Ground rent in the land register: Registration and valuation

In Fürth and the Nuremberg metropolitan area, leasehold rights are a widely used tool for enabling more affordable construction or housing on municipal or church-owned land. At the heart of leasehold rights is the ground rent-the regular payment that determines whether the leasehold is economically expensive or affordable. In the land register, the ground rent is recorded as a real encumbrance on the leasehold. Anyone buying or selling a leasehold must understand the registration structure and the implications for the value of the right.

Legal Background: Leasehold and Ground Rent under the Leasehold Act (ErbbauRG) and the Civil Code (BGB)

The leasehold right is a right in rem, transferable, and inheritable, to have a structure on another person’s land (Section 1(1) ErbbauRG). It arises through a notarized agreement and registration as an independent right in the land register-more specifically: in the leasehold register. The leasehold right is assigned its own land register page.

The ground rent is the consideration paid by the leaseholder to the landowner. Pursuant to § 9 ErbbauRG, it is established and registered as a real encumbrance on the leasehold right. This security in rem ensures that, in the event of default, the landowner can enforce the leasehold right through foreclosure.

The Fürth Land Registry Office (part of the Fürth Local Court) maintains both the land registers for encumbered properties and the leasehold registers. The Notary District of Middle Franconia is responsible for the notarization of leasehold agreements and ground rent agreements.

The term “hereditary building right” in the Fürth land register appears in Section II of the property land register as an encumbrance on the property. At the same time, a separate leasehold land register is created, in which the leasehold right itself is recorded as a legal object-with separate sections for owners (Section I), encumbrances on the leasehold right (Section II, e.g., the ground rent as a real encumbrance), and real property liens (Section III, e.g., the mortgage held by the financing bank).

Registration Structure: Land Register of the Property and Leasehold Register

The land registry structure for leasehold rights is two-tiered:

Land registry of the encumbered property (Section II): Here, the leasehold right is registered as a limited real encumbrance. The entry includes the leaseholder, the term, and a reference to the leasehold agreement.

Leasehold Land Register: A separate land register page for the leasehold right itself. This page lists the ownership structure of the leasehold right (Section I), any encumbrances on the leasehold right such as land charges for financing the structure (Section III), and-in Section II-the ground rent as a real encumbrance.

Land Register Section	Place of Registration	Content
Property (encumbered)	Section II of the Property Land Register	Leasehold right (reference to contract, term)
Leasehold right itself	Separate Leasehold Register, Section I	Owner of the leasehold right
Ground rent	Leasehold Register, Section II	Real encumbrance (rent amount, due date, adjustment clause)
Financing of the building	Leasehold Land Register, Section III	Mortgage of the financing bank

Source: WEG Act (as of WEG Reform 2020 + adjustments 2026), BGB, GNotKG Table, Bavarian Justice Portal, Land Registry Office Nuremberg/Fürth/Erlangen, as of Q1/Q2 2026.

Leasehold Rent Adjustment: Clauses and Case Law

The adjustment of the leasehold rent is one of the most common points of contention between landowners (often churches or municipalities) and leaseholders. According to the case law of the Federal Court of Justice, an adjustment of the ground rent is only permissible if an adjustment clause is agreed upon in the leasehold agreement, the clause is linked to a recognized index (usually the Consumer Price Index of the Federal Statistical Office), and the agreed-upon adjustment interval is adhered to.

In the Fürth market, church landowners (Protestant and Catholic parishes own significant tracts of land within the city limits of Fürth) have in recent years enforced ground rent increases based on index clauses triggered by high inflation in 2022-2024. In some cases, monthly ground rent payments were raised by 30 to 50 percent. This development has significantly altered the economic attractiveness of existing leasehold rights.

> If you would like to know how the current ground rent affects the market value of your leasehold in Fürth, the valuation tool from leadmarkt.ch offers an initial data-based guide.

Leaseholders who consider an adjustment to be excessive can have its appropriateness reviewed in court. The Fürth Local Court and the Nuremberg-Fürth Regional Court have dealt with leasehold rent adjustment disputes on multiple occasions in recent years. In doing so, the courts examine whether the adjustment clause in the leasehold agreement is valid (review of standard terms and conditions pursuant to Sections 307 et seq. of the German Civil Code (BGB)) and whether the specific calculation of the adjustment corresponds to the agreed method.

Practice: Financing and Valuation of Hereditary Building Rights

Financing a hereditary building right is more challenging for banks than financing traditional property ownership. Lenders differentiate based on the remaining term (a remaining term of at least 30 years beyond the loan term is considered a minimum requirement), by the amount of the ground rent (a low ground rent set at less than 2% of the current property value per annum is favorable from a valuation perspective), and by the loan-to-value ratio (banks typically limit the loan-to-value ratio for leasehold rights to 60-70% of the mortgage value).

To determine the value of a leasehold interest in accordance with the Real Estate Valuation Ordinance (ImmoWertV), the income value of the structure is calculated minus the capitalized ground rent. For a leasehold with a remaining term of 40 years and an annual ground rent of €4,800, the present value of the ground rent amounts to approximately €100,000-130,000 (depending on the discount rate), which must be deducted from the building value.

Loan-to-Value Comparison: Leasehold vs. Freehold:

Financing Parameters	Freehold	Leasehold (Remaining Term > 30 Yrs.)
Typical loan-to-value ratio	70-80%	60-70%
Interest premium	0%	0.1-0.3% p.a.
Remaining term requirement	Not relevant	Min. loan term + 30 years
Eligibility for subsidy programs	Full	Limited

Local Nuance: Fürth and Church-Owned Leasehold Properties

Historically, Fürth has a high proportion of church-owned properties that were granted under leasehold terms. The Evangelical Lutheran parish and the Catholic dioceses own properties in several districts of Fürth. Particularly in neighborhoods such as Poppenreuth, Ronhof, and Burgfarrnbach, there are older leasehold rights dating from the 1960s and 1970s, whose remaining terms will expire in the coming decades.

These impending reversions are a relevant issue for owners of leasehold rights with short remaining terms. Negotiations regarding extensions, conversion to full ownership (purchase of the property), or planning for reversion should be addressed early on-ideally 10 to 15 years before the leasehold expires, as church parishes and other property owners must coordinate their decisions internally and negotiation processes require time accordingly.

Ground Rent and Taxes: What Owners Need to Know

For owner-occupiers, ground rent is not a tax-deductible payment-it is paid as compensation for the use of the property and is not tax-deductible. For leaseholders who rent out the property, however, the ground rent is deductible as income-related expenses from rental and leasing income (Section 21 of the German Income Tax Act). This significantly improves the return on investment.

From the perspective of the landowner (grantor of the leasehold), the ground rent received is taxable as income-depending on the structure, either as income from renting and leasing or as other income. Church parishes and other non-profit organizations are exempt from corporate income tax, so they benefit differently from ground rent income than private owners.

These tax aspects should be factored into the overall calculation when buying or selling a leasehold in Fürth. Anyone acquiring a leasehold for investment purposes (rental) should quantify the tax savings resulting from the ground rent deduction and include them in the return calculation.

Conclusion for Owners and Buyers in Fürth

A leasehold is an attractive alternative to freehold ownership if the ground rent is moderate and the remaining term is sufficiently long. The land registry structure is two-tiered and complex for non-specialists. Before the transaction, buyers should review both the property land registry and the leasehold land registry, know the current ground rent, and understand the adjustment clause in the leasehold agreement. The tax treatment of the ground rent is an advantage for owners who rent out their property, which should be taken into account when planning returns.

Before you buy or sell a leasehold in Fürth, we recommend using the valuation tool from leadmarkt.ch for an initial market assessment-supplemented by a detailed review of the leasehold agreement and the current ground rent burden in consultation with a notary in the Mittelfranken notary district.

Reversion and Compensation: What Happens at the End of the Term?

When a leasehold expires or the landowner exercises a right of reversion (e.g., in the event of non-payment of the ground rent), the crucial question arises: What happens to the building?

According to Section 27 of the Leasehold Act (ErbbauRG), the leaseholder is entitled to compensation for the building at the regular end of the term. The minimum amount is two-thirds of the market value of the building; higher compensation amounts may be contractually agreed upon. This compensation provision provides important security for the leaseholder: They invest decades in the building and receive at least partial compensation in the end.

In the case of the Fürth leaseholds issued starting in the 1960s, many are set to revert to the landlord within the next 20-30 years. Church parishes and municipal leaseholders are currently negotiating extensions. For leaseholders, the term is a decisive factor in the purchase price: A leasehold with 25 years remaining is significantly harder to finance than one with 60 years.

The Fürth Local Court, as the competent land registry office, maintains the leasehold land registers and processes applications for registration and cancellation of Fürth leaseholds. In the event of a dispute regarding reversion or compensation, the Nuremberg-Fürth Regional Court has jurisdiction.

Leasehold Rent Adjustment: How Often and Based on Which Index?

The ground rent is typically adjusted for inflation. The adjustment clause in the leasehold agreement is decisive-it determines whether and how the rent may rise or fall.

The most common clause is based on the Consumer Price Index (CPI) of the Federal Statistical Office. If the CPI rises by 10 percent, the ground rent increases accordingly. That sounds fair, but it can have a significant impact on leaseholders during periods of high inflation: A ground rent of 4,000 euros annually based on the 2018 CPI was adjusted to around 4,700-5,000 euros due to the inflation surge of 2021-2023. Over a 30-year leasehold term, this adds up significantly.

In the practice of Fürth leaseholds, purchasers of leasehold rights today demand a precise simulation of leasehold rent trends over the remaining term. Especially when the adjustment clause is unlimited (no cap), the risk for the leaseholder is considerable. Some leasehold agreements include a cap (e.g., a maximum 30% increase over a 10-year period)-this protects the leaseholder.

When acquiring a leasehold in Fürth, it is therefore essential to carefully review the leasehold agreement, particularly the interest rate adjustment clause. A notary or a lawyer specializing in real estate law can professionally evaluate the clause.

---

Prepared by the my-home.de editorial team in collaboration with regional real estate analysts. Data as of: Q1/Q2 2026.