The land register is a public register in which the ownership of land is recorded. Only with the corresponding entry in the land register does a property or real estate change hands. With the so-called land charge, the lender is also entered in the land register. The land charge is the most common collateral for construction financing loans today.
the essentials in brief
- A change of ownership of a plot of land or real estate is not actually completed until the corresponding entry is made in the land register.
- Changes in the land register are always associated with costs. The cost is based on the price of the land.
- Today, the land charge is the decisive security for banks for construction financing loans.
The land register
What should the buyer of a property know about the land register?
For every purchase of land, the owner of a plot of land changes only with the corresponding entry in the land register. Notarization is required for entry in the land register, which can take six months. During this waiting period, the priority notice of conveyance (2nd section of the land register) regulates the claim to the transfer in the land register. The task of the notary is to notarize the purchase and, if necessary. to create the lien on the property. In this case, the land is provided as collateral to the lender by means of an entry in the land register. All entries and deletions in the land register as well as the associated notarial certifications are associated with costs (for a detailed overview of costs, see below).
How is the land register structured?
The inventory is followed by three sections in which various details are recorded as follows:
- Inventory (also called register): Scaled listing of the properties according to district, parcel and land parcel (according to the information of the cadastre).
- The first section contains information on the owner and the leaseholders.
- The second section contains a number of encumbrances and restrictions, including: Easements, limited personal easements, priority notice of conveyance, restrictions on disposition (e.g. insolvency and executor’s notices).
- In the third section, there are possible mortgages, land charges (for more details, see the section on land charges), security land charges, mortgages, annuity debts.
The inspection of the land register and associated costs
Actually, the land register is a public register and for such there is usually a comprehensive right of inspection. However, the right to inspect the land register is restricted, as sensitive asset and debt relationships are recorded here. Incidentally, land registers are no longer kept on paper but on electronic data storage devices. It is also already possible to inspect the respective land register in all federal states via the Internet. Inspections are subject to a fee and are subject to admission criteria due to the limited right of inspection. If the legal requirements are met, the so-called automated retrieval procedure can be used for online inspection. The fee for a restricted retrieval procedure is €50, and there is an additional retrieval fee of €8 for each land registersheet.
Costs for entry in the land register or notary fees
Changes in the land register are associated with costs. These costs are governed by the German Law on Court and Notarial Costs (Gerichts- und Notarkostengesetz, GNotKG). This involves incurring various costs for different operations, e.g.:
- Registration / deletion of property
- Registration of encumbrances (e.g. land charges)
- Certification of land register excerpts
As a general rule, the cost of registering a new owner or land charge is based on the price of the property.
For an overview of other ancillary costs before building a house, see this article.
Below you will find a calculation example for a land purchase price of 100000 € and a land charge to be registered of 80000 €.
Costs for entries in the land register
Delete priority notice of conveyance 25 €
Register land charge 219 €
Register owner 219 €
Register priority notice of conveyance 110 €
Costs for the land register 573 €
= costs for the land register and costs for the notary 1809 €
Costs for the Notary
Notarization procedure for the purchase contract 546 €
Execution fee for the purchase contract 137 €
Care fee 137 €
Signature authentication 137 €
Notary confirmation 82 €
Costs for the notary 1039 € plus. VAT 197 €
Total cost for notary with VAT 1236 €
The creditor bill
In the event of a change of creditor or bank, where the construction financing loan is to be transferred from the original lender to another bank, significant costs may be incurred. This is because a change of creditor is usually associated with a deletion and entry in the land register. Instead, a so-called assignment can also be made, whereby a deed of assignment is issued by the old creditor, i.e. the old bank, to the new creditor (or the new bank). Since the procedure of assignment is much cheaper than the official change in the land register, costs can be saved here. However, the new creditor must expressly give its consent to this.
The land charge
The land charge is the most common collateral for construction financing loans
Of course, a bank expects collateral for a construction financing loan. The registration of the land charge in the land register (also called creation of the land charge) is the most common means today. Together with the mortgage (today rather unimportant compared to the land charge) and the annuity debt, the land charge belongs to the real estate liens. Real estate liens are among the so-called real rights of realization for securing loans. This means that if the loan is not serviced in accordance with the contract, the land and property may be foreclosed. Here you can learn more about the most common construction financing loans and the collateral that comes into play.
The creation of the land charge
For a proper land charge to come into existence, the lender and borrower must agree on the so-called creation of the land charge (entry in the land register). Such an agreement must always be notarized, after which the entry in the land register can be made at the land registry.
Non-accessory real estate lien
A land charge is not accessory (from the Latin accedere: to accede) to the claim behind the land charge. This means that the land charge (unlike the mortgage) can continue to exist even if the claim has long since been settled. However, to prevent the creditor from executing the loan despite repayment, the land charge is linked to a security agreement. This stipulates that the land charge reverts to the owner upon repayment of the loan (owner’s land charge).
The land charge is a limited right in rem
However, the land charge is a so-called limited right in rem. This means that the power of disposal is limited. For example, foreclosure can be initiated if the loan is not serviced in accordance with the agreement, but the creditor cannot effect any other dispositions, such as of income from rentals. Also, the sale of the corresponding property is usually always possible, because the land charge is not based on the person of the owner, but on the property.
When does the land charge expire?
The land charge does not expire automatically when the loan is paid off, as the land charge is one of the non-accessory liens on real property. As such, the land charge may well exist independently of the continued existence of a claim. When a loan has been repaid in full, the land registry can cancel it at the owner’s request. This requires an officially certified deletion authorization from the lender and an application for deletion in the land register. The continued existence of the land charge, on the other hand, has the advantage that it can again serve as collateral for a loan at a later date.
The owner land charge
When the loan of the land charge is paid off, the land charge reverts to the owner. Then the land charge is created for the owner, this is called owner land charge. It can either be deleted from the land register or remain in existence. An owner land charge has advantages for future loans. Because it is always first priority. No possibly second registered land charge can move up to its rank. For a first-ranking land charge, the credit rating is extremely positive.
What does the registration/deletion of the land charge in the land register cost?
Costs are incurred for all entries/deletions in the land register and the notarial certification required for this. Statutory fees apply to this. The fees depend on the amount of the land charge to be registered and the purchase price of the property as well as on the notary’s expenses.
Calculation example for the registration of a land charge of 80000 €:
Land register costs
Register land charge 219 €
Costs land register 219 €
Costs land register and costs notary 558 €
For the cancellation of a land charge in the amount of 80000 € there are total costs of 241 €!
Notarization procedure for other contracts € 219
Execution fee for other contracts 66 €
Cost notary 285 €
Plus. Value added tax 54 €
Cost notary with VAT 339 €