Mortgage

Mortgage - A mortgage is a real property lien that encumbers a parcel of land to secure a specific monetary claim and is recorded in Section III of the land register (Sections 1113-1190 of the German Civil Code (BGB)).

How does a mortgage work?

A mortgage is a type of limited real right and serves to secure loans-typically for real estate financing. Its central feature is accessory nature: The mortgage is inseparably linked to the underlying claim. This means that it exists only as long as the secured claim exists. If the loan is repaid in full, the mortgage expires by operation of law and automatically converts into a owner’s land charge.

The law distinguishes between two forms: In the case of a deed mortgage, a physical mortgage deed is issued as a security, enabling the transfer of the right without a new land registry entry. In the case of a book mortgage, the exclusion of the issuance of a deed is noted in the land registry-the transfer then always requires an entry.

In addition, the German Civil Code (BGB) recognizes the security mortgage (Section 1184 BGB), in which the creditor can rely only on the claim and not solely on the land registry entry, as well as the compulsory mortgage, which is registered by court order as part of foreclosure proceedings without the property owner’s consent.

The key difference from the land charge lies in the lack of accessory nature of the land charge. A land charge exists independently of a specific claim and can be reused for new loans after the original loan has been repaid. It is precisely this flexibility that has led the land charge to almost completely replace the mortgage in modern financing practice. Today, banks in Germany use land charges almost exclusively to secure loans.

Significance of the Mortgage in Contemporary Real Estate Law

Although the mortgage is hardly ever used in practice to secure loans anymore, it remains legally relevant. In foreclosure law, the compulsory mortgage continues to exist when creditors secure their enforceable claims in the land register. The term also plays a role in the international context, as the English word “mortgage” literally corresponds to the German concept of a mortgage-although the legal institutions are not identical.

It is important for buyers and sellers to know that both mortgages and land charges can be entered in Section III of the land register. In older properties in established areas, historical mortgage entries are occasionally still found that were long ago paid off but never deleted. Such legacy encumbrances in the land register should be resolved before a sale, as they can delay the transfer of ownership.

The foreclosure mortgage remains relevant in practice: If a creditor obtains a final judgment against a property owner, they can secure the claim by registering a foreclosure mortgage in the land register. This measure serves as a strong warning signal to the debtor, as the foreclosure mortgage makes it considerably more difficult to sell the property.

Practical Tip for Nuremberg and Franconia

In the Nuremberg metropolitan region, we occasionally encounter undischarged mortgage entries from the post-war period or earlier decades in older existing properties-particularly in Wilhelminian-style neighborhoods such as St. Johannis, Gostenhof, or the Südstadt. Historical mortgages are also not uncommon for farmsteads and agricultural properties in the surrounding Franconian countryside.

We recommend that sellers obtain a current land registry extract in a timely manner and have it checked to see if settled mortgages are still listed. The deletion is carried out via a discharge authorization from the creditor and a notarized application for deletion. The sooner this is taken care of, the smoother the subsequent sales process will be. In the case of old mortgage entries where the creditor can no longer be located, a judicial publication procedure may enable the deletion.

Frequently Asked Questions

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

A mortgage is accessory-it is tied to a specific debt and automatically expires upon its repayment. A land charge, on the other hand, exists independently of any debt and can be reused for new financing after the loan has been repaid. Because of this flexibility, the land charge has almost completely replaced the mortgage in banking practice.

Are there still mortgages in the land register today?

In practice, new mortgages are rarely registered anymore. However, land registers for older properties still contain historical mortgage entries that were never deleted. Foreclosure mortgages are also still registered by courts when creditors wish to secure their claims in the land register.

Can a mortgage be deleted once the loan is paid off?

Yes. Once the secured claim has been fully repaid, the mortgage is converted by law into an owner’s land charge. The owner can then apply to the land registry office for the deletion. To do so, they need a deletion authorization from the bank as well as a notarized application for deletion. Although deletion is not mandatory, it is strongly recommended prior to a sale.

What happens if a creditor has a compulsory mortgage entered in my land registry?

The entry of a compulsory mortgage indicates that a creditor is enforcing a legally enforceable claim against the owner. It complicates or prevents the sale of the property until the debt is settled and the mortgage is deleted. In insolvency proceedings, compulsory mortgages are contested after certain time periods. We recommend seeking legal advice immediately if a compulsory mortgage is imminent.

How can you identify historical mortgage entries in the land register, and how are they removed?

In the land registers of older properties-particularly existing buildings in Nuremberg’s Gründerzeit neighborhoods or on agricultural estates in the surrounding Franconian countryside-mortgage entries from past decades are occasionally found that were paid off long ago but never formally removed. Such old entries often list creditors such as defunct savings banks, renamed banks, or deceased private individuals. The current land register extract in Section III shows all registered real estate liens-including historical ones. To delete a paid-off mortgage, you need a deletion authorization from the creditor or their legal successors. If the original creditor can no longer be located or has passed away, the heirs may grant the authorization. If no legal successor can be identified, a judicial publication procedure may be considered, through which the right can be declared void. The authorization for deletion must be notarized and submitted to the land registry office. In Nuremberg, the land registry office at the Nuremberg Local Court is responsible. Anyone wishing to sell a property with such encumbrances should resolve the cancellation issue before the sale if possible, as it can delay the transfer of ownership and create uncertainty for the buyer.

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