What Should You Know About Property Purchase Contracts in Germany?

The purchase contract lists all the rights and obligations of the buyer and seller. Some details are obligatory. These include:

• The name and address of the parties involved

• The object of purchase

• Any mortgages or rights of use. 

• The furnishings and any furniture sold with the property

• The condition of the property and existing defects

• The warranty liability: “Purchased as seen” applies here. The seller assures that he is unaware of any hidden or obvious defects and assumes no liability for defects discovered later.

• The apportionment of the ancillary costs and the regulation of the year-end settlement

• The purchase price, the date of payment, and the terms of payment

• The amount of interest on arrears if the seller is unable to hand over the property at the agreed time

• The date of handing over

In addition, the purchase contract contains a lot of legalese related to the notary process, particularly when and how to enter the contract and the potential mortgage in the Grundbuch. Our deep-dive article on the notary process explains this.

What should you pay attention to in the contract?

Before signing, you should check the purchase contract. The notary usually sends it to you, and you typically have 14 days to do so. This two-week period is only mandatory if one of the two parties is a private person and the other is a legal body (GmbH, UG, etc.). 

Ensure all names are spelled correctly and all data about the property is available. The purchase contract should also address possible inheritance claims on the property and potential rights of use.

Include existing movable inventory in the purchase contract for the house. This should be listed separately in the contract — this reduces the purchase price, and you will have to pay less land transfer tax.

Tip: Kitchen cabinets and equipment are considered movable in Germany. But be careful that it does not impact the cut-off LTV that the bank looks at. Otherwise, your mortgage rate may go up. 

The seller's bank account must be included, and if the amount is to be paid in installments, a detailed payment schedule should be included in the contract.

Important: By signing the purchase contract, you agree to pay the purchase price. If, contrary to expectations, you cannot do so, you will be liable with all your assets up to and including foreclosure.

Is there a right of withdrawal from the real estate purchase contract?

The notarized real estate purchase contract is binding for the seller and buyer. Under certain circumstances, however, it is possible to withdraw from the purchase contract or have it reversed. This is the case, for example, if the buyer does not meet his payment obligations or the seller has demonstrably concealed defects in the property when the contract was concluded.

Including the right of rescission in the purchase contract for a house is generally advisable. This is because it takes precedence over the right of rescission regulated by law, which often makes rescission very costly in terms of both time and money. A corresponding clause benefits sellers in particular since a rescission settlement can delay a new sale.

Warranties

In the case of a used house, the right to warranty is usually excluded in the purchase contract. The seller, though, must inform the buyer of all existing defects. Only in the case of fraudulently concealed defects and/or if the buyer was assured in the purchase contract that an existing defect would be repaired and this was not done can the buyer withdraw from the contract. However, the buyer has the burden of proof here. It is, therefore, important to have a property evaluation carried out by a building expert (Bausachverständiger] before signing the contract. If, in turn, the purchase price is not paid as agreed, the seller has the right to rescind the purchase contract for the house.

What is important in the contract of sale for an apartment

Additional content must be included in the purchase contract to buy an apartment. As an apartment owner, you are part of a community of owners with shares in the common property. The following points are also listed in the purchase contract for a condominium:

• The apartment number

• The size of the apartment

• The location of the apartment

• Which rooms belong to your condominium

• Your special rights of use, for example, parking spaces, gardens, etc.

• What belongs to the common property

• Your rights of use for the common property

• The community rules

• The co-ownership share with which you pay into the maintenance reserve fund

• The current Hausgeld (condominium fees)

• If you are purchasing a new apartment, the current construction plans and a construction description should also be included in the purchase contract. Any down payments made should also be documented. The apartment purchase agreement must also be notarized for the purchase to be legally valid.

TIP: Do not sign your mortgage contract too early. At the earliest, you should sign the financing application two weeks before it is notarized, as you can still exercise your right of cancellation during this time.

Understanding Apartment Ownership in Germany

When purchasing an apartment (Eigentumswohnung) in Germany, it’s essential to understand the distinctions between Gemeinschaftseigentum (common property) and Sondereigentum (private property). This knowledge affects daily life, can affect the mortgage rates and is important for ensuring a seamless mortgage process.

Gemeinschaftseigentum (Common Property): Shared areas among all apartment owners, such as stairwells, roofs, gardens, and elevators.

• Maintenance Responsibilities: Managed by the apartment association (Eigentümergemeinschaft), ensuring upkeep and repairs.

• Impact on Mortgages: Lenders assess the size and condition of Gemeinschaftseigentum, as poor maintenance or a limited reserve can lower property values and influence your property valuation in Germany. On the other hand having plenty of common land that allows for expansion or a garden can help the value.

Sondereigentum (Private Property): Individual units owned by each apartment owner, including interiors and balconies. Only the property owner is entitled to use the specified space. This right is stated as “Sondernutzungsrecht” for the apartments' areas but can also extend to storage areas in the basement/attic and parking spots.

• Ownership Rights: Full control over renovations or modifications, provided they don’t impact Gemeinschaftseigentum. Depending on the property, some restrictions might still apply regarding modernizations, for example, if the property falls under preservation protection (Denkmalschutz) or is located in an area that falls under the so-called “Milieuschutz.”

• Mortgage Considerations: Clear ownership of Sondereigentum allows lenders to evaluate the unit’s value and condition accurately, facilitating smoother mortgage approvals.

Monthly Fees (Hausgeld): Owning an apartment involves paying monthly condominium fees known as Hausgeld, which cover the following:

• Maintenance and Repairs: Regular upkeep of common areas and unexpected repairs.

• Utilities: Heating, water, garbage collection and sometimes electricity for shared spaces.

• Reserve Fund (Rücklage): Savings for future large-scale renovations or unforeseen expenses.

Why It Matters for Your Mortgage:

• Affordability Assessment: When determining your LTI ratio (Loan-to-Income ratio) in Germany, lenders consider your ability to cover these monthly fees in addition to mortgage payments.

• Financial Stability: Consistently paying Hausgeld on time positively influences your Schufa score for mortgage applications, demonstrating reliability to lenders.

Your Hausgeld payments start after the transfer date of ownership--the payment date. You would also take over all running contracts eg. Gas, water, electricity, insurance etc.

Association Documents

There are a number of underlying documents that you need to know about.

Especially the Teilungserklärung is important for your mortgage and unobstructed right of access. This can block a mortgage. The other elements are more important for assessing the specific value. But the value of your purchase is influenced by many important elements like the view, the layout, ceiling heights etc. Before finalizing your purchase, review these key documents for a mortgage in Germany:

Teilungserklärung (Declaration of Division):

• Purpose: Outlines the division of the property into Gemeinschaftseigentum and Sondereigentum.

• Importance: Provides legal clarity on ownership boundaries and responsibilities, which is essential for accurate property valuation in Germany.

Protokolle der Eigentümerversammlungen (Minutes of Owner Meetings):

• Records discussions and decisions made by the Eigentümergemeinschaft.

• Offers insights into upcoming maintenance projects or potential financial burdens that could affect your monthly fees and overall investment.

Wirtschaftsplan (Budget Plan):

• Details expected income and expenses for the apartment association over the next year.

• Helps you understand the association’s financial health, influencing your mortgage approval and terms.

Versammlungsprotokolle (Meeting Protocols):

• Summarizes outcomes of recent meetings.

Keeps you informed about changes in regulations or financial decisions that might impact your ownership and mortgage.

Why Hypofriend Can Help & Calculate Your Mortgage

Understanding property ownership and the associated documents for a mortgage in Germany can be challenging, especially for expats or first-time buyers. At Hypofriend, our expert team ensures all necessary documents are in order and explains how factors like shared ownership and monthly fees (Hausgeld) impact your mortgage options and rates.

Our advisors can also review the property documents and point out topics that could affect the valuation of the property or any potential restrictions in terms of the actual usage in the future. Additionally, they provide you with valuable insights as to the best financing options, and they do this from a holistic perspective, looking at your overall financial future.

Our German mortgage calculator and our user account allow you to effortlessly estimate your monthly payments, and our experts get you the best rates, comparing offers from over 750 banks, more than all the big brokers and banks themselves do.