The purpose and benefits of a real charge in the land register
The real charge is often used as security when selling real estate. It represents a right in rem to a property or plot of land, must be entered in the land register and can be an important factor for both buyers and sellers in the joint purchase agreement. It secures a person the right to receive a recurring benefit under certain conditions. This can be of a financial nature, but can also consist of a benefit in kind or a service. The entry in the land register ensures that the beneficiary receives the benefit. In practice, there are numerous forms of this right in rem due to the wide scope, for example in the form of maintenance, the provision of income or sums of money.
Definition of real estate encumbrance
A charge over real property is easy to explain. Like land charges and mortgages, it is a form of security for the purchase or sale of land or property. The term refers to the encumbrance of the property, whereby a beneficiary is granted a benefit. It requires agreement between the owner and the beneficiary and must be entered in the land register. This is also where the precise details and regulations of real estate encumbrances are recorded. The right expires when the encumbrance is discharged, but it is also possible to grant this right in rem for life. A real charge in the land register can reduce the value of a property and must therefore be taken into account when selling or buying.
Types and forms of real encumbrance
Classic examples of a real charge relate to the use of the right as a retirement provision. This is the case, for example, when a landowner leaves the property to his heirs or another person during his lifetime. As a result, he acts as a creditor, while the beneficiaries act as debtors. The creditor can demand consideration, for example in the form of a pension or care services. This is therefore a service. Rights of this type can also include financial obligations or payments in kind. An example of a real burden in rem is when a farm is passed from parents to their children on the condition that they receive a regular supply of crops. Financial obligations exist if you sell a property for an annuity and obtain security for the buyer’s payments by registering the annuity payments to be made. This is where real estate and annuity rights coincide.
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Legal basis of the real charge
Real estate encumbrances are regulated in the German Civil Code (BGB) and are classified as property rights. A distinction is made between subjective-personal and subjective-real encumbrances. The former is described in Section 1110 of the German Civil Code, while the regulations for the latter can be found in Section 1111 of the German Civil Code. In the case of the subjective-real form, the encumbrance cannot be separated from the ownership of the property, whereas the subjective-personal encumbrance is not tied to the ownership of the property. Furthermore, the right is not transferable and can therefore neither be sold nor encumbered.
Real charge in the valuation
Encumbrances of this type often have a major impact on the value of a property or plot of land. The encumbrance entered in the land register reduces the market value of the property or land. In order to calculate the effects precisely, it is therefore advisable to have a detailed valuation carried out by an estate agent. They will be able to precisely determine the influence of the real burden in the valuation and calculate the amount of the burden in financial terms. The annual advantages and disadvantages of the encumbrance are capitalized over the remaining term and thus converted into monetary claims. The extent to which this is significant depends, among other things, on whether it is a temporary or lifelong encumbrance.
There are three different types: financial obligations, services and payments in kind. They all represent a recurring encumbrance and must be entered in the land register of the property or plot of land. Encumbrances of this type can be limited in time, but can also be granted for life.
This form of encumbrance must be distinguished from a right of residence, as it represents an encumbrance in rem on a property and assures a beneficiary of recurring benefits. However, it is not automatically accompanied by a right to use a residential property, as is the case with a right of residence.
An example of a financial obligation is a life annuity, where a property is sold in return for a lifelong right of residence and the purchase price is not paid in full upon agreement. Services act as examples of a real charge if the right of residence is accompanied by a consideration, for example if the property owner receives care or support services. A consideration in kind is often granted in the agricultural or forestry sector when yields such as timber or harvests are transferred to the beneficiary.
The question of which encumbrance is to be entered in which section of the land register can be answered on the basis of its character as a right in rem. Rights of this type must be recorded in section II of the land register. This is done for each variant of this encumbrance in rem, whether financial, as a service or in kind.
An encumbrance of this type exists if a property or land owner grants another person a recurring benefit in connection with the property or land. These can be monetary amounts, but also other benefits. A real charge and the maintenance obligation are linked, as the owner must ensure the proper condition of the property.
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