What is a "ground lease" anyway?
The "hereditary lease" is prohibited by law in Germany today. Colloquially, however, the "Erbbaurecht" is often referred to as "Erbpacht". A "hereditary building right" is a right equivalent to real property which is formed in a separate "hereditary building right land register".
A plot of land can be leased as a "heritable building right" for a fixed period (usually 99 years) in return for a monthly ground rent. Ownership of the land remains with the ground lease provider during this period. During the term of the contract, the leaseholder usually has the right to build on the land. The hereditary building right can be sold by the hereditary building right holder during the term of the contract.
At the end of the leasehold contract, the land reverts back to the owner of the hereditary building right. In the case of residential building plots, at least 2/3 of the material value of the buildings (often referred to as the common value) is paid as compensation to the leaseholder.
Maximilian Riedel
Authorized signatory and shareholder
Real Estate Economist (IRE|BS)