Notice of Intent to Discharge

The notice of cancellation is a land registry entry that indicates that a specific right-such as a land charge, mortgage, or easement-is to be cancelled in the near future. It secures the entitled party’s right to cancellation and prevents the creditor from transferring the right in question to a third party or otherwise encumbering it in the meantime. In the purchase process, it is an important tool for ensuring that the buyer receives the property free of encumbrances before the purchase price is paid.

Function and Effect of the Notice of Cancellation

The notice of cancellation has a protective effect similar to that of the notice of conveyance: Any legal transaction entered into after its registration that would impair the cancellation is ineffective against the party entitled to the priority notice. Specifically, this means: If the bank assigns its land charge to a third party after the registration of the priority notice of cancellation, that third party cannot assert the rights arising from the land charge against the owner.

The legal basis for the cancellation notice is found in Section 1179a of the German Civil Code (BGB) (for mortgages and land charges) and the general rules on notices of priority (Sections 883 et seq. BGB). It protects, in particular, the buyer who does not yet have a claim to transfer of ownership but wishes to ensure that the property is free of encumbrances at the time of transfer. In notarial practice regarding purchase agreement procedures, the priority notice of cancellation often ensures coordinated settlement: first pay the purchase price, then cancel the encumbrances.

Use in the Purchase Agreement Process

In purchase agreements encumbered by the seller’s existing land charges, the following procedure is often agreed upon in the notarial contract: The buyer pays the purchase price into a notary escrow account or directly to the seller’s bank, which then issues a cancellation authorization and a cancellation notice. The actual cancellation of the land charge is then carried out by the land registry office after the transfer of ownership. The buyer is protected by the priority notice against abusive actions by the seller or the bank.

In practice, the process often proceeds as follows: Before the purchase price is due, the notary requests a cancellation authorization from the seller’s financing bank. The bank issues this and simultaneously gives its consent to the registration of a cancellation notice. The buyer pays the purchase price, the cancellation authorization is submitted to the land registry office, and the actual cancellation takes place shortly thereafter. This procedure has become standard practice in the German real estate sector.

Distinction from Related Terms

“Priority notice of cancellation,” “authorization for cancellation,” and “application for cancellation” are often confused in everyday language. The authorization for cancellation is the creditor’s substantive declaration of consent. The application for cancellation is the form submitted to the land registry office. The notice of cancellation is the resulting land registry entry that secures and announces the future cancellation. All three elements are interlinked in a typical purchase process.

Practical Tip for Property Owners in Nuremberg and Franconia

When processing purchase agreements in Nuremberg and Franconia, the notary typically coordinates the entire process, including notices of cancellation. As a seller, you should clarify early on which encumbrances are registered in Section III of the land register and which bank is responsible for issuing the cancellation authorization-for fixed-rate loans, early repayment may trigger a prepayment penalty.

As a buyer: Before paying the purchase price, make sure that all registered land charges are secured by corresponding priority notices of cancellation. Ask your notary whether the priority notice of cancellation has already been entered before you transfer the purchase price. This step is your most important safeguard against the risk that the seller will not have the encumbrances removed.

Frequently Asked Questions

How long does it take for a notice of cancellation to be registered?

The registration of a notice of cancellation by the land registry office usually takes 2-6 weeks. In urgent cases, the notary can file an expedited application; however, the land registry office is not obligated to give such applications priority.

Is a priority notice of cancellation the same as a cancellation authorization?

No. The cancellation authorization is the creditor’s (e.g., the bank’s) declaration of consent to the cancellation. The priority notice of cancellation is the land registry entry made on the basis of this authorization and secures the future cancellation. The authorization is the document; the priority notice is the resulting entry.

What happens if the priority notice of cancellation is entered but the actual cancellation does not take place?

As long as the notice remains in the land register, the land charge is still registered, but its effect is limited with respect to the party entitled to the notice. The creditor cannot legally dispose of the land charge. The final cancellation must be initiated by a separate application to the land registry office.

Are there separate land registry fees for the cancellation notice?

Yes, the registration of a priority notice of cancellation is subject to fees. The fees are based on the value of the land charge to be canceled and are of a similar magnitude to the fees for the actual cancellation. In the notarial processing of a purchase agreement, these costs are usually already included in the notary’s overall fee structure.

Special considerations when there are multiple land charges

In practice, buyers often encounter properties encumbered by multiple land charges from different financing phases-such as an older land charge from the original purchase and a newer one from a follow-up financing or a renovation loan. In such cases, a separate cancellation authorization must be obtained for each individual land charge, and a separate cancellation notice must be entered. The notary typically coordinates this with all participating creditor banks simultaneously to minimize delays. We recommend that buyers carefully check, when reviewing the land register extract (Section III), whether all registered land charges are listed in the purchase agreement and include a cancellation obligation. Any remaining encumbrances not listed may remain with the new owner after the transfer of ownership.

How does the cancellation notice work in the case of land charge assignments?

Creditor banks occasionally sell land charges to third parties-for example, as part of portfolio transactions or to refinancing companies. If a priority notice of cancellation has already been registered, the effect of the assigned land charge is limited with respect to the party entitled to the priority notice: While the new creditor may retain the land charge, they must consent to its cancellation. Without a priority notice of cancellation, the buyer would potentially be left unprotected in the event of an assignment following payment of the purchase price if the new creditor refuses to cancel the land charge. In these cases, the priority notice serves as an indispensable protective mechanism. In Nuremberg notarial practice, the registration of a priority notice of cancellation prior to the due date of the purchase price is therefore an established standard that we have reviewed and confirmed in every purchase agreement.

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