Claim for restitution

Claim for restitution refers to the right of a contracting party to demand the return of an item delivered, a right transferred, or a service rendered if the legal basis for the original transfer has ceased to exist or a contractually agreed-upon event giving rise to restitution has occurred. In real estate law, the claim for restitution arises primarily in three contexts: upon withdrawal from a purchase agreement, upon the retransfer of a land charge after full loan repayment, and upon the reversion of hereditary building rights. Understanding this claim is equally important for owners, buyers, and borrowers.

Claim for Restitution Upon Withdrawal from the Purchase Agreement

If a party effectively withdraws from the real estate purchase agreement-for example, due to a material defect, fraudulent misrepresentation, or unfulfilled conditions precedent-a mutual claim for restitution arises: the buyer and seller must return the benefits received (Section 346 of the German Civil Code (BGB)). The buyer returns the property, and the seller reimburses the purchase price. The retransfer of property ownership again requires a notarial conveyance and an update to the land register.

Any benefits the buyer derived from using the property in the interim must also be returned or compensated-for example, rental income during the period of ownership. Conversely, the buyer is entitled to reimbursement for expenses incurred on the property (repairs, property tax). The rescission of a real estate purchase agreement is thus a complex process that regularly requires legal counsel.

Claim for restitution regarding land charges after loan repayment

The most important practical case in the real estate sector is the owner’s claim for restitution against the bank following full repayment of the loan: The land charge registered to secure the loan does not automatically expire upon repayment of the loan. Instead, the owner has a contractual claim for restitution regarding the assignment or authorization to cancel the land charge.

The bank is obligated to issue a consent to cancellation or a deed of assignment of the land charge so that the owner can have the land charge deleted from the land register or transferred to their own name. A land charge transferred to the owner’s name can later serve as security for new financing without the need to establish a new land charge-this saves on notary fees.

The land charge remains registered in the land registry until the owner actively applies for its cancellation. Many owners are unaware that a land charge that has already been fully repaid remains in the land registry for years and is only removed through active action.

Right of Restitution in Leasehold Rights and Gifts

In the case of leasehold rights, the landowner is entitled to a right of restitution regarding the leasehold right and the structures erected thereon upon expiration of the agreed term or in the event of premature reversion (§§ 27 ff. ErbbauRG), coupled with an obligation to compensate for the building.

In the case of gifts subject to a right of revocation (Section 530 BGB), a claim for restitution of the gifted property arises upon revocation. Grounds for revocation may include serious misconduct on the part of the donee or the death of the donor, if this has been contractually agreed. In the case of gifts with a reversion clause-for example, if the donee dies before the donor-the claim for restitution is already contractually stipulated and arises automatically upon the agreed-upon event. This arrangement is widespread in family transfers to ensure that the property does not pass to the donee’s spouse in the event of inheritance.

Claim for Restitution and Insolvency Law

Claims for restitution also exist under insolvency law: If a property was transferred shortly before a contracting party’s insolvency and the transfer is deemed voidable (Sections 129 et seq. InsO), the insolvency administrator may demand the retransfer. For buyers who purchased from a seller in financial distress, this can mean that ownership is later contested-a significant risk that can be mitigated by due diligence in vetting the seller and by registering a priority notice of conveyance in the land register.

Practical Tip for Property Owners in Nuremberg and Franconia

The most common scenario in which property owners in Nuremberg and the metropolitan region ask us about claims for restitution involves old, fully paid-off land charges: Many owners have loans they paid off years ago, yet the land charge remains registered in the land registry-not deleted because they forgot or did not consider it urgent. This becomes a problem before a sale or refinancing.

We recommend requesting the deletion authorization from the bank immediately after a loan has been fully repaid and having the land charge deleted from the land register. This costs approximately €100-200 at the notary, but saves future confusion and delays in contract execution. Alternatively, the land charge can be transferred to the owner’s name if it is foreseeable that refinancing is planned in the coming years.

Frequently Asked Questions

How long does the bank have to issue the release authorization after the loan has been repaid?

Upon full repayment, the bank is obligated to issue the release authorization or land charge assignment without delay. In practice, this takes two to six weeks, depending on the institution. If the bank insists on unreasonably long processing times or charges excessive processing fees, the owner may sue to compel issuance. The processing fee for issuing the cancellation documents should not exceed €50-100; higher flat fees are generally invalid.

After repayment, can I use the land charge for new financing instead of canceling it?

Yes. Instead of canceling it, the owner can have the land charge transferred to their own name (owner’s land charge) and later assign it to a new bank as collateral for a new loan. This saves notary fees for establishing a new land charge. Whether the new bank accepts this approach depends on its internal requirements. In cases of clear re-leasing or refinancing after several years, we generally recommend canceling the old land charge and creating a new one tailored to the current loan amount.

Is there a claim for damages following an effective withdrawal from the purchase agreement?

Under the new law of obligations, withdrawal and damages are not generally mutually exclusive. In addition to the claim for restitution (reversal of the transactions), damages may be claimed in lieu of performance if the other party is responsible for a breach of duty. If the buyer has withdrawn from the contract due to a material defect that the seller fraudulently concealed, the buyer may demand reimbursement of transaction costs (notary, real estate agent, financing costs) in addition to a refund of the purchase price.

What happens to registered land charges of other creditors in the event of rescission?

If a purchase contract is rescinded, the property must be returned to the condition it was in prior to the transfer. If there is a land charge on the property that the buyer registered for financing, this must be discharged as part of the rescission. In practice, this means: The buyer’s bank must agree to the cancellation or redeem the loan from the buyer’s claim for a refund of the purchase price. Coordinating this rescission is complex and requires legal and notarial assistance.

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