Transfer of liability

The transfer of liabilities refers to the contractually agreed date from which the buyer of a property assumes all liabilities and costs associated with ownership-namely, property taxes, operating costs, insurance premiums, administrative costs, and maintenance obligations. The transfer of liabilities is a key term in the purchase agreement and generally occurs simultaneously with the transfer of use: From this effective date, the buyer may use the property and is required to manage it. This date typically falls between the notarization and the transfer of ownership in the land registry.

Difference between the transfer of liabilities, the transfer of use, and the transfer of ownership

In a real estate purchase, there are three key transfer dates that may occur at different times:

• Transfer of ownership: Does not take place until entry in the land registry; depending on the land registry office, this can take several weeks to months after payment of the purchase price
• Transfer of use: From this point on, rental income and other benefits (owner-occupancy) accrue to the buyer
• Transfer of liabilities: From this point on, the buyer must bear all ongoing costs

Notarial contracts typically combine the transfer of benefits and liabilities: “Benefits and liabilities are transferred on the date of full payment of the purchase price.” This is the standard wording in German real estate purchase contracts. The simultaneous transfer of benefits and liabilities ensures that no imbalance arises between rights and obligations: whoever benefits from the property must also pay for it.

What counts as “liabilities”?

In the strictest sense, the term includes:

• Property tax (pro-rated from the transfer date; the annual bill is often split)
• Insurance premiums (building insurance automatically transfers to the buyer until they cancel it or take out their own policy)
• Housing association fees for condominium units (maintenance fees)
• Ground rent for leasehold properties
• Development and resident contributions - contractual clarification is important here, as these often arise only after the transfer

Ongoing expenses do not include public-law obligations from the period prior to the transfer (e.g., overdue development contributions), for which the seller remains liable unless otherwise agreed. This distinction is relevant in practice because development contributions are sometimes not assessed until years after a road is completed-the question of whose “period” the measure is attributed to is then decisive.

Tax Consequences of the Transfer of Liabilities

From a tax law perspective, the date of the transfer of liabilities is significant for landlords: As of the transfer date, income-related expenses (interest, building maintenance fees, property tax, maintenance costs) are tax-deductible for the buyer, and rental income is attributed to them. The transfer is therefore relevant not only under civil law but also for income tax returns. Buyers should therefore note the exact date of the transfer and communicate this to the property management company and their tax advisor.

Special Considerations for Rented Properties

When purchasing a rented property, a unique situation arises: As of the transfer of obligations, the buyer may collect the rent and is considered the landlord under the German Civil Code (BGB)-but the tenant may not yet be aware of the change in ownership. The previous landlord (seller) is obligated to provide the tenant with the new bank account information and to inform them of the change in ownership. Until this information is provided, the tenant’s payments to the seller are considered valid and discharge the debt. The exact allocation of rental income on the transfer date is typically regulated by the notary and the parties in the purchase agreement or in a separate settlement agreement.

Practical Tip for Property Owners in Nuremberg and Franconia

When purchasing a condominium in Nuremberg, Erlangen, or Fürth, the transfer of liability for maintenance fees is particularly relevant: As of the effective date, the buyer must pay the monthly maintenance fees to the condominium association’s management-regardless of whether the title has already been transferred. We recommend that buyers ask the seller to provide a current account statement from the homeowners’ association to ensure that there are no outstanding balances at the time of transfer. According to the case law of the Federal Court of Justice (BGH), such outstanding balances may, under certain circumstances, also affect the new owner if they involve contributions that, under condominium law, are attached to the individual unit.

We also recommend preparing a handover report before the handover date, documenting meter readings (electricity, gas, water) and the condition of the property. This significantly simplifies the subsequent allocation of consumption and damage costs between the seller and the buyer.

Frequently Asked Questions

As the buyer, do I have to pay the property tax for the entire year, even if the transfer doesn’t take place until July?

No. The property tax is divided proportionally in the purchase agreement. The seller pays the portion for their period of ownership (January through June), and the buyer pays the remainder. In practice, the settlement is often handled through a credit against the purchase price or by direct agreement. The tax authorities continue to send the property tax assessment to the registered owner-that is, to the seller until the title is transferred. The internal relationship between the parties is governed by the purchase agreement.

What happens if the purchase price is paid late-does the transfer of liabilities still apply?

The transfer of liabilities is usually tied to the payment of the purchase price. If the buyer pays late, the transfer is postponed accordingly, and the buyer may owe compensation for use for the period of the delay. Conversely, the seller may claim late payment interest in the event of default. Specific provisions are set forth in the notarial contract-the wording regarding the transfer date should therefore be precise.

Do I also assume all of the seller’s liabilities when ownership transfers?

Only current liabilities as of the transfer date. Overdue payments (e.g., unpaid development costs, outstanding maintenance fees) are generally the seller’s responsibility-unless the contract stipulates otherwise. Therefore, careful drafting of the contract by the notary is essential. For WEG apartments, we recommend reviewing the minutes of the last owners’ meeting and the WEG financial statement before notarization to identify any special assessments that may have been approved.

Who is responsible for damages after the transfer of encumbrances?

From the transfer date onward, the buyer bears the risk of damage: a burst pipe, storm damage, or a heating system failure occurring after this date is the buyer’s responsibility. The seller, however, is liable for defects that existed prior to the transfer and were fraudulently concealed. Therefore, buyers should inspect the property again shortly before the handover date to verify its condition.

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