Price risk

Risk of Price - The risk of price (also known as the risk of payment) governs the question of who must bear the purchase price or payment if the performance owed is accidentally lost or damaged before delivery-for example, due to fire, storm, or vandalism. In real estate law, the risk of loss passes to the buyer upon delivery of the property pursuant to § 446 BGB; in construction law, it passes upon acceptance of the structure (§ 644 BGB).

Risk of Loss in Real Estate Purchases

In real estate purchases, the seller bears the risk of loss until delivery (§ 446 BGB). If the building is destroyed by fire before handover, the buyer is not required to pay the purchase price or must pay only a reduced amount. Upon handover (transfer of keys, transfer of possession), the risk of loss passes to the buyer-even if the buyer is not yet listed in the land register. The notarized purchase agreement typically specifies the exact time of handover. Often, a transfer of possession clause is included, stipulating that possession (and thus the risk of loss) passes to the buyer on the day the purchase price is paid in full.

Risk of Loss in Construction Contracts

Under construction law, the contractor bears the risk of price until the building is accepted (Section 644(1) BGB). If the shell of the building is damaged by flooding before acceptance, the contractor must restore it at their own expense-the client owes no additional compensation. Upon acceptance, the risk of price passes to the client. Note: If the client is in default of acceptance (refuses acceptance without just cause), the price risk passes to them prematurely (Section 644(1) sentence 2 BGB). In real estate development contracts, the transfer is often contractually linked to acceptance and payment of the purchase price.

Risk of Price and Transfer of Insurance

An often-overlooked aspect: While the statutory transfer of building insurance to the buyer (§ 95 VVG) means that the existing policy is transferred to the buyer, this does not automatically guarantee sufficient or up-to-date coverage. The seller’s older policies may have outdated coverage limits or fail to cover certain risks (natural hazards, tap water). While the buyer has the right to terminate the policy for cause within one month of the transfer of ownership, they should have taken out a new policy beforehand to avoid any coverage gaps.

For new construction under a developer contract, the terms regarding the transfer of risk must be reviewed in the contract: Some developer contracts link the transfer of ownership to full payment of the purchase price rather than to formal acceptance. This can result in the buyer already bearing the risk of loss before all defects have been remedied. A thorough analysis of the contract is therefore essential.

Practical Tip for Property Owners in Nuremberg

We recommend that buyers and builders in the Nuremberg metropolitan area carefully review the handover date in the purchase agreement or developer contract and ensure that adequate building insurance is in place from the moment of transfer of ownership. In practice, weeks may pass between the payment of the purchase price and the actual move-in-during this time, you are already bearing the risk of loss. Clarify with your insurer the date on which the policy takes effect. For new construction in flood-prone areas (e.g., the Pegnitz floodplain or parts of Schwaig), natural disaster insurance is particularly important.

Sellers should note that they remain responsible until the handover and must continue to pay for building insurance. If damage occurs during this period, proof of insurance must be provided to the buyer, and the insurance payout must be assigned to the buyer if necessary. We assist our clients in coordinating the handover date, the transfer of insurance coverage, and the land registry transfer so that all steps are seamlessly coordinated.

Frequently Asked Questions

Who pays if the house burns down between the notary appointment and the handover?

As long as the handover has not yet taken place, the seller bears the risk of loss. The buyer may withdraw from the contract or demand a reduction in the purchase price (Sections 326, 323 BGB). In practice, the seller’s building insurance covers the damage. The buyer should check whether the purchase agreement contains a clause assigning the seller’s insurance claims to them-this is standard in most contracts.

When do I, as the buyer, need building insurance?

From the transfer of ownership-that is, the point at which you assume the risk of loss. In most purchase agreements, this is the day the purchase price is paid in full. Although the seller’s existing building insurance is transferred to the buyer by law (§ 95 VVG), it is advisable to review the policy and, if necessary, adjust the coverage amount and scope of insurance. You should arrange for the change of insurer before the handover date.

What does “risk of loss” mean in the case of partial acceptance?

In construction contracts, partial acceptances may be agreed upon-e.g., for the shell of the building or individual trades. With partial acceptance, the price risk for the accepted portion transfers to the building owner. This means: If the already accepted shell of the building is damaged by a storm, the building owner bears the risk for that portion, while the contractor continues to bear the price risk for services not yet accepted. Partial acceptances should be documented in writing.

What insurance covers price risk for new construction?

During the construction phase, when neither the buyer’s nor the seller’s building insurance applies, construction performance insurance (also known as shell construction insurance) comes into play. It protects the building owner against unforeseen damage to the structure still under construction-such as from severe weather, vandalism, or theft of installed materials. In the Nuremberg metropolitan area, where construction projects often take 12 to 18 months due to the workload of tradespeople, seamless construction insurance is particularly important. From the point of transfer of risk (acceptance or contractually agreed handover date), standard building insurance then takes effect. The transition from construction insurance to building insurance must be coordinated to ensure there is no gap in coverage.

Risk of Loss and the Special Case of Leasehold Rights

When purchasing a property on a leasehold plot, special rules apply to the risk of loss: The buyer acquires the building (leasehold right), not the land. The risk of loss for the building is governed by Sections 446 and 447 of the German Civil Code (BGB); the transfer of risk occurs upon handover. The leaseholder (landowner) remains responsible for the land itself. The insurance issue is particularly relevant here: Some leasehold agreements require the leaseholder to insure the building for a specific value and to list the landowner as a co-insured party. Buyers of leasehold properties in Nuremberg-such properties are common, for example, in the context of the Protestant church or municipal land-should carefully review the leasehold agreement for such clauses.

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