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.

Selling apartment with tenant: What to consider

Selling a rented apartment is a complex undertaking. After all, many factors have to be taken into account, from finding a buyer to legal requirements. Above all, the tenants play an important role. The sale of an apartment does not necessarily mean that existing tenancies may be terminated. We will now take a closer look at what needs to be taken into account.

Termination protection: Purchase does not break rent

A sale of the apartment does not necessarily mean that the rent is broken. On the contrary, the existing lease agreements must be honored by both parties even after the apartment is sold. This is stipulated in the Civil Code. This means that the new owner must adopt the terms of the lease. The tenant continues to have the right to quiet and undisturbed possession of the apartment as long as he makes his rent payments and complies with the terms of the lease.

However, it is important that the landlord informs the tenant about the planned sale and gives him a reasonable period of time to inspect and prepare the apartment. The tenant should also be informed about the new owner and, if necessary, sign a new lease.

In summary:

• § 566 BGB: Purchase does not break rent
• Buyer takes over rental agreements
• Condition: Tenants continue to make rent payments
• Landlord must still announce sale

Right of first refusal for tenants

If it is not just a single apartment that is being sold, but a complete apartment building that is being divided into individual co-ownership shares, the tenant enjoys a right of first refusal. This is a protective mechanism designed to prevent him from having to move out of the apartment without warning after a successful sale. With the right of first refusal, the tenant can buy the apartment and now becomes part of the resulting condominium owners’ association.

The most important facts about the right of first refusal:

• When apartment building is divided into individual apartments
• Right of first refusal protects tenant from moving out
• Becomes a member of the homeowners association

You can find out here what other special features need to be taken into account in this case:

• Apartments for sale individually

The expensive alternative: a lease termination agreement

The tenancy cannot therefore be terminated unilaterally by the new owner without sufficient justification. However, the owner has the option of offering the tenants a lease termination agreement and granting them an attractive severance payment. In this contract, an eviction period for the rented apartment is agreed upon, which is independent of the legal regulation. This allows the tenancy to be terminated by mutual agreement.

Right of the landlord to inspect

Whether it’s a maisonette or a micro apartment – if you want to sell your apartment, you are legally allowed to hold viewing appointments. These are important to show and present the apartment to potential buyers. However, the landlord does not have unlimited rights to visit. He must respect the tenant’s privacy and may not conduct viewings too frequently or at unreasonable times.

For this reason, you should arrange any viewing appointments with your tenants in good time. In addition, you must state the purpose of the viewing so that the tenant can see the time and space involved. Although the landlord is generally entitled to a right of inspection prior to the sale of the rental property, the tenant does not have to allow an infinite number of inspections. According to current case law, inspections once a week are considered reasonable.

Right of inspection of the landlord declared:

• Conducting surveys allowed by law
• Agreement with tenant indispensable
• Once a week possible
• Naming the purpose of the visit

Owner-occupier: termination in the event of owner occupancy

If a landlord wants to sell his apartment, he may not simply terminate the tenant’s lease. However, there is one exception: If the landlord needs the apartment for himself or his family members and no other comparable apartment is available. In this case, the landlord can terminate the tenancy with a notice period.

It is important to emphasize that the landlord must make the own need credible. A blanket assertion that he needs the apartment for himself or his family members is not sufficient. The landlord must be able to prove that he actually needs the apartment, for example by explaining why he needs the apartment and that he has no other apartment available.

Under these conditions, a termination of own use is possible:

• Legitimate interest on the part of the lessor
• Self-interest for oneself or other family members
• Proof that the apartment is needed
• Compliance with the statutory periods of notice

Sell rented apartment: Procedure & Tips

Let’s say you’ve now decided not to move into the apartment personally, nor have you agreed to a lease termination agreement. Here are some important things to consider when selling a rented apartment:

Capital investors & investors as target group

If you decide to sell your rented apartment, you have to expect a lower demand. After all, most buyers are looking for an apartment for their own use. At the same time, the current low interest rates ensure that more and more people want to invest their money instead of hoarding it in the bank. Therefore, the purchase of rented apartments is the most interesting for capital investors.

Rented apartments can be a stable and long-term investment opportunity as they generate regular income while allowing for potential property value appreciation. Investors can benefit from ongoing rental income and thereby continue to build their wealth.

Tips for planning and procedure

Marketing a rented apartment can be complex. There are some important points to keep in mind. As mentioned above, you need to make sure that you are familiar with all the rights and obligations surrounding the sale. You are also obligated to inform the buyer of all important details about the rented apartment. This includes, for example, the current lease agreement, tenant status, rental condition, and any rent arrears. Since a rented apartment may be worth less than a vacant apartment, you should consider both the condition of the property and the amount of rent when setting the price.

The most important things summarized:

• Familiarize yourself with the rights & obligations
• Inform the tenant about the sale
• Clarify the tenancy to the buyer
• Set a realistic purchase price

Tip: Sell apartment with broker

One tip when selling a rented apartment is to hire an experienced real estate agent for this purpose. A good agent has the necessary know-how and experience to make the selling process go smoothly and achieve the best possible results for the seller. A realtor can help properly value the home, create the exposé, find prospective buyers, arrange viewings and negotiate the closing of the sale. In addition, he can assist in obtaining the necessary documents and legal issues. Thus, a real estate agent can be a valuable support in the sale of a rented apartment.

Conclusion: selling apartment with tenant

In summary, the sale of a rented apartment presents some special challenges. It is important to consider the rights and obligations of the landlord and tenant, to conduct viewings only by appointment, and to comply with the tenant’s protection against termination. When selling, all necessary documents should be complete and up to date to facilitate the sales process.

It is advisable to contact an experienced real estate agent for assistance in marketing the apartment and handling the sale. Through professional preparation and careful execution of the sales process, landlords can achieve a successful transaction and obtain a reasonable return on their investment.