Priority notice of conveyance

Priority Notice of Reversion - A priority notice of reversion is a security interest recorded in the land register that grants the former owner (or a third party) the right to demand the reversion of the property under certain conditions. It is frequently used in the context of gifts, municipal land sales, and real estate development contracts to ensure that the purchaser complies with certain conditions-otherwise, the retransfer may be demanded.

Legal Basis and Registration

The priority notice of retransfer is entered as a priority notice in Section II of the land register pursuant to § 883 BGB. It secures a conditional or future claim to the retransfer of ownership. The conditions are specified in the underlying contract (gift deed, purchase agreement)-e.g., resale within a certain period, change of use, or failure to comply with a construction obligation.

If the condition is met, the entitled party has an enforceable claim to retransfer, which is also effective against the owner’s legal successors. The priority notice prevents the property from being sold to third parties free of encumbrances. Unlike a simple contractual claim for retransfer, the priority notice has real property effect: it remains valid even if the owner resells or encumbers the property-the purchaser or the bank is aware of the encumbrance because it is visible in the land register.

An important detail: The cancellation of a priority notice of retransmission requires the cooperation of the entitled party. This party must issue a notarized authorization for cancellation. If the entitled party refuses to grant the authorization without cause, the owner may file a lawsuit to compel the issuance of the authorization.

Typical Applications

The most common applications are: Municipal land sales - Municipalities often sell building lots below market value on the condition that a residential building be constructed within a specified period (e.g., 5 years). If construction does not take place, the priority notice of reversion takes effect. Gifts subject to conditions - Parents transfer a property to a child on the condition that it not be resold while the parents are alive. Developer Agreements - The developer secures a priority notice of reversion in case the buyer fails to pay the purchase price in full. Subsidy Agreements - In publicly subsidized housing construction, compliance with occupancy restrictions is ensured through a priority notice of reversion.

Impact on Financing and Sale

A registered priority notice of reversion significantly restricts the property’s marketability and financing options. Banks seeking to register a mortgage as collateral for a loan carefully review the priority ranking: If the priority notice of reversion ranks higher than the mortgage, the beneficiary would have a stronger legal position in the event of a dispute-which the bank views as a risk. In practice, financing is therefore often only approved once the priority notice of reversion has been deleted or the beneficiary has provided a subordination agreement.

For buyers of a property encumbered by a priority notice of reversion, the following applies: Before purchasing, it must be clarified whether the conditions of the notice are still active or whether there is a basis for deletion. A property encumbered with a priority notice of conveyance is more difficult to finance and, in case of doubt, can only be sold at a lower price.

Practical Tip for Property Owners in Nuremberg

We recommend that buyers in the Nuremberg metropolitan area who are purchasing a property from the City of Nuremberg or a surrounding municipality carefully review the terms of the priority notice of conveyance. The City of Nuremberg regularly ties property sales to construction obligations (building a residential home within 3-5 years) and resale restrictions (10-15 years). If the deadline is missed, the city may demand the property be returned at the original purchase price-regardless of any increase in value that has occurred in the meantime.

Therefore, plan your construction schedule realistically and apply for an extension in a timely manner if delays occur. Many municipalities are willing to compromise in cases of justified delays (supply bottlenecks, weather, building permit procedures)-but only if communication is early and proactive. We are happy to advise you on reviewing the conditions of the priority notice and communicating with the respective municipality.

Frequently Asked Questions

Can I sell a property with a priority notice of reversion?

In principle, yes, but the buyer takes over the property with the registered priority notice. This means: The claim for reversion also applies against the new owner. In practice, either the condition must be fulfilled (e.g., house built, deadline expired) and the priority notice must be deleted, or the entitled party must consent to the deletion. A property with an existing priority notice of reversion is more difficult to sell and finance, as banks must register the mortgage in a rank subordinate to the priority notice.

How long is a priority notice of reversion valid?

The duration depends on the contractual agreement. For municipal land sales, terms of 5-15 years are common. In the case of gifts subject to conditions, the priority notice may remain valid for life. Upon expiration of the agreed term or fulfillment of the condition, the owner is entitled to cancel the priority notice. Cancellation requires a notarized written consent from the entitled party and registration with the land registry office.

What are the costs for registration and cancellation?

Registration of the priority notice of reversion at the land registry office costs half the fee under the GNotKG-for a property value of 200,000 euros, approximately 250-350 euros (notary + land registry). Deletion costs a similar amount. In the case of municipal property sales, the buyer generally bears the costs. Notary fees are included in the purchase agreement if the priority notice is registered as part of the same transaction.

Can a priority notice of reversion also be enforced against a bank?

Yes, if the priority notice of reversion ranks higher in the land registry than the bank’s mortgage. In this case, in the event of a foreclosure sale, the claim for reversion would be considered before the bank’s claim is satisfied. Banks therefore require, when financing properties with priority notices of retransfer, either a subordination agreement from the entitled party or the cancellation of the priority notice as a condition of financing. Buyers should address this issue when submitting their financing request to avoid surprises shortly before the notary appointment.

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