Home Guide A step-by-step guide to buying residential property

A step-by-step guide to buying residential property

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A step-by-step guide to buying residential property

Buying a an ahocolate bar is easy: You just take it to the supermarket cashier and pay for it. Buying a residential property is more complex, but it needn’t be daunting if you know what to look out for. This guide will help.

Please note: this is the english version of our “Der Wohnungskauf – Schritt für Schritt erklärt” on terrafinanz.de

Why buy residential property?

There are two main reasons for buying a residential property: A) You want to stop paying rent and live in your own four walls; or B) You want to invest money by buying a residential property and renting it out to tenants.

Property owner / Tenant ratio in Germany 2013

Unlike in many other countries, there are strict regulations that govern the purchase of real property in Germany. You can only buy a residential property through a notary here. That means you are obliged by law to make an appointment with a notary public, together with the property’s vendor, to sign a deed of sale. In some other countries, such as Spain, for instance, an oral agreement is enough to commit you to the sale or purchase of a property. That is not the case in Germany. The obligation to sign a notarised deed of sale is designed to give both buyer and seller the greatest possible legal security.

What is the procedure for buying a residential property?

There are a number of things that need to be done before you can call your home your own. The first is usually visiting and taking a look at the property in question, or if it is still under construction, you can view the building plans. If you like the residential property or its plans and the price and other terms of purchase are acceptable to you, you met together with the vendor at the notary’s office, where you sign the deed of sale. The last step in the rather long chain of required activities is moving into the residential property or renting it out.

What different ways are there of buying a property?

There are various ways to become the owner of your own property. The main ones are the standard purchase, the purchase through a heritable building right and the purchase through a life annuity.

Standard purchase

Standard purchase means you buy a residential property at a price that is due either immediately or in payment instalments. In commercial terms, this is a delivery-against-payment transaction. If you do not have sufficient capital available to finance the purchase, it is generally financed by means of a loan from your bank. Nearly all residential property purchases are standard purchases.

Purchase through a heritable building right

If you buy a residential property by means of a heritable building right, you only purchase the building (or part of a building) but not the ground on which it stands. With a heritable building right you purchase your residential property for a certain period of time – usually 66 or 99 years. You pay a kind of monthly rent known as a ground rent, which the parties to the contract negotiate.

The benefit: The purchase price is lower than for a comparable residential property in a standard purchase, because you do not acquire the land. It is, however, more difficult to resell properties acquired in this way, as the remaining term of the heritable building right reduces every year. When the term of the heritable building right runs out, it is also possible that the seller of the heritable building right – i.e. the lessor of the land – takes over the residential property at a statutory minimum price.

Purchase through life annuity

A purchase by means of life annuity can be a good deal for both the buyer and the vendor. The life annuity model works as follows: As the buyer, you reach an agreement with the vendor to pay them a life annuity on a regular basis, for example monthly. You make these life annuity payments until the vendor dies. This means that the total amount you have to pay, varies. The vendor’s heirs have no right to further payment of the life annuity. Your advantage is that you become the owner of the residential property as soon as the deed of sale is notarised. The vendor receives an additional income for their old age. As a rule, the buyer has to make an initial one-off payment in addition to the monthly life annuity payments that are to follow.

Differences between buying an existing property, a new property and building the residential property yourself

Teaser Flats

If you decide to build, you become the property developer. This means you assume all the related responsibilities and risks. For instance, it is then your task to find an architect or have the building plans drawn up. Alternatively, you can join forces with other parties to form a joint building venture or building cooperative.

If you buy from a property developer, it takes on these responsibilities for you. This has the advantage for you that you are protected by the German Broker and Property Developer Ordinance (Makler- und Bauträgerverordnung (MaBV)), if your residential property is a newly constructed building. This ordinance can be summarised as follows: You only pay for what is built. That means the buyer pays incrementally as the building project progresses.

The guarantees here are the notice of conveyance in the land register, or – usually until such time as the applicable pages (essentially title deeds) are entered in the land register – a bank guarantee. The former is the guarantee that you will ultimately be registered in the land register as the buyer of the residential property in question, and it reserves your priority right to the property. The disadvantage: If the developer fails to complete the building, you may have to finish it yourself along with the other owners. With a bank guarantee, you are given back your money if the developer goes bankrupt. Alfred Hollmann, real estate expert at Terrafinanz explains: “With both of these types of safeguards, every euro you pay to the developer is secured”. In the case of the bank guarantee you get your money back, and with the notice of conveyance you gain ownership of the completed part of your residential property.

In addition, the deed of sale that you sign together with a developer for a new construction is considerably longer. About 25 to 30 pages, as Alfred Hollmann says. The reason is that there are far more things that have to be regulated, as the residential property is generally still under construction, so the Broker and Property Developer Ordinance has to be accounted for. As a rule, standardised master agreements are used here. If the purchase is between private persons, you can negotiate the individual terms with the vendor yourself. Here, the deed of sale is generally shorter – about six or seven pages, says Hollmann. Because in this case your residential property generally already exists.

What a notary has to do with the property purchase process

The notary public is a mandatory part of a real estate purchase in Germany. But why? “The notary is the non-partisan advisor,” Alfred Hollmann of Terrafinanz explains. The notary’s job is to guide the buyer and seller through the transaction and answer their questions. Because as a rule, the former wants to move into the residential property or start renting it out as soon as possible, while the vendor wants to have the money in their account as soon as possible. The notary is responsible for ensuring that everything runs smoothly and all legal requirements are met.

Who chooses the notary?

The notary is impartial and the parties can choose to use any notary they want. Theoretically, the buyer and the vendor can choose two different notaries, in which case the notarisation is conducted separately – as an offer at the first appointment with the one notary and an acceptance at the second with the other. As a rule, however, vendor and buyer meet at one notary public for the notarisation. This has the advantage that questions can be clarified together and changes made to the deed of sale on the spot, right up until the moment of the final signing.

If you are buying your residential property privately, you generally choose the notary or agree upon one with the vendor. “Normally, the person who pays, chooses,” Alfred Hollmann explains. If, however, your new home comes from a property developer, they usually choose the notary public. This is because the handling of a residential property that is still under construction is more complex and has to be taken care of by one notary.

The cost of the notary public is specified by law. It is a percentage of the purchase price.

What deadlines are there for the notary?

When you buy from a property developer, it draws up the deed of sale together with a notary. The notary then sends you a draft of the deed of sale by post. Because a private person (you) and a company (property developer) negotiate with each other in this form of property purchase, German statute requires that you be given 14 days between receiving the draft and the notarisation appointment with the notary, for consumer protection reasons. What is more, the notary is obliged to hold an advisory meeting with you, which as a rule is free of charge, to answer any questions you may have.

Source: Sergey Peterman / Shutterstock.com
Source: Sergey Peterman / Shutterstock.com

You want to buy a residential property together with your partner? Then you have to clarify who is to be the owner of the new home. A 50:50 arrangement is the usual solution here, with you and your partner each holding the same share of ownership. Any other percentage is also possible.

But bear in mind: There are some special regulations here for non-Germans. For instance, some home countries, like Russia, require that both partners become owners. If the couple decides that only one of them is to become the owner, they need a marriage contract. This enables them to meet the foreign legal requirement while at the same time only registering one of them as owner.

What happens before the notarisation at the notary?

If you are buying a residential property privately, there is often a preliminary meeting with the notary in advance, where the vendor and buyer can clarify issues and agree on contractual details. This meeting is already included in the notary costs that fall due after the notarisation. The notary also inspects the land register to find out if there are any encumbrances on the property (such as land charges) and to make sure that the vendor is the owner.

 


 

What is the land register? What is a land charge?

Land register: The land register is a public register that in Germany is usually kept by the district court. The land register contains information about the ownership relationships and legal burdens on the property. For example, the land register shows who the buildings in your street belong to. You have the right to read it if you have a justifiable interest in doing so.

Land charge: If you are financing the purchase of your residential property through a bank loan (mortgage), you normally have to provide the bank with a lien as collateral. This lien is called a land charge, and means that your bank has rights to the property until you have paid the mortgage back in full. If you cannot, the bank then has the right to foreclose on your property, which means it can auction it off to cut its losses.

If you decide to go through a property developer, there is generally no joint meeting with the notary, because property developers tend to use a standard agreement, as they go through a large number of sale procedures every year. We recommend holding a preliminary meeting with the property developer.


 

What does a deed of sale contain?

Source: NotarYES / Shutterstock.com
Source: NotarYES / Shutterstock.com

Regardless of who you are buying from, you receive the documents upon which the purchase is to be based on along with your invitation to the notarisation appointment. These include, for example, the draft of the deed of sale and the instrument incorporated by reference, including the partition deed (if the residential property is not yet finished):

Draft deed of sale

The draft deed of sale is the first version of what will later be the final deed of sale that the notary reads out loud to all parties at the notarisation appointment. The part that the notary reads out contains all the relevant details such as the purchase price, the location and the size of the property.

Reference deed

Provisions that the notary does not read out loud at the notarisation – if both the buyer and the seller agree that this is not necessary – are in the reference deed. Reference is taken to this document in the (draft) deed of sale, making it a component part of the deed of sale. The reference document contains a description of the building, the construction plans, the community legal framework, i.e. the rules of ownership, and any easements. Easements clarify the rights and obligations of usage between the (future) neighbours. They can cover things such as your right to have your roof drain cross your neighbour’s property, for example.

Partition deed

Another component of the reference document is the partition deed. It divides the residential complex up into individual co-ownership shares, i.e. determining which rooms and building parts belong to which owners. Which cellar compartment belongs to your future home is a common part of this. The partition deed is entered in the land register. It also includes the community or co-ownership rules (see above), which regulates the relationships between the future neighbours.

It is recommended that you carefully read the documents before the notarisation. If you have any questions, you can ask your vendor. A chat with the notary can also help eliminate any legal doubts. When all of these questions have been answered, you and the vendor meet at the notary’s office for the notarisation.

The notarisation appointment: What happens there?

At the notarisation, the notary reads the deed of sale out loud for all those attending. You and the vendor can ask questions. Terrafinanz real estate expert Alfred Hollmann knows from experience that: “Many clients don’t ask the notary until the notarisation appointment.” If both parties are in agreement on the changes, they can still be made to the deed of sale at the appointment. For example, if it hasn’t been finalised how much a special request of yours will cost – such as the floor tiles you want – you can insist that the price be entered into the agreement.

The main details, like the purchase price, should have been negotiated in advance, however, because if the changes are major (for example if the price of your special floor tiles differs greatly from the normal tiles offered), the vendor and buyer have to come back for another appointment with the notary at a later date, where the entire contract is read aloud again. For this reason, Hollmann recommends: “You should clarify any open issues at the beginning of the appointment. Ideally, you should only have to listen to the notary read out the deed at the notarisation and not have any major questions that will make further meetings necessary.

At the end of the meeting, you, the vendor and the notary all sign the deed, and you are a big step closer to the dream of owning your own home.

What documents do you have to bring with you to the notarisation appointment?

Source: djedzura / Shutterstock.com
Source: djedzura / Shutterstock.com

You only need your ID card or passport to prove who you are. If you want to grant a land charge, you will have to make sure that the land charge documents from your bank are at the notary’s office before the meeting.

Who helps you at the notarisation appointment if you don’t speak German?

Buyers who do not speak enough German can bring an interpreter with them to the notarisation meeting. This person then translates the deed of sale that the notary reads out. Alternatively, you can issue power of attorney to someone you trust who does speak German to sign for you. This is also an option if you can’t attend the appointment yourself. The power of attorney also has to be notarised though, so you will have to have met with your representative at the notary’s office in advance to obtain this notarisation.

What happens after the notarisation?

Aft the notarisation, the notary sends you, the vendor and the land registry a copy of the deed of sale. The notary also applies to the land registry to enter a notice of conveyance in your favour. This is like a reservation that safeguards your right to future ownership, and it means that the vendor cannot sell the property to anyone else, even if another buyer offers a much higher price. If you have financed the purchase through a bank loan, this land charge (or mortgage) is also entered into the land register. This means that the bank holds certain rights to your property until you have paid back your mortgage in full.

If your residential property is not yet completed – which is normally the case if you are buying from a property developer – the vendor is obliged to continue building it in accordance with the plans and the building’s specifications after the notarisation. And then comes the part that is presumably least enjoyable for you: You have to pay the purchase price.

What expenses does a property purchase involve?

Regrettably, it is not possible to by a property without some additional costs. They amount to somewhere between five and eight percent of the purchase price and include:

  • The land transfer tax
  • The notary and land register costs
  • Any applicable commission (if an estate agent was involved)
  • Possible financing costs

Land transfer tax

In Bavaria, the land transfer tax amounts to 3.5% of the purchase price – including any additional agreements you may have reached with the vendor. For instance, you may have agreed to change the building specifications because you have some special added extras you want incorporated into the property that increase the purchase price. The extra amount is then added to the purchase price and included in the calculation of the 3.5%.

So if your new property costs EUR 500,000 and is in Bavaria, an extra EUR 17,500 are owed to the tax office in land transfer tax. This figure is higher in some other German states. Schleswig-Holstein and four other states have the highest land transfer tax in Germany, at 6.5% (2014).

land transfer taxes in Germany
Source – interhyp.de

As a rule, you will receive the notification of required payment from the relevant tax office about six to eight weeks after the notarisation. You then have one month to pay the land transfer tax.

Notary and land register costs

The notary is a very important part of the property-buying process in Germany – and that of course brings with it some costs. The notary and land register costs amount to between about 1 and 1.5% of the purchase price. The actual percentage falls incrementally as the purchase price increases. The amount of land charges involved is also taken into account in these costs.

Free notary and land register cost calculator

The notary will send you the invoice for the notary costs together with your copy of the deed of sale. That means: quite soon after the notarisation. The amount is due and payable immediately and the first reminder generally comes after about four weeks if payment is not made before then.

Contrastingly, you will not receive the bill for the land register costs until the notice of conveyance (and any applicable land charges) have been recorded in the land register. This is generally the case between four to six weeks after the notarisation. You normally then have two weeks to pay the amount due. You incur further costs when the notice of conveyance is deleted and the actual transfer of title is entered into the register, at which time you become the proud owner of the property.

Commission / Agent’s fee

If a real estate agent was involved in the sale/purchase of your new home, a commission is owed for their services. At the moment it is customary for the buyer – i.e. you – to pay this fee. Again, the amount is a percentage of the purchase price – in Bavaria commonly 3.57%.

There is no broker’s or agent’s fee if you are buying from a property developer, but the other additional costs (land transfer tax, notary and land register costs, financing costs) remain.

Estate agent commission for buyers in 2016
Source: Baufi24

Financing costs

Another point you should have on your list is the cost of financing the purchase. How high this item is depends on the type of financing you choose. Financing costs refer to all the costs that arise until the loan is paid out to you and you start paying the interest/repaying the actual loan amount. These costs may include valuation fees, commitment fees and commissions.

Source: Wolfilser – fotolia
Source: Wolfilser – fotolia

Commitment fees fall due if you fail to actually make use of the loan for your residential property. It amounts to around 0.25% of the amount not ultimately borrowed. You have to pay the corresponding amount for each month you do not require the loan. If the bank determines the value of your new home for the land charge, valuation fees are also due. They vary from between 0.2 and 0.5 % of the loan amount. If an advisor helps you find the best mortgage, a commission may also be due for this service.

What options are there for financing a property purchase?

Very few people are in a position to purchase a home out of their own pocket. In most cases, buyers take out a loan with a bank. That means you borrow a certain amount – let’s say 70% of the purchase price – from the bank and pay it back over time with interest. Insurance companies and building societies also offer such mortgage loans, as well as banks.

Most residential properties are financed using what is called an annuity loan. An annuity loan has the special feature that the annuity instalments that you have to pay monthly or annually remain the same throughout the entire term of the loan. So if you have agreed to pay EUR 20,000 a year, this amount remains the same until the loan is fully redeemed.

What changes, however, within this amount, is the ratio of interest you pay on the loan to the redemption of the amount borrowed, or principal, because with each payment you make, your residual debt reduces, and with it the share of interest owed. As time progresses, therefore, you will pay less interest and more off the principal.

For example: You borrow EUR 100,000. You pay EUR 5,000 a year back. The interest rate is 3% and your initial repayment of the principal is 2%. So in the first year you pay EUR 3,000 in interest and reduce the principal by EUR 2,000. Your residual debt thus reduces to EUR 98,000, so in the second year, the 3% interest amounts only to EUR 2,940. As you are still paying EUR 5,000 on the loan, you redeem EUR 2,060 of the principal in the second year. So as time goes on you pay back an ever increasing amount of the principal. Another advantage of an annuity loan is that the amount of money you owe every year remains the same, which makes it easier for you to calculate and plan for your repayments.

Options for payment assistance

One way of saving money is to combine your loan with a supporting loan from the KfW bank (Kreditanstalt für Wiederaufbau). The KfW is the state development bank. It helps people build, buy and renovate property by providing inexpensive loans and subsidies. Its interest rates are often lower than at other banks, and in some cases you do not have to pay back any of the principal in the first years of the loan. The KfW banks supports “energy-efficient building”, for instance, in its lending programme, based on the policy that the more energy efficient a building is, the less it costs you to finance a loan for it.

There are numerous other assistance options alongside the KfW bank as well. For example, young families or people who have lived in a locality for a long time can purchase less expensive living space. Real estate expert Hollmann advises: “Ask your local council if it offers any such assistance models”. The “München Modell” is a good example of this kind of programme in Munich.

The “München Modell”

The München Modell is a special support programme run by the city of Munich. With it, Bavaria’s state capital wants to help medium-income households and families with children purchase property in the urban area. But what is a medium income? In order to be eligible to buy a München Modell residential property (München Modell ownership), families with one child may only earn up to EUR 61,000 a year. The upper limit for families with two children is EUR 72,000, and with three or more children EUR 83,000, each amount before tax. You can find the precise breakdown at muenchen.de.

A further prerequisite for households without children is that they have had their main place of residence or work in Munich for at least three years without interruption. If you have children, one year suffices and the place of residence or work only has to be in the Munich region (“Region 14”). This region includes the districts of Dachau, Ebersberg, Erding, Freising, Fürstenfeldbruck, Landsberg am Lech, Munich and Starnberg. Applicants may not own any other real property in order to be eligible.

There are limits to the prices for homes under the München Modell. Depending on your income, a square metre of living space may cost a maximum of EUR 2,800, 3,000 or 3,200, if the vendor is the state capital Munich. This puts the purchase price well below the normal market price. People wanting to live in the home themselves will have priority in future, and as an investor looking to rent the property out, you can only rent to eligible households. In this case, the initial rent must not be higher than EUR 9 per square metre for the first five years.

Risks when buying a residential property

As tempting the dream of owning your own home is, and as reassuring it is to sleep within your own four walls, buying real property is not a move to be taken lightly. Despite all the precautions you may take, there are always risks involved. For example, you must always keep in the back of your mind that your personal circumstances (job, family) can change.

Risks when buying residential property as an investment

“Location, location, location,” says not only Terrafinanz real estate expert Alfred Hollmann, because the value of a property rises and falls with its location. Changes can have negative consequences, especially for people with investment properties, says Hollmann. Also, the rental market can develop differently as one thought, and with it the rents and your income, and not always for the better. Another risk are tenants who don’t treat your property as well as they should, don’t pay the rent and simply refuse to leave.

Risks when buying your own home

If you plan on moving into your residential property yourself, its location is also of great importance. You will presumably have invested a significant amount of capital to gain your own four walls, so you probably won’t want to move out of them again as quickly as you might if you were renting. So you are tied more restrictively to your new home, without necessarily knowing who your neighbours will be and how you will get along with them. Also, the location can turn out not to be as good as you originally thought, for instance if attractive shopping opportunities arise in other areas, but not in yours.

And last but not least, if you buy from a property developer, there is the risk of it not finishing the construction phase, for any number of reasons, or that the company cannot or will not pay for repairs that it is actually obliged to carry out.

How can you protect yourself against risks?

Germany’s Code of Civil Law (Bürgerliches Gesetzbuch (BGB)) stipulates a guarantee period of five years after acceptance of your residential property. That means that for this period you can claim for defects on the property arising due to non-fulfilment of promised construction quality.

While your future home is being built, the German Broker and Property Developer Ordinance protects you if you are buying from a property developer. This ordinance (the “MaBV”) links your payment instalments to the progress of the construction work. This means you don’t pay until the building phase is completed. “This puts you on the safe side,” real estate expert Hollmann explains.

Once you have moved in or rented out the property, insurance policies help protect you against risks. In the case of living in your home yourself, some of the insurance policies you will need are, for instance, those safeguarding against damage to the building (storm, fire, hail, water damage) and property owner liability, which are always taken out automatically through the community of owners of the parts of the building. In such cases, you don’t have to think about taking out these policies yourself.

But in addition to them there are also other policies that you may want to consider. As an owner-user perhaps home and contents insurance, and as a lessor perhaps legal expenses insurance in case you find yourself in a legal conflict with your tenants somewhere down the line. There are also several ways to protect yourself against the consequences of fraudulent tenants.

What happens if the property developer goes broke?

It can happen that you buy your residential property from a property developer that then goes bankrupt before your home is finished. What do you do then?

Well that depends largely on what safeguards you have in your deed of sale pursuant to the Broker and Property Developer Ordinance (link: What is the difference between buying from a property developer, from a private person and building the home yourself?). If the safeguard is in the form of a bank guarantee, you get every cent back that you have paid to date for the construction of your residential property. “Regardless of whether the property developer had a land charge to finance the construction project or not,” Alfred Hollmann explains.

It becomes a little bit more complicated if your security is a notice of conveyance, as is normally the case. Then it depends on whether a blanket land charge has been registered in favour of the property developer.


 

What is a blanket land charge?

The blanket land charge is the land charge that the property developer’s lender has against the property as a whole. Because in most cases, the property developer lends money for the project – just as you do to buy your home. Similarly to your bank, the developer’s lending bank secures its right to claim the repayment of the loan by having a land charge entered into the land register, and in the case of a building with more than one residential unit in it, this is then a blanket land charge.

If the property developer does not have a blanket land charge in the land register, the insolvency administrator decides what happens with your (unfinished) residential property. This doesn’t happen very often, however, because the property developer would have to have paid for the land and the status of the construction reached up to that time with its own capital. “Normally there is a blanket land charge,” Alfred Hollmann explains.

If there is a blanket land charge in the land register, the financing bank decides what happens next. There are two options here: The bank pays you your money back or the bank releases the project and you finish the building together with the other co-owners.


 

How does the acceptance of the property work?

So your dream house is finished. You can move in. When that day arrives, you receive an invitation to inspect and accept the finished product. At this inspection meeting, you declare to the vendor that the property is free of defects – or not. Your acceptance of the building work done ends the fulfilment stage – i.e. the time during which your residential property is built, as specified in the deed of sale. The guarantee period begins from that day. If you don’t have the expertise to be able to judge whether the construction work is free of defects, take someone with you to the inspection who does. This can be an appraiser from the chamber of commerce, an architect, a structural engineer or simply someone you trust who knows about these things. “Someone with expertise should help you here,” real estate expert Alfred Hollmann advises. Because while most people can see a crack in a wall, only an expert can recognise whether it is a shrinkage crack or a settlement crack in the masonry. Taking someone with the necessary know-how with you to the inspection will help you avoid discussions about whether something is a defect or not.

What do I do if I find a defect during the inspection?

Source: Anikasalsera – dreamstime
Source: Anikasalsera – dreamstime

A differentiation is made at the inspection between individual property and jointly owned property. You can inspect and accept individual property that you own alone with the vendor, because this has no impact on any neighbours or other property owners in the building. But for jointly owned parts of the construction, there is a separate joint appointment for inspection where each of the buyers inspects the jointly owned parts of the property for defects. If you can’t make the appointment, you can send a friend or another expert to represent you.


 

What is individual property? What is jointly owned property?

Individual property: Individual property is everything that can be altered without changing the external appearance of the building or affecting a neighbour. Individual property includes, for example, the paint job in your residential property, interior walls or the carpeting.

Jointly owned property: Jointly owned property refers to the parts of the building that do not belong to you alone as owner of one of the apartments. These include the ceilings and the screed flooring. Basically, jointly owned property is everything that isn’t individual property.


 

Eliminating defects

A defect means that your residential property does not provide what you agreed to in your deed of sale. This can mean, for instance, that the rooms are not the size agreed upon, that there is a crack in a wall or that the painter made a mistake.

If you notice a defect upon inspecting your residential property, don’t give your acceptance of the work. Stating the defect means it is entered into the defect report and the builder has to eliminate it before you give your acceptance. In principle, such work has to be done “immediately”, which means “without culpable delay”. This is, however, subject to reasonableness – i.e. whether a crack in an exterior wall can be dealt with when it is snowing outside and minus 10 degrees. “Delays mustn’t be intentional,” property expert Hollmann explains, but the circumstances have to be taken into account. Falsely placed trees cannot be replanted in winter, for example.

More important than the number of defects is how serious they are and the consequences they have. Painting, plaster and cleaning defects are much easier to cope with than structural defects (statics, sound and heat insulation, etc.).

Compensation and conversion

If a defect is so serious that you cannot move into your home, you have a claim for damages. These costs can include reimbursement of your hotel costs if you can no longer live in your previous domicile.

If a defect is so serious that it will not be possible to live in the residential property on a permanent basis, the purchase is cancelled, or converted. This means you get your money back and the vendor gets the residential property.

You always have a right to withdraw from the contract “if the goods do not have the promised identity and this cannot be provided within an appropriate period of time,” property expert Hollmann explains. Here too, however, the question of reasonableness applies. For example, it is not a reason to withdraw from the contract if your residential property measures only 79 square metres upon completion instead of the agreed 80. Common legal practice dictates that you have to tolerate deviations in the floor space of up to two percent.

In general, both parties have a right to withdraw from the contract if the other party is in arrears with a performance, for example if you don’t pay or if the property developer does not finish something despite you having given it a fair period of grace to do so.

By the way, you do not have to be in agreement with the vendor as to whether something is a defect or not. In cases of doubt, a court of law decides.

What do I do if I notice a defect after the acceptance?

When the acceptance is given, the five-year guarantee period begins that the German Code of Civil Law (BGB) prescribes. It applies to individually and to jointly owned property. So if you notice a defect after giving your acceptance, you can still report it.

If you do find a defect in your residential property that comes under the guarantee, what counts is who caused it. One common example is mildew. It can be caused just as easily by poor building quality as by improper usage of the building, such as not airing it enough. As a rule, an appraiser decides whether it is you or your vendor who has to rectify the problem in such a case. If the cause is a defect that comes under the guarantee, the vendor has to deal with it without delay, as with defects found during the acceptance inspection.

The statutory guarantee period ends after five years. The owner is then liable for all defects arising.