Real-Estate Purchasing Contracts

Contract Configuration

The notary is impartial by virtue of his office. He advises both contract parties equally and ensures a balanced and fair contract configuration. People searching for legal justice can rely on the official neutrality of the notary.

However, the advice given by the notary is limited to the legal aspects. Whether a purchase makes economic sense, is not examined by the notary. Therefore, he also cannot evaluate whether or not a purchase price is appropriate. This decision is the sole responsibility of the contracting parties, who can receive consultation on this matter by an expert architect, real-estate agent or civil engineer.

The notary’s primary concern is the protection of both of the contracting partners: On the one hand, the buyer must be sure that they will obtain the property unencumbered after payment of the purchase price under the contractually agreed upon conditions. On the other hand, the seller must be ensured that he will only forfeit possession of the title of the property, if he receives the purchase price.

As a precaution for the buyer, the purchase price is therefore only usually to be paid when four requirements have first been met: Firstly, a so-called priority notice of conveyance, which protects the future property acquisition against new entry of charges into the land register, must be entered into the land charge register. Secondly, all documents relating to the exemption of the property from existing encumbrances listed in the land register (encumbrance on property, etc.) must be available. Thirdly, all required permits must be issued, and fourthly, one or more right of first refusal waivers must be present. Whether these requirements have been met, is monitored for your protection by the notary.

In the same way, the notary also oversees the security for the seller. The notary lets the title of the property be transferred in the land register to the buyer, only when it is ensured that the seller has actually received the purchase price.

However, the notary is not only concerned from the view of safeguarding the contracting partners, but also with regard to the following points, which are typically to be settled in the purchasing contract:

Liability for Material Defects

When selling a used property, it is appropriate, in nearly all cases, to exclude the seller’s liability for material defects: The buyer can inspect the object of purchase and obtain advice from an authorized expert (for example: architect, real estate agent). Any defects, even those only suspected but unlikely, should be taken into consideration when determining the purchasing price. Experience dictates that complicated regulations of liability do not generally lead to the desired security, but rather only to liability disputes.

Liability for Defects in Title

The liability for legal deficiencies is not excluded as a rule. The seller must therefore eliminate existing encumbrances, especially encumbrances on property. The notary ascertains the encumbrances by means of inspection of the land registry and transfers them to the deed certificate. If such burdens or pre-existing tenancy agreements are to be transferred, these must be expressly stated in the notarial deed.

Transfers of Ownership, Usage, Encumbrances and Risk

The transfer of ownership, usage, encumbrances and risk, the so-called economic transfer of the landed property ownership, usually generally occurs with the payment of the purchase price because the buyer has performed his main activity by this action. The transcription of the title, with which the buyer also becomes the legal owner of the landed property, and which is often made by the land-charge registry office weeks after the payment of the purchase price, is on the other hand, a mere formality.

Development Costs

The costs of development must always be paid to the municipality, by the person who is registered as the owner of the property, in the land charge registry, at the time of the degree of the demand for payment. Typically, these costs are thus distributed so that the seller carries all of the invoiced development contribution costs incurred by the notice, up until the completion of the purchase contract, the buyer carries then all claims made after the conclusion of the contract (so-called notice dissolution). Alternatively, the parties can decide that the seller as opposed to the buyer, has to bear the costs of development for the current state of development upon conclusion of the purchase contract, since the quality of the development contributions is included in the purchase price calculation. If the municipality bills the final invoice for this development, after the transfer of ownership and thus the buyer is invoiced, the buyer can therefore demand reimbursement from the seller (so-called development resolution).

Encumbrance Power of Attorney

The buyer can usually only pay the purchasing price with the help of a loan, which he normally only receives from the bank, if he provides the object to be purchased as security collateral for a mortgage loan. He would therefore gain authorization from the seller, by way of an encumbrance power of attorney, to already burden the property, before the transfer of ownership. For the seller’s security, in these cases, the contract shall particularly ensure that the mortgage loan may only be ordered by the notary that performed the property purchase contract preparation, only serves to secure the actual flowing of the purchase price amount to the seller, and that the buyer’s financing bank must pay the loan amount directly to the seller.

Increasingly popular among older property owners, who do not want to inherit their property, are contractual arrangements, which are referred to as the retirement of the property. This means the following: The seller sells his property, but reserves a lifelong usufruct right or a lifelong housing right or leases the property back. This retirement of the real estate has the purpose that the seller extends by the receipt of the purchase price his financial clearance and at the same time he can use the real estate up to his death. Whether such a retirement of the property is possible and which type of retirement is meaningful depends on the individual case. Please arrange a consultation appointment with us.

Checklist

For the preparation of the purchasing contract, I ask the buy and seller to please clarify the following questions and to bring the following documents to the meeting or notarization:

1. Seller

Questions: Who is selling: natural person (private individual), legal person, authorized representative, caregiver, executor of the last will and testament?

The following information is required by the parties:
Natural people: First name, surname, name given at birth, date of birth, address;
Businesses: Company, registered office, business address, district court, commercial registration number

Documents:
Photo identification, commercial register excerpts, copies of the powers of attorney, in the case of heirs not registered in the land register, certificate of inheritance, grant of probate, certificate of appointment of the caregiver.

2. Buyer

Questions: In accordance with Number 1 and in addition when acquired by spouses: In which participating ratio is the object to be acquired: in percentage community of partial owners, for example, to ½ co-ownership shares or in civil-law partnership? For spouses, where one of them did not possess a German citizenship at the time of marriage: In which, if applicable, foreign matrimonial property regime does the buyer live?

Documents:
In accordance with Number 1.

3. Object of Purchase

Questions: What is being sold or being sold together: house, condominium, hereditary building right, building plot, unmeasured partial area of a property, with garage property or parking space in an underground carpark, portion of a private road, built-in kitchen with or without appliances, sauna, gardening equipment, heating oil? Which defects of the building, in particular, have been expressly pointed out to the buyer? For sub-plot sales: Has the surveying been applied for, or has it already been performed? If not, then who will carry the costs of the surveying?

Documents:
Land registry certificate of title or land registry messages, for partial areas, excerpts from the cadastral map or site map, for ownership of residential apartments, declaration of division together with community regulations, including allocation plans.

4. Purchase Price

Questions: When is the price of sale payable? How is the purchase price to be divided if there are several buyers? Is the financing of the purchase price secured?

5. Rental and Tenancy Agreements/Vacating

Questions: For renting or leasing: Has a rental deposit been made? Is the tenant of an agricultural property, a farmer?
When vacating: When should the property be vacated and the object then be handed over?

Documents:
Rental agreements, tenancy agreements.

6. Land Charge Registry Encumbrances

Questions: Which encumbrances entered into the land register (for example: right of residence, rights of way or other easements, land charges or mortgages) will be transferred? Is the property in a development, redevelopment, zone to be reallocated or land consolidation area?

Documents:
For the deletion of encumbrances on property: Address of authorized parties, including loan numbers for banks, and if already granted by the authorizer: authority for cancelation and land charge certificates or mortgage deeds.
When taking over rights: Approval certificates, for land charges and mortgages: Current value status of the loan.

7. Exceptional Land Registry Encumbrances

Questions: Are there any clearance area acquisitions (for properties in Bavaria) or construction obligations (for properties in other federal states)? Has this been clarified by inquiry with the lower building supervisory authorities? Has it been clarified by the responsible municipality or city, whether development contributions, sewer connections or street-construction contributions or property levies are in arrears? Should the notary obtain this – which is then subject to fees – information; then it should be performed early before the contract of sale?

For ownership of residential apartments: Has an inspection of the last several protocols of the community of apartment owners’ meetings been made?

Costs

Notary fees cannot be levied or negotiated at the will of the notary, they are strictly regulated by law. Decisive is the Court and Notary Fees Act that applies throughout federal territory. Therefore, the same fees are always charged by each notary for the same notarial activity.

The notarization fees are based on the so-called commercial value; in the case of a deed of sale, according to the purchase price. The consultation and the preparation of the draft, including all changes is included. For the monitoring of purchase price maturity and property transfer, ancillary fees will be charged. In addition, there are usually some additional small expenses for copies, postage and telephone as well as the statutory value-added tax.

Rule of thumb: The transaction costs for a purchasing contract, for the acquisition of property in Bavaria, are approximately 5.5% of the purchase price (excluding real-estate agent commission): of this, 3.5% is property acquisition tax, 2.0% is notary and court fees. In most other federal states, a higher property acquisition tax is levied. The exact notary fees can only be determined on a specific case-by-case basis, since particularly the amount of ancillary fees depends on which permits and additional notifications must be sought out by the notary, which deletions he has to make, etc. Therefore, ask the notary about the exact fees before the acquisition.