Creation of a Land Lien

Land Charge Deed - A land charge deed is a notarized document through which a property owner authorizes the registration of a land charge in the land registry in favor of a bank. It forms the legal basis for securing real estate financing.

The Land Charge Deed Process in Detail

The creation of a land charge is a key step in any loan-financed real estate transaction. The process follows a set pattern: First, the financing bank sends the buyer a land charge creation form that contains all the terms of the security-the amount of the land charge, the interest rate, and ancillary payments. The buyer forwards this form to the notary who will authenticate it.

The notary prepares the land charge deed based on the form and notarizes it. This deed typically includes a submission to foreclosure clause: The owner thereby agrees that, in the event of default, the bank may directly foreclose on the property without first having to obtain a court judgment. This clause makes the deed an immediately enforceable title and is indispensable for banks.

After notarization, the notary submits the application for registration of the land charge to the competent land registry office. The land charge only becomes effective upon actual registration in Section III of the land register. The notary then sends the bank a certified copy of the deed as well as the registration notice. Upon receipt, the bank releases the loan for disbursement.

In the purchase process, the land charge is often established immediately after the notarization of the purchase agreement or even during the same notary appointment. We recommend ideally having the bank’s written financing commitment available before the notary appointment so that the land charge application form reaches the notary in a timely manner.

Costs of the Land Charge

The costs for the land charge consist of notary fees and land registry fees, both of which are regulated by the Court and Notary Fees Act (GNotKG). The notary fee for the notarization is a full fee according to the fee schedule, calculated based on the amount of the land charge. For a land charge of 300,000 euros, notary fees amount to approximately 635 euros, and land registry fees to an additional 635 euros. Expenses for certifications and postage are added to this. In total, buyers should expect to pay around 1,400 to 1,600 euros for a land charge of this amount. These costs are borne by the buyer as the borrower.

Practical Tip for Nuremberg and the Metropolitan Region

In the Nuremberg metropolitan region, we observe that processing times at the Nuremberg Land Registry currently range from about four to six weeks. We advise buyers to factor this timeframe into their financing plans, as the loan proceeds are only disbursed after the land charge has been registered. For time-sensitive transactions, the notary can issue a certificate of priority, which confirms to the bank in advance that there are no obstacles to the registration. Many banks accept this certificate and then disburse the loan even before the final registration. We recommend coordinating this point with the notary and the bank early on to avoid delays in the payment of the purchase price.

Frequently Asked Questions About the Land Charge

When is the land charge established?

The land charge is typically established at the same time as or shortly after the notarization of the purchase agreement. Many notaries in the Nuremberg region offer to handle both procedures in a single appointment. This requires that the bank’s land charge form be submitted to the notary in a timely manner. We recommend submitting the form to the notary at least one week before the scheduled notary appointment.

Can a land charge be registered without a notary?

No, the registration of a land charge requires notarization in accordance with Section 873 of the German Civil Code (BGB) in conjunction with Section 19 of the German Land Registry Act (GBO). A private written declaration is not sufficient, as the land registry office only accepts applications that are notarized or certified by a notary. The submission to enforcement, which is a component of nearly every land charge, also requires notarization.

What is the difference between a land charge and a mortgage?

Unlike a mortgage, a land charge is not tied to a specific claim. It exists as an independent right separate from the loan and remains in the land register even after full repayment, unless it is deleted. This makes it more flexible: An existing land charge can be reused for new financing without incurring additional notary fees and land registry fees. In practice, land charges are almost exclusively created today, while mortgages are rarely used.

Land Charge Creation and Submission to Foreclosure

The submission clause in the land charge deed is one of the most far-reaching declarations a property owner makes. It allows the bank to initiate foreclosure directly without court proceedings in the event of default. Owners should be aware of the implications of this and carefully read the land charge deed before notarization or have it explained by the notary.

In practice, this means: If a borrower in Nuremberg encounters financial difficulties, the bank can act quickly. Anyone in such a situation should immediately seek a discussion with the bank and, if necessary, consult a debt counseling service. Many banks are willing to agree to payment deferrals or repayment suspensions before initiating foreclosure proceedings-but only if the borrower communicates proactively.

Registered Mortgage vs. Book Mortgage

When establishing a mortgage, owners can choose between two forms: the book mortgage and the registered mortgage. The book mortgage is the standard form today: it is entered only in the land register without a separate security document (mortgage certificate) being issued. The registered land charge, on the other hand, is embodied by a physical land charge certificate, which is required for transferring the land charge to another bank.

In practice, nearly all banks today opt for the book land charge, as it is more cost-effective (no certificate issuance fee) and eliminates the risk of losing a security. For borrowers planning to refinance with another bank at a later date, the book land charge presents no disadvantage: The assignment of the book land charge to a new creditor can be done informally and requires only a declaration of assignment-without notary fees for the assignment itself. Upon loan maturity, the land charge can be deleted from the land register (costs approx. 100-200 euros for the notary and land register) or remain as a so-called “dormant land charge” if future refinancing is planned.

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