What is a land charge caution / priority notice?

When purchasing real estate, the priority notice of conveyance (Auflassungsvormerkung) or declaration of conveyance (Auflassungserklärung) plays an important role. The entry of the priority notice is regulated in the real estate purchase agreement. The priority notice of conveyance protects the buyer and is one of the prerequisites for the payment of the purchase price. It secures the transfer of ownership.

Acquisition of property: Land charge notice protects the buyer

The priority notice of conveyance is used as a security instrument in Land Register registered pursuant to § 883 BGB so that the seller cannot initiate any further changes to the land register. The advance notice secures the real estate buyer's claim against the transferor, hence the designation Cancellation caveat. It serves to protect the buyer, as it is intended to prevent the seller from selling the property or land multiple times in the meantime. In a sense, it serves as a type of reservation in favor of the purchaser. In addition, the advance notice of transfer of ownership (Auflassungsvormerkung) prevents the seller from utilizing the encumbrance on the property. Thus, they cannot practically mortgage the land. Because the future property owner must encumbrance on real property not apply and can demand its deletion.

For the registration of the notice of-right in the land register, according to the specifications of the Land Register Act Section 13 GBO, an application and a declaration of consent are present. The notary applies for the entry of the priority notice of conveyance at the land registry as soon as the purchase agreement has been notarized. In the purchase agreement, the pending legal change recorded in the land register and the notary is authorized by the buyer and seller to initiate the agreed legal changes under certain conditions.

It takes a few days or even weeks until the priority notice of conveyance is entered in the land register (Section II) and the land register is thus blocked in favor of the buyer (land register block). This depends on how quickly the land registry offices process incoming applications. Anyone buying a piece of real estate in Munich should expect a period of approx. 1 to 2 weeks.

Advantages of the land charge caution (or: Advantages of the priority notice of conveyance)

• After the notarization and registration of the priority notice of conveyance, a Resale of the property not possible to another interested party.
• A Encumbrance of the property with a mortgage is no longer possible if the security instrument is entered in the land register
• The seller can no longer withdraw from the transaction or real estate sale.
• The Purchase price payment Payment is protected before final land register entry.
• If insolvency proceedings are opened against the developer, the buyer retains the Property right.

Important note for every buyer: Without the registration of the notice of Auflassung in the land register, the protection of the claim to the acquisition of the property can be jeopardized and is therefore very uncertain. Because as long as the seller is registered as the owner in the land register, they can in principle dispose of the property and potentially act to the detriment of the buyer.

Payments made to the seller before registration are also unsecured and therefore disadvantageous to the buyer. The notice of Auflassung limits the seller's ability to act regarding the property and protects the buyer.

Approvals and registrations prior to payment of the purchase price

When a buyer acquires a property, they want to be sure that the object is free of all encumbrances. Therefore, it is important that a notary not only enters the priority notice of conveyance into the land register, but also ensures that the Commercial property cleared of all encumbrances which the buyer does not want to assume.

Furthermore, all necessary permits must be available to the responsible notary's office. This includes the municipality's notification that it statutory right of first refusal will not exercise (so-called negative certificate). The priority notice of conveyance for the buyer is entered in Section II of the Land Register registered.

Only then will the buyer receive a request for payment of the purchase price from the notary. The buyer must then ensure that the purchase price is credited to the seller's account within the period specified in the contract. The transfer of ownership in the land register takes place after the purchase price for the property has been fully credited to the seller's account. It usually takes several weeks until the change of ownership is completed and the new owner is entered in the land register. The transfer of ownership is thus the final step in the sale or purchase of a property.

Significance of the land charge advance notice for real estate financing

The land charge entry not only offers the buyer protection against unwanted entries in the land register, but it also establishes a prerequisite for banks to be able to provide real estate financing. The lenders would like to, before the Approval of the real estate financing Review the draft purchase agreement and ensure that the priority notice of conveyance is provided for. Following the notarization of the purchase agreement, the notary sends a copy of the contract documents to the financing bank. The disbursement of the Real estate financing is tied to the entry of the notice of conveyance in the land register.

FAQ – Priority Notice of Conveyance and the Most Frequently Asked Questions

What is the difference between a priority notice of conveyance (Auflassungsvormerkung) and a priority notice of reverse conveyance (Rückauflassungsvormerkung)?

The transfer of ownership notice protects the buyer and indicates a Transfer of ownership in the land register. The land charge caution ( Auflassungsvormerkung ) secures the rights of the property buyer before the change of ownership takes place. It is no longer possible for the seller to encumber the property with a land charge or other entries to which the buyer has not consented. The Reversionary caution encumbers the land register, protects the previous owner of a property or plot of land against unwanted resale by the new owner. This type of caution protects the new owner from creditors in the event of insolvency.

How much does it cost to enter a priority notice of conveyance in the land register?

The costs of the notice of conveyance are to be borne by the Property value of the purchase object dependent. Buyers should budget for about 50 percent of the fee that will later be charged for the land register entry. Overall, the costs for the land register entry are about 0.5 percent of the purchase price.

Sample calculation: If the notarized property price is 500,000 EUR, the land registry fees would be approx. 2,500 EUR, of which approx. 1,250 EUR would be for the registration of the notice of Auflassung (conveyance).

However, this is only a rough estimate, because the actual cost calculation may still further factors play a role (among other things) the amount of the land charge to be enteredSome land registry offices still charge fees for the deletion of the priority notice of conveyance, even though there is no statutory fee provision for this. The costs are among the so-called additional purchase costs and shall be borne by the purchaser.

What is the difference between conveyance and land charge caution notice?

The legal terms "Auflassungsvormerkung" (land charge caution/priority notice) and "Auflassung" (conveyance) are often confused. Both play an important role in the acquisition of real estate. In the With the Auflassung, the seller declares before a notary that they will transfer the property to the buyer. For this purpose, the buyer undertakes to pay an agreed purchase price.

Thus, the conveyance is a legally binding entry in the land register for the buyer. In practice, several months pass between the application and the transfer in the land register. Therefore, a so-called priority notice or conveyance priority notice is entered in the land register to secure the place for the land register entry. You can Notice of reservation as a type of reservation or as Hedging instrument for the buyer see until the transfer of ownership has taken place.