Right to purchase

In real estate law, right of first refusal refers to the right of a prospective buyer, secured by a preliminary agreement, a reservation agreement, or a priority notice of conveyance, to purchase a property before the final purchase agreement is notarized. It arises when both parties have reached a basic agreement, but the purchase is still subject to certain conditions (e.g., financing approval, building permit, or settlement of an estate). Legally, the right of purchase lies between a non-binding letter of intent and a binding purchase agreement.

Legal Basis and Security Measures

Under German law, a right of purchase in the strict sense does not arise solely through a verbal agreement-the notarized purchase agreement remains indispensable for the transfer of ownership (Section 311b of the German Civil Code (BGB)). The following serve in particular to secure the right of purchase:

1. The priority notice of conveyance in the land register, which prevents the seller from selling the property to a third party or encumbering it further
2. A notarial preliminary contract that obligates both parties to conclude the final purchase agreement
3. An offer with a deadline for acceptance, in which the seller has the offer notarized and the buyer can accept it within a specified period

The priority notice of conveyance is the strongest security instrument: It is effective in rem and protects the buyer against acquisitions by third parties acting in bad faith. Even if the seller files for bankruptcy after the priority notice is registered, the buyer’s right is generally protected in bankruptcy proceedings.

Right to Purchase in the Initial Acquisition of Newly Constructed Properties

In the real estate development sector, the right to purchase plays a special role: Buyers often reserve residential units as early as the planning phase through reservation agreements, with or without a fee. If the real estate development model is structured in accordance with the Real Estate Brokerage and Development Ordinance (MaBV), the priority notice of conveyance is registered immediately after the purchase agreement is notarized and protects the purchaser against the developer’s insolvency.

Without these safeguards, the reservation is merely a contractual agreement without any effect in rem. In the event of the developer’s insolvency prior to completion, the buyer loses their standing as a creditor without a registered priority notice and without a completed and accepted residential unit-a significant risk in project developments.

Difference Between Reservation and Right of First Refusal

Many prospective buyers confuse an informal reservation (often a unilateral declaration by the seller not to sell the property to another party for the time being) with a legally secured right to purchase. Key differences:

• Simple reservation: No legal binding force, no security in rem; the seller may sell to another party at any time
• Notarized priority notice of conveyance: Security in rem, entered in the land register; fully protects the buyer against third parties
• Notarized preliminary contract: Contractual obligation; breach may result in claims for damages, but no automatic transfer of ownership

Risks and Recommendations

Anyone who “reserves” a property without agreeing to a notarial security bears the risk that the seller will sell the property to another buyer or subsequently increase the price. Free reservations without a notary are legally almost unenforceable. We recommend involving a notary early on and having a priority notice of conveyance registered as soon as the bank’s financing commitment is in place.

Practical Tip for Property Owners in Nuremberg and Franconia

In Nuremberg and the Franconia metropolitan region, the market for attractive residential properties is highly dynamic in some areas-good properties sell out quickly. Anyone wishing to secure a property should work toward obtaining a financing commitment quickly and involve a notary early on. At my-home.de, we coordinate the entire process: from the financing request to scheduling the notary appointment to registering the priority notice of conveyance-ensuring your prospective purchase is legally watertight.

During periods of high market demand, we also recommend not limiting purchase commitments to written letters of intent, but rather going to the notary as soon as possible-because only notarization and the subsequent priority notice of conveyance protect against competing buyers.

Frequently Asked Questions

Is a reservation fee refundable if the purchase does not go through?

That depends on the specific agreement. Pure reservation fees without notarization are often invalid if they bind only the buyer, but not the seller. In many cases, case law has declared such clauses null and void. If in doubt, you should have a reservation agreement reviewed by an attorney before transferring any money.

How long is a priority notice of conveyance valid?

The priority notice of conveyance remains entered in the land register until the transfer of ownership is completed and the title transfer is finalized-or until it is jointly deleted by both parties. It provides protection against the seller’s dispositions in favor of third parties throughout the entire interim period.

Can a prospective right of purchase be attached or inherited?

Yes. A prospective right of purchase secured by a priority notice of conveyance is a fully valid, attachable, and inheritable property right. If the buyer dies after the contract is signed but before the transfer of ownership, the heir assumes the buyer’s legal position.

What does it cost to register a priority notice of conveyance in the land register?

The fees are based on the GNotKG (Court and Notary Fees Act) and the purchase price. As a rule of thumb, the cost of registering a priority notice of conveyance is approximately €200-500 (notary and land registry combined). This is a very affordable safeguard given the risk that exists without such a notice. Often, the priority notice is automatically notarized and registered as part of the purchase agreement.

What should I do if the seller demands a higher price between the preliminary contract and the main contract?

If a notarized preliminary contract exists, the seller is obligated to fulfill the agreed-upon purchase price. If the seller subsequently attempts to increase the price, the buyer may demand fulfillment of the preliminary contract-through legal action if necessary. Without notarization, legal enforcement is difficult: A verbal or privately written purchase price agreement is invalid due to § 311b BGB and is therefore unenforceable. In practice, there are occasional cases in the Nuremberg metropolitan region where sellers in a seller’s market attempt to renegotiate the price between the agreement and the notary appointment. Anyone who has registered a notarial priority notice of conveyance is in a significantly stronger negotiating position-the seller can no longer sell the property to a third party, which increases the pressure to sell at the agreed price.

Right to Purchase in Foreclosure Auctions

A special case of the right to purchase arises in foreclosure auction proceedings. The highest bidder in a foreclosure auction acquires a right in rem to the transfer of ownership upon the local court’s award decision-a type of legally regulated right to purchase. The transfer of ownership in the land register is then carried out ex officio. In the Nuremberg metropolitan region, foreclosure auction dates are held regularly at the Nuremberg Local Court. Interested buyers should check the auction portal (zvg-portal.de) in advance for upcoming dates and carefully review the court’s market value appraisal. Since properties subject to foreclosure cannot be viewed and no warranty applies, careful preliminary research is crucial.

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