Retention of Title

Retention of Title - Retention of title (Section 449 of the German Civil Code) is an agreement whereby ownership of an item is not transferred to the buyer until the purchase price has been paid in full. In the real estate sector, traditional retention of title plays no direct role with respect to land, as ownership is transferred via the land register. However, it is highly relevant in the case of construction contracts (building materials), built-in kitchens, and other fixtures that are attached to the property-as well as in a modified form in developer contracts.

Retention of Title in Real Estate Transactions

Land and Buildings

For real estate, there is no traditional retention of title-ownership is only transferred upon entry in the land registry. Instead, the notice of transfer protects the buyer and the due date provision protects the seller (transfer of title only after payment of the purchase price).

Building Materials and Contractor Services

Contractors and building material suppliers often deliver under retention of title: The material remains the property of the supplier until the invoice is paid in full. However, if the material is permanently installed (e.g., windows, heating system), the retention of title expires-the item becomes an integral part of the property (§ 946 BGB) and automatically belongs to the property owner. The supplier loses ownership.

Built-in Kitchens and Movable Fixtures

For built-in kitchens and freestanding fixtures, the retention of title remains in effect as long as they are not permanently attached to the building (not an integral part). The buyer of a property should verify whether the seller has paid for the built-in kitchen in full-otherwise, the kitchen manufacturer may reclaim it.

Significance in a real estate development contract

In a real estate development purchase contract, ownership is transferred only after full completion and payment of the purchase price, in accordance with the Real Estate Brokerage and Development Ordinance (MaBV). The MaBV regulates installment payments based on construction progress (maximum of 7 installments), with the developer retaining ownership until the final installment is paid. The buyer is protected by a priority notice of conveyance in the land register.

Retention of Title in Real Estate - Overview

Situation	Retention of title possible?	Legal consequence	Protection for buyer
Purchase of land	No (retention of title not possible)	Transfer of ownership only upon entry in the land register	Priority notice of conveyance (§ 883 BGB)
Purchase from a developer (MaBV)	Yes - until final installment	Transfer of ownership upon completion + payment	Priority notice of conveyance, MaBV installments
Building materials (installed)	Expires upon installation	§ 946 BGB - integral part	- (supplier loses ownership)
Built-in kitchen (not yet installed)	Yes	Kitchen manufacturer may reclaim	Require proof of payment from seller
Movable fixtures	Yes	Right of reclamation until payment	Indemnification clause in the purchase agreement
Extended retention of title / processing clause	Yes (under contract law)	Not enforceable against § 946 BGB	No real effect after installation

Extended retention of title and processing clause

In construction practice, building material suppliers and tradespeople often work with extended retention of title: The retention of title extends not only to the delivered goods but also to all claims arising from the business relationship. Additionally, processing clauses may be agreed upon, under which the supplier becomes a co-owner of the processed item even after the material has been installed. However, these clauses conflict with Section 946 of the German Civil Code (BGB) if the material becomes an integral part of a property-in this case, ownership of the property takes precedence. For building owners and developers, this means: Once materials have been installed, they generally cannot be reclaimed; the supplier retains only a contractual claim for payment.

Practical Tip for Property Owners in Nuremberg and Franconia

When purchasing an existing property in Nuremberg, you should check the purchase agreement to see which furnishings are included in the sale and whether they have been paid for in full. Particularly in the case of recently installed high-end kitchens (valued at over €10,000), saunas, smart-home systems, or designer furnishings, the supplier may retain title if the previous owner has not yet settled the invoices. Ask the seller to provide you with the invoices and proof of payment for high-value fixtures, or include an indemnification clause in the purchase agreement. When purchasing from a developer in new construction areas in Nuremberg, we recommend strictly adhering to the MaBV-compliant installment payment plan and making each payment only after confirmation of the actual construction progress.

Frequently Asked Questions

Can the seller reclaim the property if I don’t pay the purchase price?

No - there is no traditional retention of title for land. As long as you are not yet listed in the land registry, ownership does not transfer anyway. If the priority notice of conveyance is already in the land register, the seller can withdraw from the purchase agreement and demand the cancellation of the priority notice-typically after setting a written deadline and issuing a reminder. The reversal of the transaction is then handled by the notary who notarized the agreement and may entail costs for the withdrawing party.

What happens to building materials delivered under retention of title?

If the material is permanently installed (windows, roof tiles, screed, heating system), it becomes an integral part of the property and automatically belongs to the property owner-the retention of title expires (Section 946 of the German Civil Code). The supplier cannot reclaim the materials but retains a claim for payment against the purchaser (contractor or building owner). For this reason, building material suppliers often secure their claims additionally through a construction contractor’s security mortgage (Section 650e of the German Civil Code), which can be entered in the land register for the building lot.

When buying an apartment, do I need to check whether the built-in kitchen has been paid for?

It is strongly recommended-especially for high-end kitchens (valued at over €10,000). If the kitchen has not yet been fully paid for by the previous owner and is subject to a retention of title, the kitchen manufacturer can theoretically reclaim it as long as it has not yet been permanently attached to the property and is therefore not an integral part of it. Ask to see the invoice with proof of payment, or include a corresponding warranty clause in the purchase agreement in which the seller confirms that all items sold with the property are free of third-party retention of title.

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