Selling an apartment with a right of residence: How does it work? – Advantages & special features

Selling an Apartment with Residential Rights – Selling an apartment can be a difficult decision, especially when it comes to a home you’ve lived in for years. But what if you want to sell your apartment for personal or financial reasons? With a registered right of residence, you can sell your home with a clear conscience and still remain living at home. Find out here what a right of residence for life means, what to look out for and how a change of ownership affects the right of residence.

The right of residence declared

When it comes to real estate as a retirement plan, you may have heard of the concept of a right of abode. A right of residence entitles a beneficiary to use a property even if it belongs to someone else. Residential rights can be agreed either for a limited or unlimited period of time and can be either for a consideration or free of charge.

The right of residence defines:

• Use of a property allowed
• Lifetime vs. limited
• Paid vs. free of charge

Things get particularly interesting when it comes to a lifelong right of residence. A life-long right of residence allows the beneficiary to occupy the property for the rest of his or her life, even if the property is sold or inherited. This type of living right is often used as collateral for elderly people or family members to secure a permanent home for them.

For whom is the right of residence worthwhile?

In principle, a life-long right of residence can be granted to various people, depending on individual circumstances and needs. Typically, however, a life-long right of residence is granted to elderly people or family members who wish to live in the owner’s property but are unable to purchase their own property.

Elderly people can obtain a life-long right of residence to ensure that they can continue to live in their familiar surroundings in old age without having to worry about selling or buying a new property. This is often a good option for older people who are single or whose partner has already passed away.

The right of residence is ideal for close relatives, spouses, parents & grandparents

Benefits for the whole family

In principle, you can sell your apartment to any interested party. However, the right of residence deters some interested parties. For this reason, apartments encumbered with a right of residence are passed on within the family. This has several advantages.

Advantages for sellers

The right of residence ensures that you will continue to have a place to live while receiving a financial benefit from the sale or gift of the apartment. In addition, giving away or selling the apartment within the family can help keep the property within the family and avoid family disputes.

Advantages for heirs

At the same time, your heirs can enjoy a lower purchase price, as the right of residence reduces the value of the apartment. Since the apartment changes hands early, they can also save on inheritance tax.

All advantages at a glance:

• No move out necessary
• Financial benefit from sale
• Remain in the family
• Lower purchase price
• Saving the inheritance tax

This must be observed

If you decide to sell your apartment with a registered right of residence, a number of things must be taken into account. We will now take a closer look at the special features that come along with such a sale.

Duration of the right of residence

A right of residence can either be limited in time or be lifelong, which means that it expires either at the end of the agreed period or upon the death of the beneficiary. Revocation of the right of residence is only possible in exceptional cases. However, the beneficiary can voluntarily relinquish his or her right of residence at any time, for example if he or she moves into a nursing home. Mere non-use of the right of residence does not automatically mean its cancellation. Only after 30 years of non-use can the right of residence be deleted from the land register without the beneficiary’s consent.

In summary:

• Duration is determined in advance
• Revocation only in exceptional cases
• Waiver is possible at any time
• Cancellation after 30 years of non-use

Inheritance to third parties not possible

As a rule, the right of residence cannot be inherited and ends with the death of the person entitled to the residence. The heirs or successors can therefore not inherit or continue the right of residence unless this was expressly stipulated in the original agreement.

This means that after the death of the owner of the right of residence, the owner of the property again has full power of disposal over the property and can sell, rent or otherwise use it.

Notarial registration in the land register

In addition, the right of residence must be notarized and entered in the land register in order to be legally valid. The entry in the land register is necessary to establish the right of residence as a real right to the property. The notary appointment plays an important role here, as the notary ensures that all the necessary steps and formalities are complied with.

The registration of the right of residence in the land register ensures that it is clear to everyone that a right of residence exists and who the holder of this right of residence is. It also provides legal protection for the owner of the right of abode, as it enables him to assert his interests against third parties, including the owner of the property.

The following is necessary to secure the right of residence:

• Notarial certification
• Registration in the land register

Sell apartment with right of abode

Assume that the apartment is already encumbered with a right of residence and is now to be sold again. This is also possible, although the sale is more complicated with an existing right of residence than without. So what needs to be taken into account here?

Right of residence still exists

When a property with residential rights is sold, certain regulations must be observed. The seller must not only inform the buyer about the existing right of residence, but also protect the rights of the person entitled to the residence. For example, the sale must not impair or otherwise jeopardize the right of residence.

Right of residence continues to exist even in the event of a change of ownership

Thus, the right of residence continues to exist even if the property is sold, and the buyer must recognize and accept the right of residence.

Reduction in value & lower purchase price

When one wishes to acquire a property, the goal is usually to have unrestricted power of disposal over it. However, an existing right of residence can restrict this freedom and thus reduce the demand for such a property. The value of the property is also reduced by the existing right of residence, which is why in most cases a lower purchase price is achieved.

Conclusion: Preparation is half the battle

A life estate can be a good option if you want to sell your home but still stay in the area. It gives you the freedom to use the capital from the sale of your home while continuing to live in your familiar surroundings. However, it is important to note that the right of residence cannot be inherited and that it must be notarized and registered in the land register. The right of residence also has an influence on a later sale, as it reduces both demand and value.

So overall, a life estate can be a great option for people who want to make sure they have a home for the rest of their lives. However, one should be aware of the legal aspects and possible effects on the sales price in advance.