The hereditary building law Building on someone else’s land

It is often difficult to find empty building land, especially in cities and densely populated centres. If open spaces exist, they are usually already owned by the city, state, church or private individuals. If you’re lucky, the owner will still let you build your home there, without you having to purchase the property first. This is what leasehold rights make possible. We explain here in detail what this entails.

What is the rental agreement?

According to Article 94 of the German Civil Code (BGB) a building must always be considered an integral part of a property. However, hereditary building law allows ownership of the building and ownership of the real estate to be considered separately. It allows you to build or buy a home without purchasing the associated land. The property owner gives you the right to use the land – to build on it, live on it and manage it – during the agreed contract period. In exchange you pay a land fee, which is equivalent to the monthly rent. In exchange you will be registered in the land register as entitled to inherit the property.

The hereditary right to a property can be passed on, for example, to the next generation who takes over the house built or purchased. However, it can also be extended by renewing the contract. But be careful: If the lease is not extended and expires, both the land and the property become the property of the tenant.

The duration of the rental contract

The duration of the surface right is not established by law. The duration often depends on the respective right of use and the relevant conclusion of the contract. Since real estate is a long-term investment, contracts are usually signed for a period of between 70 and 99 years. Shorter terms are possible and sometimes make sense, for example in the case of commercial real estate.

How much does rental building rights cost?

Anyone who builds on someone else’s land pays a monthly or quarterly fee for the property, the so-called ground rent. This is not established by law, but can be freely negotiated with the tenant. Land revenue is usually between 2 and 6% of the land value, including development costs.

Example of land rent calculation (source: Leasehold Building Law Association):

About financing:

For those hoping for financial support from the state, renting presents no disadvantages. Even if you are a tenant you can apply for financing normally. In our blog post “Saving money by building a house: KfW financing and co.” Find out more about funding opportunities.

What rights does the tenant have?

The hereditary right to build is similar to the right to property. As a result, the home and its lease may be sold or inherited. Extensions and modifications to the building are also possible without any problems. The contract decides whether the tenant, i.e. the owner of the property, has a say in such changes. However, this often includes reservations for approval for the resale of the building or for its specific forms of use.

The German Association for Inherited Construction Law

The German Association for Inherited Building Law is an association of providers of hereditary building rights and service providers in the construction industry. It sees itself as a universal interlocutor in matters of rental construction law and represents the interests of tenants in Germany before the public, media, politics and administration. It also offers members a platform for professional exchange.
The German Association for Inherited Construction Law provides information in the form of seminars, at the annual congress on hereditary construction law, but also on its website www.erbbaurechtsverband.de.

Would you rather build your own property? In our blog post “Looking for a property: how to find the right building land” you will find tips on what to pay attention to when looking for a property.