Leasehold Land Register

Leasehold Land Register - The Leasehold Land Register is a separate land register page created by the relevant land registry office for each leasehold interest. It documents the leasehold interest as a right equivalent to real property, with separate sections for owners (the leaseholders), encumbrances and restrictions, as well as mortgages and land charges. The leasehold land register exists in parallel with the land register page of the encumbered property (parent property) and is indispensable for the financing, transfer, and pledging of the leasehold right.

Structure and Content of the Leasehold Land Register

Like a regular land register, the leasehold land register is divided into several sections:

Heading:

• Designation as a leasehold land register
• Specification of the encumbered parent property (land register page number and location description)

Inventory:

• Description of the leasehold right (scope, duration, ground rent amount)
• Reference to the leasehold agreement

Section I - Owner:

• Name of the leaseholder (person holding the leasehold right)
• Date of registration and legal basis

Section II - Encumbrances and Restrictions:

• Entry of easements, rights of first refusal, or other restrictions
• Obligations of the grantor (landowner) to give consent

Section III - Real Property Liens:

• Real property liens and mortgages registered against the leasehold
• These enable bank financing of a leasehold property

Significance for Purchase, Financing, and Transfer

The leasehold land register has considerable practical significance:

• Purchase of a leasehold: As with a standard real estate purchase, the leasehold is transferred through conveyance and registration in the leasehold land register; it must be notarized
• Financing: Banks accept land charges in the leasehold land register as collateral; lending is possible, but often subject to restrictions (the remaining term of the leasehold must be significantly longer than the loan term)
• Discharge: Upon expiration of the leasehold or in the event of early termination, the leasehold land register is closed
• Inspection: The leasehold land register may be inspected by persons with a legitimate interest, just like the regular land register (§ 12 GBO)

Relationship between the Leasehold Land Register and the Main Land Register

The leasehold land register and the main land register are two separate records that reflect different legal positions and refer to each other in terms of content:

The main land register (land register of the encumbered property) contains a note in Section II stating that the property is encumbered with a leasehold right-with a reference to the leasehold land register. The owner listed in the Master Land Register is and remains the grantor of the leasehold (landowner). Although the grantor loses the free use of the property for the term of the leasehold, they remain the owner.

The Leasehold Land Register lists the leaseholder as the owner. Section III contains the financing land charges. When financing the property, the bank reviews both land registers: the Master Land Register for prior encumbrances on the landowner’s property (which could jeopardize the leasehold right) and the Leasehold Land Register for the status of its own land charge.

Practical Tip for Owners in Nuremberg and Franconia

In Nuremberg and the metropolitan region, leasehold rights are frequently found on church-owned land (Evangelical Lutheran Church, Archdiocese of Bamberg) or on municipal land. We recommend that prospective buyers of leasehold properties carefully review the leasehold land register and the associated leasehold agreement before finalizing the purchase-particularly the remaining term, the ground rent adjustment clauses, and the right of reversion.

The Nuremberg Land Registry Office (at the Nuremberg Local Court) issues land registry extracts from the leasehold land register upon request. For advice on financing a leasehold, we recommend speaking with the financing bank early on, as many institutions have stricter requirements regarding the remaining term than they do for the purchase of freehold property. Experience shows that banks require a remaining term of at least the loan term plus 20 years.

Frequently Asked Questions

How does the leasehold register differ from the standard land register?

The standard land register (main land register) documents ownership of the property and records the leasehold as an encumbrance in Section II. The leasehold register is a separate volume that documents the leasehold as an independent right-with its own owner (the leaseholder), its own encumbrances, and its own real estate liens.

Can I take out a loan against a leasehold interest (i.e., encumber it with a mortgage)?

Yes. Since the leasehold interest is a right equivalent to real property, a land charge can be entered in the leasehold register. Banks generally require that the remaining term of the leasehold interest exceed the loan term by at least 20-30 years.

What happens to the leasehold land register after the leasehold right expires?

Upon expiration of the leasehold right, the leasehold land register is closed. Registered real estate liens generally expire if reversion occurs and the landowner is not liable for compensation. Existing bank real estate liens must be settled or refinanced before expiration.

How do I obtain an extract from the leasehold land register?

Any person with a legitimate interest (e.g., prospective buyers, lenders, heirs) may request an extract from the competent land registry office. In Bavaria, this is the land registry office at the local district court of the respective district. In Nuremberg, the Nuremberg District Court is responsible. The extract can also be viewed via the Electronic Land Registry (within the scope of notarial access).

Leasehold Land Registry and Division of the Leasehold Right

A leasehold right may be divided under certain conditions-for example, if a large property with multiple buildings is to be allocated to different leaseholders. In this case, separate leasehold land registers are created for the individual partial rights. This is particularly relevant in the development of larger residential neighborhoods on church-owned or municipal land, as occasionally occurs in Nuremberg. The division requires the consent of the leasehold grantor and notarization. Each partial right receives its own leasehold land register page with separate sections for encumbrances and real property liens-the management and financing of the individual units can thus be carried out independently of one another.

Priority Rules for Financing

Anyone financing a leasehold must be fully aware of the priority rankings in the leasehold land register. In Section III of the leasehold land register, real estate liens are recorded in the order of their entry; the priority determines which bank is served first in the event of foreclosure. In addition, there is the special circumstance that the ground rent payable to the grantor of the leasehold may be secured as a real encumbrance in the leasehold land register or in the main land register-and this real encumbrance often ranks ahead of the financing mortgages. For buyers and banks, this means: In the leasehold register, it is not sufficient to check only Section III. Section II, containing encumbrances and reservations of consent, must also be thoroughly analyzed before a financing decision is made.

Cancellation of the Leasehold Register Following Reversion

If the leasehold reverts to the landowner through reversion-for example, because the leaseholder has permanently failed to meet their obligations-the Leasehold Register is closed. In this case, the registered real estate liens do not generally expire automatically; they must be settled separately, which in practice often leads to complex negotiations between the grantor of the leasehold and the financing banks. The grantor’s obligation to compensate the former leaseholder (at least two-thirds of the building’s value pursuant to § 27 ErbbauRG) can have significant financial implications. For buyers of a leasehold with a short remaining term, we therefore recommend carefully reading the reversion clauses in the leasehold agreement and assessing the leasehold grantor’s financial capacity in the event of reversion.

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