Suspensive condition

Suspensive condition - A suspensive condition is a contractual clause that makes the validity of a legal transaction contingent upon the occurrence of a future, uncertain event (Section 158(1) of the German Civil Code (BGB)). As long as the condition has not been fulfilled, the contract has no legal effect. In real estate law, it is frequently used to link purchase agreements to the granting of a building permit, a financing commitment, or official approvals.

Typical Conditions Precedent in Real Estate Purchases

The following conditions precedent are regularly found in notarized purchase agreements:

• Financing reservation: The contract only becomes effective if the buyer submits a binding loan commitment within a specified period. Without such a commitment, the buyer may withdraw from the contract without penalty.
• Building permit: For land purchases intended for construction, the contract’s effectiveness is contingent upon the issuance of a building permit-this protects the buyer from purchasing land that cannot be built on.
• Waiver of Right of First Refusal: In many land sales, the municipality has a statutory right of first refusal. The contract becomes effective only when the municipality declares that it will not exercise this right.
• Approval under the Real Property Transactions Act: For agricultural and forestry land, the sale requires approval under the Real Property Transactions Act.
• Approval under the UmwG: In the case of conversion processes (e.g., mergers of companies), the transfer of real estate may be subject to registration in the commercial register.

Typical Deadlines and Processing Times in Practice

The length of the conditional period depends on the type of condition and the specific situation. The following guidelines have proven practical in the Nuremberg metropolitan region:

Type of Condition	Typical Timeframe	Competent Authority
Financing contingency	4-6 weeks	Buyer’s financial institution
Municipal waiver of right of first refusal	2-3 months	Municipality/city (Section 28 BauGB)
Building permit	3-9 months	Nuremberg Building Authority
GrdstVG approval	4-8 weeks	Agricultural authority
WEG Administrator Approval	2-4 weeks	Administrative Advisory Board / Administrator

In Nuremberg, the Building Authority processes building permits within a wide range of timeframes depending on complexity and workload. We recommend allowing for a period of at least six months for real estate purchase agreements subject to a building permit condition.

Distinction from a resolutive condition

While a suspensive condition renders the contract effective only upon the condition’s fulfillment, a resolutive condition renders a contract that is initially effective ineffective upon the condition’s fulfillment (Section 158(2) of the German Civil Code (BGB)). In practice, this distinction is significant in several respects:

• Land registry entry: In the case of a suspensive condition, a priority notice of conveyance can be entered to protect the buyer-but ownership itself is not transferred until the condition is fulfilled. In the case of a resolutive condition, ownership has already been transferred and reverts only upon fulfillment of the condition.
• Real estate transfer tax: It is only incurred when the contract takes effect, i.e., upon fulfillment of the condition. If the condition is not fulfilled, no tax is due.
• Risk allocation: Between the conclusion of the contract and the fulfillment of the condition, the seller generally bears the risk of loss or deterioration of the property-unless the contract provides otherwise.
• Reversal of the transaction: With a suspensive condition, there is nothing to reverse if the condition does not occur-with a resolutive condition, services already performed must be reversed.

Guidance for Sellers and Buyers

A well-formulated suspensive condition protects both parties. Based on our experience in Nuremberg, we recommend the following provisions:

For Buyers: Agree on a sufficiently long period for the financing commitment and describe exactly which document serves as proof of the condition-a bank confirmation, a financing offer, or a binding loan commitment. Have the notary explain the consequences of the condition not being met, particularly whether notary fees already incurred must be reimbursed.

For sellers: Ensure that the condition period is not unlimited. An automatic expiration upon the deadline’s expiration protects you from an indefinite blockage of the property. Also stipulate whether and which costs the buyer bears if the condition fails due to their conduct.

Practical tip for property owners in Nuremberg and Franconia

We recommend that buyers in the Nuremberg metropolitan region ensure clear deadlines for conditions precedent during contract negotiations. A financing contingency should cover at least four to six weeks, as banks in the region-including Sparkasse Nürnberg, VR-Bank Metropolregion Nürnberg, and national institutions-typically require this time for credit review. Sellers should insist that a reasonable timeframe be agreed upon, after which the contract automatically lapses-otherwise, the property remains tied up indefinitely.

For properties on the outskirts of the metropolitan region-such as in Fürth, Erlangen, or the Nürnberger Land district-the municipality’s right of first refusal is particularly relevant if urban development measures are planned. The City of Nuremberg has actively exercised its right of first refusal in certain redevelopment areas in recent years. Therefore, have the notary explicitly confirm whether a right of first refusal applies to the property in question.

Frequently Asked Questions

What happens if the condition is not met?

If the condition precedent does not occur within the agreed-upon period, the contract becomes definitively void-it is deemed not to have been concluded from the outset. Any payments already made, such as a down payment into a notary escrow account or a reservation fee, must be refunded unless the contract contains a provision to the contrary. Notary fees are generally still due in accordance with the GNotKG, as the notary has already performed the notarization service. The allocation of costs should therefore be specified in the contract. Real estate transfer tax does not apply if the purchase contract remains invalid due to the condition not being met-any notice of assessment already issued must be revoked upon request.

Can the condition be changed retroactively?

Yes, both parties may amend, extend, or waive the condition by mutual agreement. Since the underlying purchase agreement is notarized, any amendment to the condition requires a notarized addendum (§ 311b BGB). An informal exchange of letters or an email agreement has no legal effect-even if both parties agree. In practice, it is common for the deadline for a financing contingency to be extended by mutual agreement if the bank needs more time or the credit check is delayed. The costs for the notary’s amendment are manageable and typically range between 150 and 400 euros.

Is real estate transfer tax due if the condition does not materialize?

No. Real estate transfer tax is only incurred when the purchase agreement becomes effective, which, in the case of a condition precedent, does not occur until the condition is fulfilled (Section 14 of the Real Estate Transfer Tax Act). If the tax office has nevertheless issued a tax assessment-for example, because the notary reported the notarized contract-it can be revoked upon request as soon as it is proven that the condition has not been fulfilled. In Bavaria, the real estate transfer tax is 3.5% of the purchase price; for a purchase price of 400,000 euros, that would be 14,000 euros. This amount is waived in full if the contract becomes invalid due to the condition not being met. Proof to the tax office is provided by submitting a notarial confirmation or the notice regarding the condition not being met.

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