Even after the final loan installment, the old land charge usually remains in the land register – it does not disappear on its own. When selling, however, the buyer and their bank almost always require a land register free of encumbrances. Whether you therefore need to have the land charge deleted, transfer it to the buyer’s bank or, in exceptional cases, leave it in place depends on your situation. We explain the three options, the exact procedure and the costs.
What Is a Land Charge – and Why Does It Remain in the Land Register?
A land charge is a charge on your property in rem: It entitles the creditor – usually your bank – to demand a specific sum of money from the property in an emergency (Section 1191 BGB). It is entered in Section III of the land register and originally served as security for your real estate loan.
It is important to distinguish between the land charge and the outstanding balance of your loan. The land charge is legally independent: Once you have fully repaid the loan, it does not automatically expire but remains in the land register until it is actively deleted. After repayment, you have what is known as a right to retransfer against the bank – the bank must then either arrange for the land charge to be deleted or assign it to you.
You should also distinguish the deletion costs from the early repayment penalty. The latter is the fee charged by the bank for repaying an ongoing loan early – a matter relating solely to the loan agreement. Deleting the land charge, on the other hand, concerns only the land charge in the land register and costs considerably less.
Does the Land Charge Have to Be Deleted for the Sale?
There is no law requiring its deletion. In practice, however, there is almost no way around it: Nearly every notarised purchase agreement obliges the seller to transfer the property free of encumbrances in Section III. And the buyer’s bank, which finances the purchase, insists on having its own first-ranking land charge – it will not accept an unrelated old encumbrance ranking ahead of it.
For you as the seller, this means: The old land charge has to go – either by deletion or by transfer to the buyer’s financing bank. It can remain in place only if a buyer expressly wishes to continue using the existing land charge.
Delete, Transfer or Leave in Place: Three Ways in comparison
Option 1: Delete the land charge
The classic and most common option. The land charge is finally removed from the land register, which is then free of encumbrances. This creates clear conditions and is easiest for buyers and their bank. Disadvantage: Notary and land register fees are incurred, and any later re-registration would only be possible with a new, chargeable order.
Option 2: Transfer the land charge to the buyer’s bank
Instead of deleting it, the existing land charge can be assigned to the buyer’s financing bank. The advantage: The buyer saves the cost of ordering an entirely new land charge because only an assignment—usually less expensive—is registered. This is particularly worthwhile if the amount of the land charge roughly matches the buyer’s financing. The prerequisite is that both banks and the notary coordinate the process; this requires somewhat more coordination.
Option 3: Leave the land charge in place
Anyone who is not selling but is keeping the property and intends to take out another loan in the foreseeable future—for example, for modernization—can deliberately leave the repaid land charge in place as an owner’s land charge and thus save the expense of a costly new order later. When selling, however, this option is the exception: As a rule, the buyer wants a clean land register free of encumbrances.
Deletion in five steps
Step 1: Clarify the remaining debt and repay the loan
If the loan has not yet been fully repaid, the remaining debt is repaid from the purchase price upon sale. The notary handles this through an escrow instruction: The bank issues the deletion authorization against payment of the remaining debt. If the loan has already been repaid, this step is omitted.
Step 2: Request the deletion authorization from the bank
The deletion authorization is the bank’s declaration that it consents to the deletion. It must be publicly certified (§ 29 GBO). Banks generally issue it free of charge after full repayment; processing takes between one and six weeks, depending on the institution.
Step 3: Obtain the certificate for a certificate-based land charge
If it is a certificate-based land charge, you also need the original land charge certificate. If it has been lost, it must be declared invalid in a public notice procedure—this takes time, so plan for it early.
Step 4: Notary certifies and submits
As As the owner, you must consent to the cancellation (§ 27 GBO). The notary certifies your signature, compiles the cancellation authorization, consent and – if available – the land charge certificate, and submits the application to the land registry office.
Step 5: The land registry office cancels the land charge
The land registry office records the cancellation in Section III (§ 875 BGB). Your land register is then free of encumbrances. Depending on the workload, the entire process often takes four to twelve weeks until the entry is made.
How much does cancellation of the land charge cost?
The basis for calculation is always the nominal amount of the land charge entered in the land register – not the purchase price and not the actual remaining debt (§ 53 GNotKG). Two half fees are charged for the cancellation: one to the notary for certification and submission, and one to the land registry office for the cancellation itself. As a rule of thumb, the total costs amount to around 0.2 percent of the registered amount.
Specific examples:
- 100,000 euros land charge: around 270 euros
- 200,000 euros land charge: around 435 euros
- 300,000 euros land charge: around 635 euros
Small expenses and VAT on the notary fee are added. The bank’s cancellation authorization itself is free of charge. These cancellation costs are usually borne by the seller, because the seller owes delivery free of encumbrances – unlike the notary and land registry costs of the purchase agreement, which are paid by the buyer.
Advantages and disadvantages of cancellation for sellers
- Advantage – clear conditions: A land register free of encumbrances creates trust and accelerates the sale.
- Advantage – smooth financing: The buyer’s bank easily receives first priority.
- Advantage – no residual risk: No old security remains in the land register that someone would have to deal with later.
- Disadvantage – costs: The notary and land registry office together cost around 0.2 percent of the land charge amount.
- Disadvantage – time: Cancellation can take several weeks; you should factor this into the sale schedule.
- Disadvantage – no buffer: A cancelled land charge cannot be reactivated free of charge; subsequent financing requires a new creation.
FAQ about the land charge when selling
Do I absolutely have to have the land charge cancelled before the sale?
Not necessarily in advance. What matters is that the property at the time of transfer of ownership free of encumbrances. In practice, the cancellation is usually handled in parallel with the sale through the notary – the remaining debt is settled from the purchase price, and the cancellation authorization is issued simultaneously.
Who pays for the cancellation – buyer or seller?
As a rule, the seller pays for cancelling the old land charge because they owe delivery free of encumbrances. The buyer, on the other hand, bears the costs of their own new land charge as well as the notary and land registry costs of the purchase agreement.
How long does cancellation take?
Allow a total of around four to twelve weeks. The bank often needs one to six weeks to issue the cancellation authorization; depending on its workload, the land registry office needs additional weeks for the registration.
What is the difference between a land charge and the remaining debt?
The remaining debt is the outstanding amount of your loan. The land charge is the security registered in the land register for it. It is legally independent and remains in place even after full repayment until it is cancelled or assigned.
Can the buyer take over my land charge?
Yes, that is possible. Instead of cancelling it, the land charge can be assigned to the buyer’s financing bank. The buyer then saves the costs of ordering a new land charge. However, this requires both banks to agree and the amount to be suitable for the financing.
Conclusion: Selling free of encumbrances is the standard – plan the cancellation early
For the sale, the old land charge almost always has to be removed: buyers and their banks expect a land register free of encumbrances. The usual approach is cancellation – predictable, with manageable costs of around 0.2 percent of the land charge amount, and properly coordinated with the sale through the notary. Check with the buyer and the banks involved whether an assignment would be worthwhile instead. Above all, request the cancellation authorization early so that the notary appointment does not fail because the bank’s paperwork is missing.