Jointly and severally liable

Joint and several debtors are multiple individuals who are liable to a creditor for the same debt, whereby the creditor may demand full payment from each individual but receives satisfaction only once in total (Section 421 of the German Civil Code (BGB)). In the real estate sector, joint and several liability is particularly relevant in the case of jointly taken-out loans, lease agreements with multiple tenants, and real estate transfer tax. Each joint and several debtor is liable for the full amount-regardless of their individual share.

Joint and Several Liability in Real Estate Financing

When married couples or domestic partners take out a mortgage loan together, both are liable as joint and several debtors. The bank may demand full repayment from either of them. This improves their creditworthiness in the bank’s eyes but also has consequences: In the event of separation or divorce, each partner remains fully liable until the bank agrees to release one partner from the loan agreement. The bank is by no means obligated to grant such a release.

In practice, this means: If the relationship fails, the partner who has moved out remains jointly and severally liable for the payments, even if they no longer derive any benefit from the property. Banks typically grant a release only if the remaining borrower is financially viable on their own-that is, if their income and collateral are sufficient to service the entire loan alone. If this is not the case, the partner who has moved out remains liable until the loan is fully repaid.

Joint Liability in the Lease Agreement

If multiple people sign a lease agreement as tenants, they are jointly and severally liable to the landlord. The landlord can demand the full amount of rent and operating costs from each individual tenant. If a co-tenant moves out, they remain jointly and severally liable until the landlord agrees to release them from the agreement or a new lease agreement is signed. We advise every tenant moving out to obtain a written release from the landlord.

Without this release, the co-tenant who has moved out remains liable to the landlord for any rent arrears that arise after their move-a risk that is often underestimated in shared apartments or among couples who are separating. For landlords, however, joint and several liability offers protection: they do not have to accept a tenant refusing full responsibility and referring to the co-tenant.

Internal Settlement Among Joint and Several Debtors

If a joint and several debtor pays more than their internal share, they have a claim for compensation against the other joint and several debtors (Section 426 BGB). In the real estate sector, this means: If one of the two borrowers pays the entire installment, they can reclaim half (or the contractually agreed share) from the other. In the event of a divorce, such claims for compensation are often settled as part of the equalization of accrued gains.

However, the claim for compensation under § 426 BGB is not automatically enforceable-it must be asserted in court if necessary. In the event of a dispute, this can be a lengthy process. We therefore recommend documenting the internal allocation of liability in writing, ideally already in the purchase agreement or in a supplementary notarized agreement.

Joint and Several Liability for Real Estate Transfer Tax

Multiple buyers of a property are jointly and severally liable for real estate transfer tax. The tax office may demand the entire tax from any individual buyer. In practice, payment is usually made by one buyer based on internal agreements. If the tax is not paid in full, the tax office may take action against any of the buyers-regardless of who was supposed to pay according to the internal agreement.

The same principle applies to real estate agent commissions and notary fees when these are divided among multiple buyers: Externally, all buyers are jointly and severally liable for the total amount. Internal agreements regarding the division of costs only provide protection internally, not vis-à-vis the notary or the tax office.

Protecting Joint Liability with Insurance

An underestimated aspect of joint real estate financing is the risk that arises if a joint debtor becomes insolvent-whether due to illness, unemployment, or death. Term life insurance covering both borrowers protects the other joint debtor in the event that one partner dies. Disability insurance protects against the risk of loss of income due to illness. We recommend considering both forms of coverage as mandatory components of your financing plan when purchasing real estate.

Practical Tip for Homeowners in Nuremberg and Franconia

In the Nuremberg metropolitan region, many couples purchase real estate together and take out loans jointly. We recommend establishing clear internal agreements as early as the purchase contract stage: Who bears what share of the financing costs? What happens to the property in the event of a separation? Should the property be sold, or should one partner buy out the other?

A notarized partnership or prenuptial agreement that addresses these issues can prevent costly and protracted legal disputes in the event of a separation. Especially in Nuremberg, where real estate prices have risen sharply in recent years, the question of how value is distributed in the event of a separation can quickly lead to significant disputes-therefore, addressing this early in a prenuptial agreement is not a sign of mistrust, but rather prudent financial planning.

Frequently Asked Questions

As a joint borrower, can I simply withdraw from the loan agreement?

No. Withdrawal from a loan agreement requires the bank’s consent. This is generally granted only if the remaining borrower is creditworthy on their own. Alternatively, the loan can be fully transferred to a single borrower, though this triggers a new credit check and, if applicable, an early repayment penalty.

Is a joint debtor also liable for debts incurred after they leave?

Yes, as long as they have not been formally released from the contract. New debts (e.g., rent arrears or back payments for operating costs) can still be claimed from them if they remain a party to the contract. A written release from the landlord or the bank should therefore be sought at all costs.

How is joint and several liability handled with regard to real estate transfer tax?

Multiple buyers of a property are jointly and severally liable for real estate transfer tax. The tax office can demand the entire tax from each individual buyer. In practice, payment is usually made by one buyer based on internal agreements-but in their external relationship, all buyers are jointly and severally liable for the total amount.

Are there ways to limit joint and several liability in advance?

Internally, yes: Through contractual agreements, joint and several debtors can determine their respective shares of liability and regulate mutual compensation obligations. However, it is not possible to limit joint and several liability vis-à-vis the creditor (bank, landlord, tax office)-the creditor always retains the right to demand the total amount from any debtor.

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