Generally, all individual and legal entities with legal capacity, whether resident or non-resident, can invest in and own real estate.
This includes legal entities under private law, e.g. stock corporations (AG) or limited liability companies (GmbH) as well as legal entities under public law.
Types of property rights in real estate Ownership Land in Germany is typically held either by rights in rem (e.g. ownership, hereditary building rights, mortgages, land charges and easements) or by relative rights which are generally contractual rights (e.g. commercial or residential leases).
While any right in rem requires registration with the relevant land register, the relative/contractual rights cannot be entered into any official or public register. The strongest right in rem is ownership (Eigentum) which consolidates both the ownership of land and buildings.
- Hereditary building rights (Erbbaurechte) grant the ownership of a building together with the long term right to use but not to own the related land. Hereditary building rights are saleable and inheritable and the respective building can be encumbered in the same way as ownership, subject to the hereditary building right agreement (Erbbaurechtsvertrag). Hereditary building rights are granted for set periods, customary terms are between 30 and 99 years. The tenant of the hereditary building right usually pays an interest on such building right (Erbbauzins). Upon expiry of the term of the hereditary building right the owner of the land becomes the owner of the building while the former tenant of the hereditary building right receives a compensation for the disposition of its right to the building.
- An easement is a means of providing security in rem of certain rights to a piece of land that in turn is owned by another person. Such right to the land can either be a right of use (e.g. right of way or a passing right) or a right of tolerance by the owner of the land (e.g. tolerance of a boarder building). The easement must be registered with a land register and may not be deleted without the approval of the holder of the associated right.
- The classic means of providing security for the financing of the purchase of a property is to encumber the land with mortgages or land charges. If a borrower does not fulfil his obligation under a loan the lender may satisfy the debt by realising the property charge, e.g. by auctioning the land. Whilst the mortgage is a so-called accessory right which is strongly linked to the contractual claim referred to in the corresponding loan agreement, the land charge is an abstract right and can remain
- Independent of a contractual claim and may even exist notwithstanding an existing claim only for the purpose of securing a certain rank in the land register. Nowadays, due to its greater flexibility, the land charge is the most favourable security in real estate finance transactions.
Forms of ownership in real estate German law differentiates between the following types of ownership:
- Sole ownership: In the event of sole ownership (Alleineigentum) the sole owner is the only person authorised to control and dispose of the respective land.
- Co-ownership: When holding co-ownership (Miteigentum) more than one person own an undivided share of land. However, each co-owner is entitled to dispose of its share of land.
- Joint ownership: In case of joint ownership (Gesamthandseigentum) the land forms part of the jointly held assets, e.g. by a civil law partnership or any association without legal capacity. Each joint owner is entitled to a share of the joint property but it is not entitled to dispose of its share independently. In case of the death of an individual, their land or their share of land held as a co-owner/joint owner generally forms part of their estate.