Declaration of Release

A release statement is a declaration by a creditor-usually a bank or building society-in which the creditor waives, in whole or in part, an existing security interest (specifically a land charge or mortgage) in a property, thereby enabling its removal from the land register. In a real estate purchase, the release statement is a crucial document: without it, a property encumbered by a land charge cannot be released from encumbrances and cannot be transferred to the buyer.

Release Statement in the Context of a Real Estate Purchase

If an owner sells their property and there is still an outstanding loan with a registered land charge, there are generally two options:

1. Redemption of the land charge: The buyer pays the purchase price; the seller repays the loan, and the bank releases the land charge. The notary applies for its removal from the land register.
2. Assumption of the land charge: The buyer assumes the seller’s loan, which requires the bank’s consent.

In practice, option 1 is the most common. Before the purchase price is due, the notary obtains a release commitment from the bank, in which the bank confirms that it will release the land charge upon receipt of the redemption amount.

Content and Form of the Release Declaration

A release declaration typically contains:

• Description of the registered land charge (Section III of the land register)
• Redemption amount, including prepayment penalty (if the loan has not yet matured)
• Account number for payment
• Deadline for receipt of payment
• Declaration that the land charge will be released for cancellation upon payment

The release statement itself can be in any form; however, notarization of the bank’s signature is required for the deletion authorization in the land register. In practice, the bank sends the notary either a pre-notarized deletion authorization or an informal release commitment, from which the notary derives the formal deletion authorization.

Release Declaration and Due Date of the Purchase Price

The notary does not determine the due date of the purchase price until all requirements have been met-including the bank’s release commitment. This protects the buyer: they pay the purchase price only once it is certain that they will receive an unencumbered property. Coordinating the timing between the release declaration, payment of the purchase price, and land registry entry is one of the notary’s key responsibilities.

Typically, the process proceeds as follows: The notary sends the purchase agreement to the seller’s bank and requests the issuance of a release commitment. The bank confirms that it will release the mortgage upon receipt of a specific amount in a designated account. Only once this confirmation is received does the notary issue the notice of due date to the buyer. After payment is received, the bank confirms the release, and the notary applies to the land registry office for the deletion.

Partial Release for Properties with Multiple Liens

If a property is encumbered by multiple land charges-for example, from an initial loan and a subsequent loan-a partial release is required. The bank may release individual land charges while others remain in place (e.g., because the buyer assumes a land charge). In such situations, coordination among multiple creditors is particularly complex and should be initiated early on.

Partial release also occurs in the case of partial sales of land: If a parcel is separated from a larger property and sold, the financing bank must release the parcel being sold from the mortgage without releasing the remaining property as collateral. In doing so, the bank assesses whether the remaining mortgaged property provides sufficient security for the existing loan.

Early repayment penalty as a common point of contention

If the loan is still within the fixed-rate period, the bank typically requires an early repayment penalty to compensate for lost interest. This can be substantial-quickly amounting to tens of thousands of euros if the remaining term is long and the loan amount is high. Sellers must deduct this amount when calculating the net proceeds. We recommend inquiring with the bank about the estimated prepayment penalty before deciding to sell, in order to realistically estimate the achievable net proceeds.

Practical Tip for Property Owners in Nuremberg and Franconia

Sellers in Nuremberg and Franconia should initiate their bank’s release procedure early on. Some banks-especially larger branch banks-require several weeks to issue a release confirmation, particularly if the loan is being paid off early and an early repayment penalty must be calculated. Regionally active savings banks and cooperative banks are often faster in this regard and have more direct local contacts.

We recommend that our sellers notify the bank immediately after the notary appointment so that the release statement is available in time and the due date for the purchase price is not delayed. In a recent transaction, we prevented a delay of several weeks by contacting Sparkasse Nürnberg early on-thereby ensuring that the seller could move on schedule.

Frequently Asked Questions

Do I have to pay an early repayment penalty when I sell my property?

That depends on the loan terms. If the loan is still within the fixed-rate period, the bank usually requires an early repayment penalty to compensate for lost interest. This can be substantial and must be taken into account when calculating the net sales proceeds. After the fixed-interest period expires or in the case of variable-rate loans, the prepayment penalty generally no longer applies.

What is the difference between a release declaration and a deletion authorization?

The release declaration is the bank’s contractual commitment to waive its security interest. The deletion authorization is the formal declaration submitted to the land registry office to remove the land charge from the land register. Both are required for a complete release from encumbrances. In practice, the bank often sends the notary a letter that combines both in a single document.

Can a buyer assume the seller’s land charge?

Yes, if the seller’s bank approves it and the buyer meets the creditworthiness requirements. In practice, assuming the debt rarely makes sense, as the buyer generally prefers to secure their own financing at current terms. Exception: The existing loan has particularly favorable legacy terms that the buyer wishes to assume-in times of rising interest rates, this can be an attractive scenario.

What happens if the bank refuses to release the mortgage?

The bank is legally obligated to release the mortgage if the agreed-upon redemption amount is paid in full. An unfounded refusal is not permitted. If the bank nevertheless causes difficulties, the notary or an attorney can, if necessary, enforce the release through the courts. In practice, a complete refusal is rare-delays in processing are more common, but these can be avoided through early communication.

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