Investor Guide
2026-10-10 08:31

Erbbaurecht (heritable building right): A Building Without Its Land, on a Clock

An Erbbaurecht is a transferable and inheritable right to own a building on someone else's land, usually for a fixed term — in our experience commonly 50 to 99 years — and against an annual ground rent. For a supermarket investor it can lower the entry price, but its value erodes as the term runs down, and the contract's consent and compensation clauses decide what it is worth.

What it is

The landowner, often a church, a municipality or a large institution (Part 7), grants the right to have a building on or under its land (§ 1(1) ErbbauRG). The building is an essential part of the right, not of the land (§ 12 ErbbauRG), and the right has its own register sheet, the Erbbaugrundbuch (§ 14 ErbbauRG). It can be created only at first rank, so no registered charge on the land ranks ahead of it (§ 10(1) ErbbauRG). Contracts to create or acquire one need notarial form (§ 11(2) ErbbauRG), and for transfer tax it counts as a plot (§ 2(2) no. 1 GrEStG).
The ground rent (Erbbauzins) is secured as a real burden on the right (§ 9(1) ErbbauRG). Index clauses are permitted for terms of at least 30 years (§ 4 PrKG), and the statutory brake on increases protects only residential buildings (§ 9a ErbbauRG). In our experience terms commonly run 50 to 99 years (Part 7).

Why it matters to investors

Three sets of clauses decide the value (Part 7). First, at expiry the building passes to the landowner, who must pay compensation unless the contract limits or excludes it (§ 27(1) ErbbauRG). Second, reversion (Heimfall) lets the landowner reclaim the right early in agreed cases (§ 2 no. 4 ErbbauRG), against compensation the contract may also limit or exclude (§ 32(1) ErbbauRG). Payment arrears justify reversion only once they reach two years' ground rent (§ 9(4) ErbbauRG).
Third, a sale or a land charge frequently needs the landowner's consent (§ 5 ErbbauRG); until it is given, even the purchase contract is ineffective (§ 6(1) ErbbauRG). Under the conditions of § 7 ErbbauRG the holder can demand consent, and a court can replace a refusal given without sufficient reason.
As the remaining term shortens, value erodes towards whatever compensation the contract provides, and lenders want the right to run well beyond the loan (Part 7). The structure also narrows the pool of buyers on exit (Part 12).

What to check

• The remaining term against the lease term, the loan term and your holding period.
• Compensation at expiry and on reversion, and every reversion trigger.
• The landowner's consent to your purchase and to your bank's land charge, in registrable form.
• The ground rent, its indexation formula and its review dates.
• Any renewal priority, or duty of the landowner to sell the land (§ 2 nos. 6, 7 ErbbauRG).
Related terms: Grundbuch · Grundschuld · Due Diligence
Sources: ErbbauRG §§ 1, 2, 5, 6, 7, 9, 9a, 10, 11, 12, 14, 27, 32; PrKG § 4; GrEStG § 2; Gordon Real Estate Group, "German Prime Retail", Parts 7 and 12. Legal position as of 10 October 2026.
Photo: Alex Block / Unsplash
This entry is general information and not legal or tax advice.