The German property security system
by lawyer Jens Schwanen
-consultant for the German Association of Publicly Appointed Surveyors, incorporated association (Bund der Öffentlich bestellten Vermessungsingenieure, e.V. (BDVI))-
I. Legal basis
1. The constitution
In Germany property is secured in terms of constitutional law according to article 14, paragraph 1, clause 1 Basic Law by guaranteeing private property as a legal disposition. The so-called property guarantee is to give the right holder some space in the area of property law and to allow him to develop and to arrange his life on his own authority. The legal contents of property is therefore characterised by private utilisation (exercise to one’s own advantage) and availability (not necessarily unrestricted).
2. The Civil Code
The Civil Code stipulates a more detailed definition of what is meant by property in daily legal relations. According to the Civil Code property is conceptually the most comprehensive right to carry out real (use, consumption) and legal (encumbrance, disposal) authority acts, which the legal system allows regarding movables and – in the case of property – regarding immovable. Ownership represents a so-called law of property (real law). Laws of property are effective against everyone. For this reason a thing has to be recognisable as a single thing and it has to be definable in contrast to other things (principle of visibility and of recognisability).
II. The land register
This principle of clarity and definiteness of law of property and of land registry law requires that the object of legal relations is unequivocally and unambiguously identified. The land register serves this purpose, which has first of all as its object to establish and determine the different plots of land. At the same time the land register secures property and shows which private rights and encumbrances, e.g. easements, provisional entries in the real estate register, mortgages or land charges, exist regarding the corresponding plot of land. For this reason the land registry – which is part of the local court - keeps a separate land register folio for every plot of land in Germany (exception: certain plots of land serving public purposes) in the land register.
III. The real estate register
The factual individualisation of property may however not be carried out only based on the land register. On the contrary, it results from the real estate register. The real estate register is a public register consisting of several registers and large-scale maps, which is kept by a land registry office. In this register every real estate (= registered titles and buildings) is proved and described so that the requirements of legal relations and of the administrative and economic sector regarding a basic information system can be met. The real estate register is therefore the geometrically unambiguous proof of real estate. Normally it consists of the real estate map including cadastral figures and the real estate register.
The publicly appointed surveyors
The legislator has realised that (sovereign) surveying tasks may not only be carried out by administrative authorities but that they may also be carried out by private persons. For this purpose the legislator has appointed them to assume sovereign responsibilities. These persons are called “publicly appointed surveyors”. The surveying laws of the different Länder of Germany (with the exception of the Free State of Bavaria) and the profession rules based on the surveying laws stipulate the responsibilities which may be assumed by publicly appointed surveyors. According to these laws publicly appointed surveyors exercise a liberal profession; their activity does not represent a trade.
In North Rhine-Westphalia for example publicly appointed surveyor are allowed – besides the authorities of the public surveying administration – to carry out cadastral surveys (according to § 5 paragraph 1, no. 2 Surveying and Cadastral Law of North Rhine-Westphalia cadastral surveys are surveys which serve the establishment and continuation of the real estate register and the determination or demarcation of property boundaries). Furthermore, publicly appointed surveyors are allowed to authenticate facts established by surveying land establishments with irrebuttable presumption of the accuracy of the contents (§ 1 paragraph 2 Profession Rules for Publicly Appointed Surveyors in North Rhine-Westphalia dated 15th December 1992).
In the widest sense the job profile of the publicly appointed surveyor is comparable to the job profile of the notary.
The definition of property and plots of land
The system outlined above shows that cadastre and land register are very closely connected. For this reason the administration of justice takes – taking into account the considerations mentioned above - the following definition as a starting point:
"Legally a plot of land is an area consisting of one or several land parcels which has a special place in the land register and which is therefore entered in an autonomous way. This special place is either a separate land register folio (§ 3 paragraph 1 Land Register Code) or if a joint land register folio is kept for several land parcels (joint registration) according to § 4 of the Land Register Code, it is the special number under which the plot of land is registered in the inventory of this land register folio.”
Consequently, the plot of land is the registration unit of the land register.
IV. The irrebuttable presumption of the accuracy of the contents of the land register (§ 892 Civil Code)
The effects resulting from entries in the land register are far-reaching. Consequently, § 891 Civil Code contains a legal presumption for the existence of registered rights and for the non-existence of the cancelled rights. This presumption may only be rebutted by proving its incorrectness. The rebuttable presumption of § 891 Civil Code is underlined by the legal bona fide grantee of a plot of land (or of a right to it) to become irrebuttable fiction of the correctness, the “irrebuttable presumption of the accuracy of the contents” of the land register (§ 892 Civil Code). It means the following: according to the German property system it is consequently insignificant whether the land register was incorrect at the time of the purchase unless a contradiction was registered in the land register or the grantee knew about the incorrectness of the land register. Thereupon the conflict between justice and legal certainty in German land registry law has been decided in favour of legal certainty.
The presumption of § 891 Civil Code mentioned above and the irrebuttable presumption of the accuracy of the contents of the land register according to § 892 Civil Code concern the information given in the real estate register, which have been adopted to the land register, in so far as they determine the area which constitutes the object of the registered rights. The contents of the land register as defined by § 892 Civil Code therefore comprises the information describing the land parcels which are part of a plot of land, i.e. community, communal district and area, if necessary field and field section number as well as the determination of land parcel boundaries in the real estate register, i.e. the land register map and the surveying documents, respectively in so far as they determine at the same time property boundaries. As a rule the measurements described in the surveying documents are therefore - if land register maps and surveying documents correspond - decisive for the determination of the property boundary.
Result
The presumption that the entries in the land register are correct, which is described above, and the irrebuttable presumption of the accuracy of the contents of the land register as well as the close connection between land register and real estate register show that the field of activity of the publicly appointed surveyor in Germany plays an important role in the whole context regarding the property security system.
V. The demarcation
The legislator codified the so-called demarcation or boundary marking in § 919 of the Civil Code so that the boundary may not only be unequivocally determined in the case of legal disputes or if a property purchase agreement is concluded. According to this paragraph the property owner is allowed to ask the owner of a neighbouring property to take part in the setting of fixed boundary marks and in the restoration if a boundary mark has been moved or become unrecognisable (sic!).
Consequently, this provision serves to secure an indisputable boundary by fixing boundary marks. It justifies a real claim to participation, which directly arises from the property.
In this context it is remarkable that the federal legislator has reserved the nature and procedure of the demarcation to the provisions of Land law. Correspondingly, the nature of the demarcation and the rules of procedure, which have to be complied with, are very variform. In some Länder in Germany the legislator even passed over to the decision to completely renounce a demarcation of property boundaries. In these Länder the specific public interest in a boundary marking duty, i.e. the prevention of boundary disputes and with it keeping law and order is obviously not considered to be necessary anymore.
The determination and demarcation of property boundaries, which are part of cadastral surveying (cf. § 5 paragraph 1, no. 2 Surveying and Cadastral Law of North Rhine-Westphalia), represent an essential field of activity in which the publicly appointed surveyor works. In this field he does not only contribute by providing his surveying competence, but he also carries on boundary negotiations and advises property owners and abutters regarding legal issues concerning the subject “boundary”.
VI. The conveyance of property
1. The contract of sale requiring a specific form
An essential characteristic regarding the conveyance of property is the property purchase agreement. If a willing builder for example has settled all preliminary questions, i.e. if the community has for example first rebuttal or if development costs arise or if it is to be built within the bounds of a development plan, and if he now decides to purchase the property, he has to conclude a property purchase agreement. This contract of sale constitutes the basis for the later transfer of ownership.
Basis for the later transfer of ownership means that the mere conclusion of a contract of sale does not directly change any rights under German law (principle of abstraction or separation). On the contrary, the property purchase agreement “only” constitutes the so-called obligatory contract, i.e. the vendor undertakes under the law of obligation to convey the ownership of a certain plot of land. The original passing of ownership has however not yet taken place with it; on the contrary, the passing of ownership is only carried out by the obligatory contract following this act. It is important to know this because many people think that grantees have already become owners of the property when the notarial property purchase agreement has been concluded.
The central provision regarding the property purchase agreement can be found in § 313 Civil Code. According to this paragraph the property purchase agreement has to require a specific form. § 313 Civil Code stipulates the following: “A contract by which one party binds himself to transfer or acquire ownership of a piece of land must be authenticated by a notary. A contract not concluded in that form becomes valid in its entirety if the appropriate conveyance and entry in the land register are made.”
The aim of this extremely strict formal requirement is first of all to protect the landowner from overhasty conveyances of his property. Furthermore, it is aimed at guaranteeing proper advice for both parties. For this reason § 17 of the Authentication Act places a special duty to instruct the parties on the notary. Consequently, the notary has to inform the persons involved about the legal implications of the transaction, i.e. he has to show on which conditions the intended success depends and which direct legal consequences are connected with it. In addition, the authentication of the contract of sale serves as evidence. The formal contract represents a secure document of evidence for doubtful cases and disputes.
It has also to be pointed out that § 313 Civil Code applies to all kinds of contracts in this field like for example exchange contracts and deeds of gift. It is also important to know that the whole property purchase agreement is subject to the formal requirement of § 313 Civil Code. Consequently, it complies with the administration of justice of the supreme court in Germany that the legal authentication requirement regarding a contract obliging to the transference of property also and especially applies to the sufficiently precise description of the site constituting the object of obligation. This point shows once again that land register and cadastre as well as surveying play an important role in Germany.
2. The transfer of property (conveyance of property)
As mentioned above the notarial contract of sale places an obligation on the property owner to convey the property to the grantee. The obligatory contract is followed by the disposition contract which only causes the passing of ownership to the grantee. The Civil Code requires the following two aspects regarding the conveyance of the property:
a. the agreement on the change of law
b. the registration of the change of law in the land register
According to § 873 Civil Code agreement means that the grantee agrees with the vendor about the transfer of ownership. The law calls this agreement “transference” in § 925 Civil Code; the agreement has to set all details of the change of law which are to be brought about and it must not be attached to any conditions or periods (§ 925 paragraph 2 Civil Code).
3. The conclusive effect
One of the most important questions in practice, which is regularly asked, is the question when a conclusive effect regarding the agreement arises. This case is also prescribed by law. Concerning this point § 873 paragraph 2 Civil Code stipulates that the persons involved are only bound to the agreement before the registration if the statements are authenticated by a notary or made at the land registry or submitted to it, or if the beneficiary has handed over an approval of registration to the other party according to the provisions stipulated in the Land Register Code. The purpose of this provision is to protect the parties to a contract from overhasty decisions. The agreement which has become binding may at any time be revoked by an informal contract between the persons involved.
It is important to know the following: by the way, the fulfilment of the conclusive effect protects the purchaser from unilateral revocation by the vendor, but it does however not protect from other dispositions of law. That is the reason why the provision of § 873 paragraph 2 Civil Code is regularly criticised. A dishonest vendor is therefore – at least in theory – able to sell the property to a second party during the period between the registration of the application at the land registry and the registration of the purchaser in the land register. The second party may then even manage – at least in theory – to be registered in the land register as the owner before the “first purchaser” so that the second party becomes the legitimate property owner.
This awkward situation of a possible loss of the purchase price may be faced in two ways: on the one hand, it is possible to call in the authenticating notary as a trustee, who has imperatively to be called in regarding every property purchase agreement. In this case the grantee of the property pays the purchase price to the notary for safekeeping; on the other hand, the notary commits himself to pass on the purchase price to the vendor only after the grantee has been registered in the land register as the owner. The second possibility is to register a so-called provisional entry in the land register as a security of the claim to a conveyance of property, which is prescribed by § 883 Civil Code.
Cologne, 26th October 1999
(translation by Henrike Täuscher; quotations from the German Civil Code translated by the translator)
