Anyone who owns a house on land held under a heritable building right pays no purchase price for the land, but instead a permanent ground rent (Erbbauzins). Many owners eventually ask whether they can buy out this so-called heritable building right (Erbpacht) by acquiring the land themselves. Legally, Erbpacht is today called a heritable building right (Erbbaurecht), governed by the Heritable Building Rights Act (ErbbauRG). The most common route to a buy-out is purchasing the land from the grantor (Erbbaurechtsgeber), so that land and heritable building right come together in one hand. For over 60 years we have accompanied owners and buyers in the Düsseldorf market and we also assess heritable building right arrangements for you. This guide explains calmly and clearly which routes exist, how the purchase price arises, which taxes and costs apply, and who must consent.
Erbpacht or Erbbaurecht: the difference in everyday use
In everyday language, almost everyone speaks of Erbpacht when referring to land that does not belong to them but on which their own house stands. Legally, this term is outdated. What applies today is the heritable building right (Erbbaurecht) under the Heritable Building Rights Act (ErbbauRG). In this guide we use both terms, but always mean the same thing.
Under § 1 ErbbauRG, the heritable building right is the transferable and inheritable right to have a structure on someone else's land. It is recorded in its own land register sheet, the heritable building right register (Erbbaugrundbuch), and legally counts as a right equivalent to land. You are therefore the owner of your house, but the land itself belongs to the grantor (Erbbaurechtsgeber), often a municipality, church, foundation or a private owner.
For a buy-out, this separation is decisive: as long as the heritable building right and land ownership are separate, the ground rent (Erbbauzins) keeps running. Only when both come together in one hand can the heritable building right be ended and the annual payment cease.
Ways to end or buy out a heritable building right
There are several ways to end a heritable building right. Which one applies depends on the contract, the remaining term and whether both sides are willing to cooperate:
- Purchase of the land: You buy the land from the grantor (Erbbaurechtsgeber). Afterwards, the heritable building right and ownership come together in one hand, and the heritable building right can be deleted. This is the most common and usually cleanest way to buy out Erbpacht.
- Amicable early termination: The grantor and the holder of the heritable building right terminate it early by notarial contract. Under § 26 ErbbauRG, termination requires the consent of the landowner.
- Lapse at the end of the term: On expiry of the agreed duration, the heritable building right lapses. The building passes to the landowner, who in principle owes the holder compensation for the structure under § 27 ErbbauRG.
- Reversion (Heimfall): In cases of serious breach of contract, such as substantial payment default, the grantor may demand transfer of the heritable building right under § 32 ErbbauRG. This is not a route you would actively choose yourself, but a risk scenario from the contract.
For most owners who want to be rid of their Erbpacht permanently, it comes down to purchasing the land. The remaining routes are rather special cases or occur at the end of the term anyway.
Buying the land: merging ownership and heritable building right
When you acquire the heritable building right land, you as the holder buy the land on which your house stands. Economically, this buys out the Erbpacht, because the ground rent (Erbbauzins) ceases once the land and the building belong to you together.
Before the purchase there are two separate land register sheets: one for the land and a separate heritable building right register (Erbbaugrundbuch) for the heritable building right. With the notarial conveyance and registration in the land register, you become the owner of the land. Once land and heritable building right are permanently united in one hand, the heritable building right is as a rule deleted. After that, there is only a single unified plot, with the house as its essential component.
The correct sequence is important: existing encumbrances on the heritable building right, such as land charges held by your bank, must be settled before or together with the deletion. They can be transferred to the land, reordered or redeemed. These steps belong firmly in the notarial contract and in coordination with the creditors involved.
How does the purchase price for the land arise?
There is no statutory price for acquiring heritable building right land. In practice, the value is approached via several methods that are often combined:
- Land value: The starting point is often the standard land value (Bodenrichtwert) for the location, adjusted to the specific features of the plot. It reflects the market value of the bare land.
- Capitalised ground rent: The annual ground rent (Erbbauzins) can be converted into a present-day capital value as a permanent payment. Since the ground rent is often agreed as a percentage of the land value, a value approach for the land can conversely be derived from it.
- Remaining term and contract conditions: A long remaining term, a low ground rent or favourable clauses improve your starting position. A short remaining term reduces the value of the heritable building right and influences the negotiation over the land price.
From these building blocks a justifiable value range emerges, which the grantor and the holder of the heritable building right can discuss. With institutional grantors such as municipalities or churches, the margins are often narrower and bound to internal guidelines. A sound, transparent valuation is the best basis here for a realistic conversation. We assess the value of heritable building right land for you objectively.
Real estate transfer tax in NRW when buying the land
The purchase of the land is an independent, taxable acquisition under § 1 of the Real Estate Transfer Tax Act (GrEStG). In North Rhine-Westphalia the real estate transfer tax is 6.5 percent. Under §§ 8 and 9 GrEStG, the tax base is the consideration, that is, as a rule the agreed purchase price for the land.
An important point that often causes surprise: if you already paid real estate transfer tax when the heritable building right was created or acquired, this is not credited against the land purchase. For tax purposes these are two separate transactions with different tax bases. The law does not provide for a general offset.
Exemptions may apply if the seller is closely related to you. Under § 3 GrEStG, acquisition by a spouse or registered partner, as well as by persons related in a direct line, such as parents and children, is exempt from real estate transfer tax. This also applies where you are at the same time the holder of the heritable building right. Whether an exemption applies in your case is assessed bindingly by your tax adviser.
Consents, notary and land register: the procedure
For the buy-out to succeed cleanly, several parties must cooperate depending on the situation:
- Grantor: He sells the land and must consent to an early termination of the heritable building right under § 26 ErbbauRG.
- Mortgage creditors: If land charges or mortgages encumber the heritable building right or the land, the creditors must consent to the deletion or reordering so that their security is not unintentionally lost.
- Municipality: On the sale, a statutory right of first refusal of the municipality under the Building Code may need to be examined. A certificate of non-exercise is usually obtained here.
The actual purchase is notarised before the notary. Often the contract regulates the land purchase, the termination of the heritable building right and the treatment of the encumbrances in one go. Notary and land register costs follow the Court and Notary Costs Act (GNotKG) and, for a land purchase, are based on the purchase price. As a rough guide, the notary and land register together usually amount to around 1.5 to 2 percent of the purchase price. Added to this are possible fees for deleting the heritable building right and for ordering the mortgage rights.
Financing and the question of the right time
Acquiring the land is an investment that can be financed like an ordinary property purchase. Banks often view the unification of land and heritable building right in one hand positively, because this makes the property more easily mortgageable as full ownership. Alongside the purchase price, budget for the incidental acquisition costs, that is, real estate transfer tax, notary and land register.
On timing, the remaining term plays a central role. If the remaining term of the heritable building right is short, the value of the heritable building right falls, and financing the bare heritable building right often becomes difficult for banks. Precisely then, buying the land can be the better route, because it removes the uncertainty at the end of the term and saves the ground rent (Erbbauzins) in the long run.
Whether the purchase pays off for you depends on the purchase price, the previous ground rent, taxes and costs, and your plans for the property. With over 60 years in the Düsseldorf market and a network grown over decades with more than 20,000 contacts, we also assess and broker heritable building right arrangements and place your situation realistically, without sales pressure. This is general information and does not replace legal or tax advice.
