Building Lease Saves Money
Plots of land in popular neighborhoods account for a considerable portion of the purchase price, typically between 30 and 40% of the total purchase price. If you now take into consideration that you are not required to purchase the portion of the plot of land for your apartment (which in effect constitutes an imaginary portion) but rather pay a fee (or more specifically the building lease fee), then it is easy to recognize that this system provides a considerable cost saving. It is for that reason that building lease is in such great demand.
Building lease - exactly what is it?
It is the sellable and hereditable right to own a building on a plot of land owned by a third party. The ownership of the plot of land is separate from the ownership of the building. For that reason, you can rent out, sell, borrow on, and bequeath your condominium like every other home. As a result, the building is not owned by the owner of the plot of land, but rather the owner of the building lease, i.e. the owner of the condominium, you.
Building lease, how safe is it really?
A building lease is entered at first rank in the cadastre of the respective plot of land to ensure its absolute safety for the owner and future buyers. As building leases constitute a separate priority right, an individual page is started in the cadastre (cadastre of the building lease) as well.
The declaration of partition splits the building lease in accordance with the provisions of the residential property law into condominium building leases for the individual condominiums, and separate condominium building lease cadastres are created. A condominium building lease and the ownership of a condominium are equal by law. A condominium building lease grants the owner of the building lease in a similar manner to the owner of a condominium the special ownership of a particular condominium in the building to be constructed.
If you are the owner of the building lease, you are the owner of your condominium (and in addition your basement and the parking space in the underground parking structure etc.). The ownership of the plot of land, on the other hand, remains in the hands of the owner of the plot of land.
Building lease fees - how much are they?
You need to pay a fee (in particular the building lease fee) to the owner of the plot of land to be granted a building lease. This building lease fee is individually determined for each condominium. As is common for all building lease agreements, the building lease fee is tied to the development of the cost-of-living price index. According to the building lease agreement, the building lease fee can be adjusted in accordance with the price index of the Federal Statistical Office every 3 years. The owner of the building lease is required to pay the building lease fee of the condominium. The building lease fee of the development Cosimo in Oberfoehring currently amounts to an average of 2.45 Euro per m² of living area and 8.00 Euro per parking space. The building lease fee is secured by entering a lien in the condominium building lease cadastre.
What are the benefits of building lease?
It offers ownership of the property for 3 generations. The building lease which constitutes a right similar to owning the plot of land for the residential complex "Cosimo" expires after 75 years, i.e. at the end of 2076. Until that time, you and your heirs are owners of your building lease condominium. You can assume that the church trust will renew the building lease agreement of the building lease owner. If the building lease has expired in 75 years, and if the agreement is not being renewed, the owner of the building lease receives a compensation amounting to two thirds of the common value of the building lease condominium. A sworn expert will determine this value, and the owner of the building lease has a right to receive this compensation. If and only if the owner of the building lease does not conform to the building lease agreement, the owner of the plot of land can reclaim the building lease prior to its expiration (also referred to as reversion). For example, a default on at least two annual payments of the building lease fee on the side of the owner of the building lease constitutes such a breach of the agreement. However, even in case of a reversion the owner of the building lease has a right to two thirds of the common value of the building lease. A building lease gives you the right to sell, borrow on, give away, and bequeath the condominium. As the building lease constitutes an equal right to owning the plot of land and exhibits a separate page in the cadastre, the building lease is at your disposal in a manner similar to any other real estate. The initial entry of mortgages and land charges in the building lease has been authorized to finance the purchase price. This ensures that financing can be obtained without problems.
Can I obtain tax advantages?
If you will use the condominium for yourself: All advantages provided by the legislature for purchasing real estate (new properties) apply to building lease condominiums (Ref. EigZulG - German law regulating grants for homes). The same applies to public subsidies in accordance with §25 of the law regulating the construction of homes (WoBauG). If you are an investor: Almost all expenditures, in particular all construction costs and the building lease fee, can be depreciated (AfA) upon purchasing a building lease property.