Real burden

Real encumbrance - A real encumbrance is a charge on real property that obligates the respective owner to make recurring payments to the beneficiary and is recorded in Section II of the land register (Section 1105 of the German Civil Code (BGB)).

What is a real burden and how does it work?

The real burden is a type of limited real right and is governed by §§ 1105-1112 BGB. It encumbers a property in such a way that the respective owner must make recurring payments to a specific person or to the respective owner of another property. These payments can vary greatly in nature: monetary payments (e.g., monthly annuity payments), payments in kind (e.g., delivery of firewood or agricultural products), or services (e.g., care and support services).

In real estate law, we distinguish between the subjective-real encumbrance and the subjective-personal encumbrance. In the case of the real encumbrance, the right belongs to the respective owner of a beneficiary property and automatically transfers to the new owner upon sale. In the case of a personal real burden, a specific natural or legal person is entitled to the right-the right expires upon their death or dissolution and is not transferable.

The registration is made in Section II of the land register for the encumbered property and requires notarial approval. A key difference from a land charge or mortgage (Section III) is that the real burden does not serve to secure a monetary claim but rather establishes recurring obligations to perform. While a land charge grants the creditor a right of foreclosure on the property, the real burden obligates the owner to make active, ongoing payments.

Typical applications include the life annuity in real estate sales on an annuity basis, the retirement portion (retirement allowance) in the transfer of a farm, and obligations under heritable building rights agreements. In all these cases, the real burden secures the beneficiary a permanent claim to performance that remains in effect regardless of who owns the property.

Priority, Loss of Value, and Redemption

In Section II of the land register, the real burden is listed in priority relative to other registered encumbrances such as easements, rights of residence, or preliminary notices. The priority determines which right is satisfied first in the event of a foreclosure sale. A real encumbrance generally reduces the market value of the encumbered property, as future owners must assume the ongoing payment obligations. When determining the value, the capitalized present value of the outstanding payments is deducted from the property value.

Valuing a real encumbrance for valuation purposes requires the capitalization of future payments. For monetary payments, the present value of the payment series is discounted at a market-standard interest rate. For payments in kind or care obligations, a conversion to a monetary value is first required, which necessitates an assessment by an expert. In inheritance and gift tax law, a separate valuation rule applies: The tax office capitalizes the real burden based on the annual value × the statistical multiplier in accordance with the Valuation Act.

The redemption of a real burden is possible if it has been contractually agreed upon or if the requirements of § 1111 BGB are met. In practice, a redemption amount is often negotiated that corresponds to the present value of the remaining performance obligations. After payment and the consent of the beneficiary, an application for deletion from the land register can be filed.

Real Burden as a Tool for Succession Planning

Beyond traditional applications, the real burden is gaining importance as a tool for real estate succession planning. Parents who wish to transfer their home to their children during their lifetime without bearing the risk of losing their retirement security can secure care, support, and housing benefits through a real burden. When combined with a right of residence or usufruct, this creates a tailor-made security package for the transferor. The real burden should be formulated as precisely as possible regarding its content-the type, scope, and duration of the services owed-to avoid future disputes over interpretation. Vague wording can significantly complicate the enforceability of the claims.

Practical Tip for Nuremberg and Franconia

In the Nuremberg metropolitan region, we encounter real burdens particularly frequently in farm transfers in the Franconian countryside-such as in the Nuremberg region, Franconian Switzerland, or the district of Roth-where retired farmers secure housing, support, and care services through a retirement arrangement. Real encumbrances also play a central role in real estate sales on a life annuity basis, which are particularly common among older owners in neighborhoods such as Erlenstegen or Buchenbühl.

We recommend that prospective buyers carefully review the entries in Section II of every land register extract and clarify the specific scope of a real encumbrance using the approval certificate at the land registry office before proceeding with purchase negotiations. During price negotiations, the present value of the outstanding obligations should be factored into the calculation as a reduction in the purchase price. In the Franconia region, it is also advisable to seek specialized advice from a notary, as regional peculiarities-such as those regarding retirement planning-should be understood.

Frequently Asked Questions

What distinguishes a real burden from a land charge?

A land charge (Section III) secures a monetary claim and grants the creditor a right of foreclosure on the property-typically in favor of a bank to secure a loan. A real burden (Section II), on the other hand, establishes recurring performance obligations for the owner that may go beyond mere monetary payments and are not intended to secure a loan.

As a buyer, do I have to assume a registered real burden?

Yes, a real burden registered in the land register is a right in rem and binds every future owner of the encumbered property. Upon purchase, the associated obligations automatically transfer to the new owner. Before deciding to buy, one should therefore carefully examine what payments are owed, to what extent, and for how long.

Can a real burden be deleted?

Deletion is possible if the beneficiary consents and issues a notarized authorization for deletion. In the case of personal real burdens, the right expires upon the death of the beneficiary, and deletion can then be requested with the death certificate. In addition, a buyout in exchange for a lump-sum payment may be agreed upon, provided both parties agree on the buyout amount.

How does a real encumbrance affect financing?

Banks take a registered real encumbrance into account when determining the mortgage lending value of the property. The present value of the outstanding obligations is deducted from the mortgage lending value, which reduces the potential loan amount. In some cases, banks require the cancellation of the real burden or an explicit subordination agreement from the beneficiary before granting a loan. Anyone wishing to finance a property encumbered by a real burden should contact the bank early on.

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