Transfer of risk

Transfer of risk refers to the point in time at which the risk of accidental loss or accidental deterioration of a purchased item passes from the seller to the buyer. In real estate law, the transfer of risk is a key concept: From this point on, the buyer bears the risk-for example, if the property is damaged by fire, storm, or other events beyond their control-even if they are not yet registered as the owner in the land registry.

When does the transfer of risk occur in real estate transactions?

In real estate purchase agreements, the transfer of risk is generally specified in the contract and usually coincides with the closing date-that is, the date on which the buyer receives the keys and takes possession of the property. This date often falls after the notarization but before the entry in the land registry. Typical provision in the purchase agreement: “The handover and the transfer of risk take place on the day the full purchase price is received in the notary’s escrow account.”

Standard legal rule under Section 446 of the German Civil Code (BGB): The risk passes upon handover of the purchased item. For real estate, therefore, it depends on the actual time of handover, not on the time of entry in the land register.

Consequences of the transfer of risk

From the time of transfer of risk, the following applies:

• The buyer bears the risk of accidental damage, even without fault on their part
• The full purchase price remains due, even if the property is damaged
• Ongoing costs (property tax, insurance premiums, operating costs) are transferred to the buyer
• The buyer should have taken out their own building insurance as of the time of transfer of risk

Therefore, it is important that buyers secure insurance coverage in a timely manner-ideally at the time of handover. Although insurance law provides that the seller’s building insurance passes to the buyer (Section 69 VVG), the buyer should immediately transfer the policy to their name or take out a new insurance policy.

The Handover Report as an Important Document

A handover report should always be prepared upon the transfer of risk. This document records the condition of the property at the time of transfer and serves as evidence in the event of subsequent disputes regarding existing defects. The handover report should include:

• Date and time of the handover
• Names of all persons present
• Meter readings (electricity, gas, water, district heating)
• Condition of the property (rooms, windows, doors, heating, basement, garage)
• Handover of all keys (with quantity)
• Note regarding existing defects and their assessment
• Agreed repairs with deadlines

Defects not noted in the handover report can be difficult to prove later-for both the buyer and the seller.

Transfer of Risk and Defects

Defects that arose before the transfer of risk are the seller’s responsibility. Defects that arise after the transfer of risk are generally the buyer’s responsibility. That is why we always recommend carefully inspecting the property once more immediately before the handover and documenting its condition in the handover report.

If damage occurs between the notarization and the handover-such as water ingress from a burst pipe or storm damage to the roof-the responsibility still lies with the seller. The seller must report the damage to the insurance company and have it settled, or provide the buyer with appropriate compensation. In practice, we recommend including clear provisions in the purchase agreement for such cases, such as: “Damage occurring between the notarization and the handover shall be settled by the seller; any insurance proceeds shall be payable to the buyer.”

Practical Tip for Property Owners in Nuremberg and Franconia

In the Nuremberg metropolitan area, several weeks to months often pass between the notarized purchase agreement and the actual handover (waiting period until the purchase price is due, bank approvals). During this time, the property is not yet in the buyer’s possession and the transfer of risk has not yet taken place. Nevertheless, we recommend that buyers speak with their insurance provider early on to ensure there is no gap in coverage.

We always provide our clients with a complete handover report at the time of transfer and personally accompany the key handover. In practice, we have seen that the handover report later became crucial evidence-for example, when moisture damage occurred. Our advice: Take your time during the handover, go through all rooms systematically, and don’t hesitate to point out any defects-this protects both parties.

Frequently Asked Questions

What happens if the property burns down between the purchase agreement and the handover?

Since the transfer of risk has not yet taken place, the risk lies with the seller. The seller must settle the claim or may, if necessary, withdraw from the purchase agreement if the property no longer exists in the agreed condition. In such a case, the buyer may be entitled to a reduction in the purchase price or withdrawal from the agreement.

As a buyer, do I have to take out building insurance immediately?

You should have your own building insurance in place by the handover date (transfer of risk) at the latest. Although the seller’s insurance automatically transfers to the buyer under Section 69 of the German Insurance Contract Act (VVG), you have the right to cancel it at the next renewal date and take out your own policy. We recommend clarifying the insurance coverage in advance with an independent insurance broker.

Can the transfer of risk in the purchase agreement be set for a different date?

Yes. The transfer of risk can be freely agreed upon in the contract. In some cases (e.g., if the buyer wishes to enter the property before the handover), the transfer of risk can also be agreed upon in advance. However, this should be expressly stipulated in writing in the purchase agreement or a supplementary agreement.

What happens if the seller does not hand over the keys on time?

If the seller delays the handover without cause, even though all payment terms have been met, they are in default of acceptance (creditor’s default) and continue to bear the risk of accidental damage. In addition, the buyer may be entitled to claims for damages-such as for lost rent or moving expenses. In such cases, we recommend seeking legal counsel.

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