An English or American Executor finds that the Testator’s Estate comprises a Flat, House or Plot of Land in Germany. What now?
If the deceased owned real estate in Germany which the executor or the beneficiaries now wish to sell as soon as possible, this legal guide explains what needs to be done to sell an inherited home in Germany. The sale of the German property may be complicated further if the house or flat is currently leased to a tenant, because German law protects private tenants against termination of the lease agreement. But first things first:
(I) Obtain German Grant of Probate (Certificate of Inheritance)
From a German law perspective, the estate of the deceased is not administered by a personal representative. Instead, the estate passes directly to the heirs due to the principles of automatic inheritance (Vonselbsterwerb) and universal succession (Gesamtrechtsnachfolge). If there are several heirs, they form a community of heirs (Erbengemeinschaft) and must act unanimously. More on this here.
Unfortunately, due to the UK opting out of the EU Succession Regulation, an English Grant of Probate or a Scottish Letter of Confirmation are not accepted in Germany (and vice versa). Non-EU Grants of Probate are even less acceptable. Thus, in order to prove to the German Land Registry and to the potential buyers who is entitled to sell and transfer the German flat or house, the executors or beneficiaries will have to go through German probate. There are two options for this: (i) to apply for a Certificate of Inheritance (which is the standard approach) or (ii) to apply for a Certificate of Executorship (which is the exception in Germany). More on how to apply for German probate here.
However, since in most inheritance cases from Common Law jurisdictions the wills are usually very clear on the issue of who the executors are, but not necessarily very clear on who – in German terminology – the “heirs” are and what the heir’s respective shares and rights would be. Thus, in these Anglo-German or American-German succession cases, it is sometimes simpler to apply for a Certificate of Executorship. A Certificate of Executorship does, in contrast to the Certificate of Inheritance, not state who the beneficiaries are, but instead it only states who is entitled to administer the estate. Such a Certificate of Executorship is in most cases accepted as sufficient proof by German courts and the German land registry. However, there is a small risk that a Certificate of Inheritance (Erbschein) may be demanded to effect the sale. Still, in most international succession cases we suggest to opt for the Certificate of Executorship.
The application does involve a significant amount of paperwork and the Executor will have to swear an oath in the presence of either a German notary or – in the UK or the USA – before a German consular officer.
Our law firm prepares the necessary application wording, sends a list of required documents and arranges for certified translations of the English or American documents (wills, death certificates etc) into German. Once the executors have taken the oath, we shall send the application to the German probate court at the deceased’s last German residential address.
(II) Putting the Property on the Market / Resolve Tenant Issue
If the testator did not live in Germany himself then chances are that he or she has leased the property to tenants. Under German law, the flat can be sold even if it is currently being leased to a tenant. The lease agreement automatically transfers onto the new owner. The German legal buzz word is “Kauf bricht nicht Miete” (selling the property does not terminate lease). An investment buyer may even like the idea of the German flat being rented out. However, having a tenant inhabiting the German property does limit the number of potential buyers because, in reality, most buyers are looking to move in themselves, especially if it is a small apartment or small house in a rural German area, where no one is interested to purchase property for investment reasons.
Thus, executors and beneficiaries usually wish to end the lease agreement and remove the German tenant. Evicting such a tenant is, however, rather tricky in Germany, because private tenants are well protected under German civil law. Lease agreements are usually open ended in Germany and the owner (here the executor) needs a legitimate reason to terminate such lease agreement. The most common reasons being non-payment of the rent or a need of the owner to use the flat for himself or a family member.
The intention to sell a flat is, per se, not necessarily a reason to terminate the lease agreement, but if we can establish that with termination of the lease agreement, the owners cannot find a buyer, this should suffice. However, the burden of proof that this is indeed the case lies with the landlord.
This matter may prove difficult. The executor should therefore ask the tenants whether they would be interested to buy the flat or house themselves. If not, the best strategy is usually to simultaneously look for buyers (there may be a potential buyer who does not mind that the flat is leased out) and at the same time start the termination and eviction proceedings.
To find buyers for a German property the owners can either advertise the real estate themselves (the market leader on German internet for this is www.immobilienscout24.de), if the executor or a beneficiary is willing and able to show the flat to potential buyers. The more professional alternative will probably be to hire a local estate agent. The agent’s fees in case of a real estate sale in Germany are usually borne by the buyer. Our firm does assist with finding a reliable and English speaking German estate agent.
(III) Sale of German Property
The selling and transfer of any property in Germany must be effected through a German notary public who acts as a neutral (judge like) legal official ensuring that both parties are being protected (Legal guide to buying a house or apartment in Germany). We will be happy to find a bilingual notary and instruct him / her once we have a buyer. We will also be happy to assess the draft sale agreement and explain the content to you (Template of German Land Sale & Purchase Agreement).
The purchase price is usually paid into the notary’s fiduciary account and is distributed by the notary as soon as the new owner is registered in the Grundbuch (Local Land Registry). The sale deed also resolves any mortgage issues.
(IV) German Inheritance and possibly also Property Sales and Capital Gains Tax
Finally, there is the matter of German taxes. Whether “only” the German assets or the deceased’s global estate is subject to german Inheritance tax depends on the deceased’s nationality and residence at the time of death (The Perils of German IHT and Gift Tax). In addition, selling inherited German real estate may trigger capital gains tax (depending on how long the property had been held by the testator prior to his / her death) as well as property acquisition tax (usually only for the buyer).
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More information on buying property in Germany, the German Land Registry and conveyancing process and the rights and duties of tenants and landlords in Germany is available in these posts:
- Legal guide to buying a house or apartment in Germany
- Tenants beware of Waiver Clauses in German Property Lease Agreements
- Buying German Property as Brexit Counter-Strategy
- Template of German Land Sale & Purchase Agreement
- Is “Miteigentum” in a German Property the same as “Tenancy in Common”?
- Apartment Prices in Germany: How to get a quick Overview
- Searching for Property Information in the German Land Registry
Or simply click on the sections “Property” or “Conveyancing in Germany” in the right column of this blog.
For more information on cross border probate matters and international will preparation see the below posts by the international succession law experts of Graf & Partners LLP:
- Most Germans die without a Will (German Intestacy Rules)
- Formal Requirements to set up a valid Will in England, Scotland and Germany: What are the Differences?
- The Perils of German IHT and Gift Tax
- Careful with Deed of Variation if Estate comprises Foreign Assets
- Basics of German Inheritance and Succession Law
- Executors and Trustees in German Inheritance Law
- How to apply for a German Grant of Probate
- The Infamous German Community of Heirs – And how to avoid it
- Germans Heirs are Personally Liable for Debts of the Deceased
- International Wills and Estate Planning for British-German Families
- Prove German Wills for English Probate
- Disputed Wills and Contentious Probate in Germany
- Disinherit your no-good children? Not so easy in Germany
- Don’t be afraid of Clients with Foreign Assets!
- Can foreign Taxes be set off against UK Inheritance Tax?
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The law firm Graf & Partners and its German-English litigation department GP Chambers was established in 2003 and has many years of experience with British-German and US-German probate matters, including the representation of clients in contentious probate matters.
We also advise and represent foreign clients who wish to purchase, sell or lease property in Germany. In case you would like to obtain specific advice on a specific case or need assistance in buying, selling or leasing property in Germany, please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 463 7070.