Anyone financing a property will usually encounter the topic of land charges. This article describes what a land charge is, how the notarial registration process works, and what costs arise.
What Is a Land Charge?
A land charge is a real property lien that encumbers a plot of land with a specific monetary amount (§ 1191 BGB). It serves to secure loans, particularly mortgage loans. Unlike a mortgage, the land charge is not tied to a specific claim, making it more flexible in practice.
Most banks require the registration of a land charge in the land register to secure a property loan. Without this security, a loan will generally not be granted.
Book Land Charge and Certificated Land Charge
There are two forms of land charge:
- Book land charge: The land charge is registered only in the land register. Transfers require an assignment declaration and land register entry.
- Certificated land charge: In addition to the land register entry, a land charge certificate is issued. Transfer is effected by handing over the certificate and a written assignment declaration.
In practice, the book land charge is overwhelmingly used today, as it is easier to handle and eliminates the risk of certificate loss.
Process of Land Charge Registration
Step 1: Loan Agreement
The starting point is the conclusion of a loan agreement with the financing bank. The bank transmits the land charge registration form with the terms of the land charge to the notary.
Step 2: Review by the Notary
The notary reviews the land charge registration form and prepares the certification. In particular, the notary checks:
- The correct designation of the property
- The amount of the land charge and the land charge interest
- The submission to immediate enforcement
- Any in rem interest and one-off ancillary charges
Step 3: Certification Appointment
At the certification appointment, the notary reads aloud the land charge registration deed and explains its contents. The submission to immediate enforcement is explained in detail, as it has far-reaching consequences: In the event of non-payment, the bank can pursue enforcement against the property without prior court proceedings.
The property owner signs the deed. In the case of purchase contracts, the land charge registration frequently takes place at the same appointment as the certification of the purchase contract.
Step 4: Entry in the Land Register
The notary applies for the entry of the land charge in the land register. The entry is made in Section III of the land register. Depending on the workload of the land registry, this may take several weeks.
Step 5: Notification to the Bank
After registration of the land charge, the notary transmits a certified copy of the land charge registration deed and proof of the land register entry to the financing bank. The bank can then disburse the loan.
The Enforcement Submission Clause
A central component of the land charge registration is the owner's submission to immediate enforcement against the encumbered property (in rem enforcement submission) and frequently also against all personal assets (personal enforcement submission).
This clause enables the bank to pursue enforcement directly in the event of non-payment, without first having to obtain a court judgment. The notary is obliged to inform the property owner about the significance and implications of this provision.
Deletion of the Land Charge
After full repayment of the loan, the land charge can be deleted. To this end, the bank issues a deletion consent, which must be notarially certified. The notary then applies for deletion at the land registry.
However, there is no obligation to delete. Some owners retain the land charge as a so-called owner's land charge in order to use it again for future financing.
Costs
The notary fees for land charge registration amount to a 1.0 fee under the GNotKG, calculated on the land charge amount. For a land charge of 300,000 euros, notary fees of approximately 635 euros are incurred. Land register entry fees of the same amount are added.
