a communal tax.

    Direct taxes: In general, letting and leasing of real estate is VAT exempt. However, the lessor is entitled to opt for the application of VAT with respect to a lease agreement if the property is used by the tenant for services and supply's which are subject to VAT.

    Corporate income tax and trade tax (if the income is derived through a German permanent establishment) apply to income, profits and gains arising from the real estate. These will vary depending on whether the real estate is owned by an individual or entity, the nature of the entity and if they are resident in Germany.

    Taxes on asset sales are:

    Real Estate Transfer Tax (RETT): RETT is based on the purchase price for the property. The tax rates vary between 3.5% and 6.5% dependent on where the property is located Stamp Duty Land Tax (SDLT): Under German sale and purchase agreements RETT usually burdens the buyer of the real property.

    Value Added Tax (VAT): at 19%; however, sale of commercial real estate is in general exempt from VAT or may be treated as a VAT-free transfer of a going concern (i.e. a business that is operating and making a profit), depending on the facts. The seller normally must make an election to charge VAT (which invariably it would do to enable it to recover VAT it incurs in relation to the real estate).

    Capital Gains Tax (CGT): 15.825% corporate income tax if the seller is a corporation. In addition, German trade tax may apply if the income is derived through a German permanent establishment; trade tax rates vary regionally, the effective trade tax rates presently range between 7% and approx. 17%. In case of individuals as sellers a progressive income tax rate is applied; the top rate amounts to 45%.

  15. What are common terms of commercial leases and are there regulatory controls on the terms of leases?

    The common terms of commercial occupational leases are set out below. This summary focuses on occupational leases rather than leaseback arrangements or ground leases (e.g. heritable building rights), which generally have substantially different terms.

    German statutory law is very tenant-friendly and provides for the rent being a "gross rent" including most of the service charges, repair works etc. Therefore any material deviations from that framework may be regarded as null and void under German statutory laws. Therefore, there will normally not be a full repair lease in place but certain parts of the cost for the property remain with the owner. The following are the main parameters for a lease:

    • Parties
    • Permitted Use
    • Duration
    • Rent
    • VAT
    • Rent review/indexation, usually by CPI , usually no market review
    • Repair
    • Service charge
    • Assignment
    • Underletting
    • Termination rights
    • Renewal rights
    • Rental security
    • Obligation to operate

    For each of the above terms we have summarised below the key features and what, if any, regulatory controls apply.

    Duration: Leases can be indefinite or for a fixed period. The legal maximum fixed duration for a lease is 30 years after which time period the lease is terminable within a statutory notice period (generally 3-6 months). For residential leases a fixed term without termination right for the tenant is only allowed in very limited cases. The duration of office and industrial leases will not be more than between 10-15 years with extension rights, however, generally, there will be a shorter fixed term of 5 years with extension options for the tenant, sometimes even shorter leases giving tenants more flexibility.

    Rent: There are no regulatory controls as to the amount of rent other than for the residential market. Rent is usually payable monthly in advance On the grant of a new lease, landlords will generally give tenants rent-free periods (or capital sums in lieu of such periods) to cover fit-out works and, in poor market conditions, as an incentive to take the lease.

    VAT: Generally, leasing is not subject to VAT, therefore the landlord has to opt for VAT if he wants to recover VAT he has paid with respect to investment on the premises. Residential use is not subject to VAT and the same applies to banks, insurances, certain financial institutions, in which case the landlord may not opt for VAT (and consequentially cannot recover it). The question whether the landlord may opt for VAT depends on the final use of the premises, therefore a use will generally be agreed in commercial leases, which does not prohibit the landlord from opting for VAT.

    Rent review: Other than in the residential sector, there are no regulatory controls as to when or how the rent may be increased and parties are free to determine the type and frequency of the review. However, there are certain restrictions if automatic indexation clauses are used – those may only be used if the lease has a term of at least 10 years (with termination rights only for the tenant) and if the indexation does not interfere with other rent review mechanisms.

    Types of rent reviews are:

    • Rarely: open market, where the rent is reviewed by reference to the rents payable in comparable properties. If the parties cannot agree what the open market rent is, it is typically determined by reference to an independent expert. Open market reviews are every 3 or 5 years depending on the duration of the lease;
    • stepped, when the rent is increased at agreed intervals by agreed amounts;
    • index linked, where the rent increases in accordance with an agreed index (such as the consumer prices index which must work upwards and downwards, though) at an agreed frequency (sometimes every year); and
    • turnover, where the rent is an agreed percentage of the tenant's turnover subject to agreed minimum and maximum rents. These types of review are common in retail leases.

    Permitted Use: There are regulatory controls. Leases will also usually restrict a tenant's ability to change the use of the premises. See above for VAT.

    Repair: As set out above, there are regulatory restrictions of what may be imposed on the tenant in terms of repair. Generally, lease terms will be evaluated as standard terms where regulations are more restrictive than for individually negotiated terms.

    Service charge: There are statutory service charges which may be recovered from the tenant as well as a few others (including certain maintenance and insurances and property management charges which must be capped).

    Assignment: While assignment on the lease on the side of the landlord will automatically occur with change of title, the tenant will usually not be allowed to assign the lease to a third party with being released from its obligations. Contrary to common law jurisdictions, assignment generally is not a wide topic in leases.

    Underletting: There are few regulatory controls. Underletting means that the landlord remains responsible for all obligations under the lease. Generally, there is no visibility on the terms of the sublease for the landlord.

    Termination rights: Leases expire at the end of the term unless the tenant has a (mostly) contractual right to a new lease. Leases also usually provide that landlords can terminate the lease for cause if the tenant breaches its obligations. To evacuate a tenant, a court process will be required following termination. Under certain circumstances the court may stop evacuation if there is an overarching need of the tenant for the premises (often the case for residential tenants but may also be applicable for commercial tenants). Furthermore break rights may be agreed.

    Renewal rights: Renewal rights may be contractually agreed, which is regularly the case. For residential leases there are only restrictive rights to terminate such lease.

  16. How are use, planning and zoning restrictions on real estate regulated?

    For almost every building project and major change of usage a permission is necessary, which has to be issued by the local authority. The competent authority has to review, if the planned project is in accordance with a patchwork of federal law as well as state regulations.

    The federal legislator has the competence to issue the legal framework for zoning and planning restrictions. As the municipalities are closer to the local conditions, it is their obligation to use that legal framework and issue a structure and a development plan.

    Structure plan (Flächennutzungsplan): Within the structure plan the municipality outlines the allowed use of real estate within their territory. They can set the approximate allowed use of the real estate, thus this plan is in general designed for administrational use and not legally binding.

    Development plan (Bebauungsplan): This plan is more relevant for construction projects, as it is legally binding and the allowed use for every plot is determined by the municipality. The municipality can choose between around ten different area types, which are given by the federal legislator. Important area types are manufacture areas and industrial areas, it is also possible to set out an area where the only allowed usage of real estate is buildings. The allowed usage of every area type can be found within the regulation of usage of real estate (Baunutzungsverordnung), hence under certain circumstances deviations are possible. Furthermore the maximum dimensions of a building project can be determined in a development plan.

    It falls within the competence of the state legislator to set out the legal framework regarding the technical requirements for buildings and the progress of issuing a building permission, therefore it differs slightly in every state. For example there are regulations regarding the distance between buildings, fire prevention, and the construction of roofs, existing.

    The states are also competent to issue the legislation regarding the protection of heritage. If the construction project affects a monument protected by that legislation, the project needs to be adapted.

    The requirements above are applying to most of the building projects. Larger project may need an additional assessment of the environmental impacts to be permitted.

    Some projects with heavy environmental impacts are excluded from the progress above and find their own regime within the Bundesimmisionsschutzgesetz.

  17. Who can be liable for environmental contamination on real estate?

    Liability for environmental contamination on real estate in Germany is attached to the polluter in the first place but also arises for the user/possessor or owner. The authorities may, under certain circumstances, decide in their discretion which party they hold liable. Such party may have the right to recover claims from the polluter.

    Statutory liability

    Contaminated land regime: This establishes a "polluter pays" principle for clean-up of contaminated land and pollution of waters. If the state of the land (or waters in on or under the land) is such that there is actual significant harm, or a significant risk of significant harm, to the environment, the regulator must designate the land as "contaminated land". It must also serve a remediation notice on the responsible person to clean up the contaminated land / waters. The regulator will be the local authority.

    Even if the owner or occupier of land was not responsible for contaminants initially being present (and is therefore not at that stage regarded as a polluter), he can be held liable.

    Under the Statutory Guidance, liability can be passed between parties to exclude a polluter (e.g. a seller of real estate) in certain circumstances, such as where the land is sold to a buyer with full information as to the contaminated state of the land. However, the authority may still hold such seller liable.

    Pollution claims may, in practice, be exceptionally complex and resource-intensive for local authorities. It often takes long until remediation notices are served and the authority comes to a conclusion which would be the right party to make remediation claims against.

    Water Pollution Works: This also imposes liability on persons who cause or knowingly permit pollution of controlled waters (e.g. groundwater or rivers) to carry out clean-up works.

  18. Is expropriation of real estate possible?

    Powers are available to public bodies, and other bodies exercising public functions (an "authority"), to acquire land compulsorily in a variety of situations. These powers of compulsory acquisition are given to help such bodies to fulfil their statutory responsibilities. However, in practice such powers are relatively rarely exercised due to the financial situations of the communal authorities. Commonly used examples include powers of:

    • Local Authorities to acquire land for urban planning purposes and exercise statutory pre-emption rights;
    • Compulsory acquisition is possible for infrastructure purposes (such as railways, underground, highways, etc.).
    • Authorities decide on apportionment procedures to restructure a region.
    • Authorities decide on redevelopment measures.

    With respect to pre-emption rights and compulsory acquisition, compensation is available to an owner and / or occupier for land or rights acquired compulsorily. Redevelopment measures however will regularly incur costs to the land owners for which such redevelopment measure is assessed.

  19. Is it possible to create mortgages over real estate and how are these protected and enforced?

    Yes, mortgages or land charges can be created over real estate.

    A legal mortgage or land charges will generally be compulsorily registrable in the Land Register. A mortgage over a leasehold is registered in the Leasehold Register.

    Debts and liens on real property are to be purchased in order that they may be realised either in a compulsory sale (auction) or outside of foreclosure proceedings on the basis of appropriate agreements with the creditor concerned.

    The German foreclosure procedure is extremely complicated, contains a whole number of pitfalls and requires extremely careful preparation. In deciding upon whether a specific debt and a specific lien on real property is to be purchased, account should be taken of the following:

    Under both the German law governing the land register and the law of foreclosure proceedings what essentially matters is the rank which the land charge has in the land register. This rank depends upon the time of entry of the right in question in the land register. The rank may however be altered by way of agreements with the other holders of rights and with the owner. It is thus necessary to obtain a current extract from the land register and to examine the land registry files before any assessment on such rank are made.

  20. Are there material costs associated with the creation of mortgages over real estate?

    A mortgage must be notarised and generally will contain a clause submitting the property to immediate enforcement. Such clause enables enforcement without a prior court judgment. However, the court auction procedure will still remain in place. On top, there will be registration fees for the mortgage. The mortgage may be a certificated mortgage, in which case its assignment is possible without registration of the assignment (which would again incur costs) but with assigning the mortgage certificate, which happens outside the land register. The charges imposed will be on a gliding scale but they may amount to approx. 0.5 percent of the mortgage value depending on circumstances.

    There are no property or transfer taxes payable in relation to the creation of security over real property.

  21. Is it possible to create a trust structure for mortgage security over real estate?

    Yes. Where there are multiple beneficiaries of security, it is common to use a security trustee to hold the security on trust for the beneficiaries, which may include a syndicate of lenders. Under a trust structure, the trustee will hold the mortgage and beneficiaries of the security can change without any changes being required to the mortgage documentation.

  22. What is the main legislation relating to commercial real estate ownership?

    Interests in land: German Civil Code (BGB), which governs all legal aspects of owning, purchasing, selling and transferring ownership of a property.

    Land Registration: The Land Register Ordinance (GBO) sets out the main legislation for registration of land interests as well as for encumbrances in Germany.

    Leases: Again, the German Civil Code (BGB) is decisive. Besides that, there are some local ordinances regulating mainly restrictions for residential landlords (including restrictions on sale and rent increases and reviews etc.).