German real estate law differs a lot from English and American real estate law but from French, Italian and Spanish law as well. The basic difference to anglo-saxon law is explained by the different legal history of the anglo-saxon states and Germany. Whilst in England and Ireland all land is considered to be the property of the crown and lawyers normally refer to rights over land as interests in land, German lawyers refer to property in land (ownership) and to limited rights in rem. Property in land comes close to fee simple (absolute) with infinite duration. It is or may become possessory. Limited rights in rem are special rights derived from property in that only certain legal powers are granted to the titleholder. These interests generally never become possessory.
In order to understand the differences and the German legal wording one needs an insight into the rules governing the whole concept and the actual reality it covers. When looking for relevant information as to German law one will as a rule start with statutory rules. Often they are laid down in so called Gesetzesbüchern (Law Books, Codes). The main German Law in civil law is the Bürgerliches Gesetzbuch (Civil Code), generally abbreviated BGB. Two main principles of German real estate law which are not codified are those of Trennung (independence) and Abstraktion (abstraction). They are often misinterpreted or misunderstood. The BGB distinguishes between a contract of obligation (Verpflichtungsgeschäft, one which creates an obligation to perform) and the contract of disposal (Verfügungsgeschäft, one which transfers, changes, encumbers or cancels an interest in land). This difference is named the Trennungsprinzip. Both legal transactions (Rechtsgeschäfte) are generally independent from each other. The independence of the right in rem from the obligation which causes the obligation to transfer, change, charge or cancel the right in rem is technically known as the principle of abstraction. For these reasons the agreement about a mortgage must be distinguished from the obligatory loan agreement which brings into existence the obligation for which the mortgage is to serve as a security. This (latter) agreement has in its content nothing but the common will of the parties that a mortgage (or a land charge) in favor of the mortgagee is to come into existence on the property of the owner. Thus one must not confuse the object of the credit agreement with the encumbrance of the property.
German land law is mainly governed by the German Civil Code (Bürgerliches Gesetzbuch-BGB), the Condominium Act (Wohnungseigentumsgesetz), the Leasehold Act (Erbbaurechtsordnung) and the Land Register Regulations (Grundbuchordnung-GBO). Propertyand other interests in land only exist if they are expressly provided by law (numerus clausus of rights in rem). These interests include:
Legal charge (Grundschuld, Rentenschuld, Reallast, Hypothek)
Land (or an interest in land) is recorded in two registers for different reasons and held by different authorities.
1. Cadastral Registration
The Land Surveying and property cadastre Acts govern the recording of ownership boundaries. The Cadastral Office is administered by municipalities or by local district governments. The business of the Cadastral Office is to provide plans which show all the existing plots. The Cadastral Office is open to everyone. But no special information about/concerning the owner and charges is available.
Boundaries are mainly precisely determined by coordinates and shown in the cadastral map. Each parcel has a unique reference number in a special numbering system which includes in digital form state, district, community. The plans held by the Cadastral Office are divided in districts (Gemarkung), fields (Flur) and plots (Flurstücke). A district consists of one or more fields and a field consists of one or more plots each of them having a special number. Land therefore will be registered under district/field/plot number.
2. Land Registration
The German Parliament has made provisions about registration procedures and applications for registration by means of the Grundbuchordnung (GBO). Therefore the recording of estates in land is governed by the Land Register Regulations (GBO). The Land Register is held by the local county courts. The Land Register deals with the business of registration of legal interests in land. The Land Register consists of Land Register Jugdes (Grundbuchrichter) and special clerks (Rechtspfleger). The normal business of registration is done by the clerks.
The Land Registry holds the land books (Grundbücher). In principle every plot is registered on a special page (Blatt) of the ”Grundbuch” and will be cited as registered in the land book (Grundbuch) at the county court (name of the county court), book (number of the book), site of the book.
A page (Blatt) of the German Land Book is divided in four parts. First there is the inventory (Bestandsverzeichnis) followed by the so called three Abteilungen (sections): Abteilung I (section I), Abteilung II (section II) and Abteilung III (section III). Section I is provided for the registration of the owner of the plot. Section II is provided for the registration of the limited rights in rem (for example easements and usufructs) except those registered in section III which is provided for registration of the charges (Grundschuld, Rentenschuld, Hypothek) against land.
Registration of titles is a strongly formalized procedure on the premises of the consent and the application (Bewilligungsgrundsatz) of the titleholder will say that every alteration of the Register will only take place if there is an applicant applying for the alteration who is entitled to do so. Each application must be notarised.
Registration of titles has several consequences. Firstly registration gives any disposition with regard to land legal effect. Secondly it is presumed by law that the registered titleholder is entitled to the right (§ 891 ph. 1 BGB). Thirdly the contents of the Land Register are deemed to be correct (principle of good faith) in favour of a person who by legal transaction acquires a right to a piece of land or to a right upon such a right, unless an objection against the correctness is entered, or unless the incorrectnes is known to the acquirer (§ 892 ph. 1 BGB). Fourthly if there are several rights the order of precedence between those rights with which a piece of land is encumbered is determined by the sequence of the entries (§ 879 ph. 1 BGB).
In principle a disposal (Verfügung) relating to land only becomes effective if the person is legally entitled to dispose of it, which is normally the case when the person has a registered title. A disposal which is made in respect of an object by a person not entitled to make it is ineffective unless the person who is entitled to make it gives his consent (§ 185 ph. 1 BGB). But in some cases provided by law this rule is replaced by § 892 BGB (principle of good faith). The principle of good faith is intended to protect certain third parties when the Register does not show the true legal position in the way in which it should show it. The protection exists only in favour of those persons who acquire a right in rem in respect of the plot or of a right in respect of a right in rem relating to the plot by means of an agreement. § 893 BGB adds to these the case of making payments or other performances in favour of persons registered as titleholders. Finally § 893 BGB provides a general clause extending the rule of good faith to all dispositions in respect of the plot or rights relating thereto between the registered holder and a third party.
Example: A is registered in section I as the owner of the plot, the true owner being B. A grants a mortgage in favour of C and a lease to D. German Law considers the act of granting a mortgage being a disposal concerning a right in rem and will protect C but not D. The later is not protected because the granting of a lease merely constitutes an obligation under a contract of lease.
3. Access to information
Any person justifying an interest may inspect the Land Register and make copies of its entry in the Register, or of any part of the register. Thus only persons who are titleholders or those who may justify their interest by production of a title which might be registered (for example a judgment against the owner of the land) have access to the Land Register. An approved enquirer can obtain a copy of any register or map of a registered property. Otherwise only notaries public and state authorities have access to the Land Register (§§ 43 – 46 Grundbuchverfügung). However, the purchase price paid for a piece of property is not recorded on the land register. Information as to the price paid for property is not available to the public. But everybody has access to the so called lcoal “Gutachterausschuss” (expert commitee) where general information about land prices is available to the public. This kind of information is based on data which the German notarys public make available to the expert committee.