Transfer of Ownership of Flats and Apartment Houses/Plots of Land
With regard to the transfer of ownership of flats and plots of land, we offer the following types of advice:
- advice to the purchaser of a flat
- advice to the purchaser of an apartment house/plot of land
- advice to vendors
Advice to the purchaser of a flat
Ownership of a flat is a complicated legal construction that can be designed differently in every residential complex. For this reason, the purchaser should be very clear – before he signs the contract – about what it is that he is actually buying. The notary who officially records the contract of sale and purchase does not help the purchaser in all aspects of the transaction because he is required to be neutral. The notary ensures that the contract of sale and purchase is concluded in a proper fashion. In particular, he ensures that no party makes unsecured advance payments. However, when it comes to economic questions, the notary is not allowed to offer an opinion unless the mismatch between performance and counter-performance exceeds what is morally acceptable, and the notary notices this. The notary does not check, at least not unless he is specifically asked to do so, if the flat corresponds to the expectations and needs of the purchaser and if the deed of partition of the residential complex contains “nasty surprises” that possibly cannot be identified by a person with no legal training and even by a non-specialist lawyer.
This is where our legal advice comes into its own. In the interests of the purchaser, we check the following questions:
- Does the physical building correspond to the deed of partition?
- Is the use of the cellar or a parking space legally secured?
- Is the basis for any rights of special use (e.g. for terraces or gardens) legally effective?
- Can the flat or commercial unit be used in accordance with the wishes of the purchaser (e.g. for work purposes or for letting purposes)?
- In what ways are the other units in the residential complex allowed to be used and could this cause a disturbance to the purchaser (e.g. the opening of a café/restaurant in a neighbouring commercial unit at a later stage)?
- Are there appropriate rules and provisions concerning the distribution of costs in the residential complex and the obligations to carry out repairs?
- Is the purchaser liable for possible service charge debts of the vendor?
- Has there been any construction/conversion work in the unit and was this work authorised?
- How are voting rights distributed in the residential complex?
- Has the deed of partition been amended subsequently?
- Are there any legal disputes within the owners’ association?
- Is the unit currently let?
On the basis of our many years of experience with problems concerning the transfer of the ownership and the part-ownership of flats, we recommend having a check carried out by a lawyer, particularly when it comes to purchasing commercial units, unconverted attics, attic flats that have subsequently been added to the building, maisonette flats, flats where fairly large areas are covered by special rights of use, and parking spaces in split-level parking systems. Legal advice is also necessary when purchasing units in complexes with a mix of residential and commercial use.
When it comes to purchasing a newly built flat or a refurbished flat, we recommend a legal check of the contract of sale and purchase (developer’s contract), the deed of partition and the building specifications. In addition to the aspects mentioned above, the following questions are of particular importance in the case of these contracts:
- Are the provisions dealing with the developer’s obligation to build and refurbish clear and unambiguous and do these provisions correspond to the expectations and wishes of the purchaser?
- Is the warranty obligation of the builder regarding building defects drawn up fairly?
- Are the rules and provisions for acceptance of the individually and communally owned parts of the property legally effective and acceptable to the purchaser?
- What is the method of payment for the purchase price?
- Is the builder providing a security and what precise form does this security take?
Advice to the purchaser of an apartment house/plot of land
When it comes to purchasing an apartment house or a plot of land, our advice to the purchaser includes a legal due diligence process and an analysis of the legal structure of the contract of sale and purchase.
The legal due diligence consists of a legal evaluation, which looks, amongst other things, at the following aspects:
- Is the current building legitimate in terms of building regulations? Are there any requirements from the building authorities with respect to the building? Is further building possible? Are there any entries in the register of land charges?
- What building work has been authorised on the neighbouring plots of land? Or what building work is planned or is at least permissible?
- Are there any legal agreements in existence concerning the rights of neighbours?
- Is the building listed? Is there any contamination of the soil?
- Is the plot of land encumbered in any way, e.g. with easements, usufructuary rights, mortgage rights, priority notices or pre-emption rights?
- What charges under public law exist and what restrictions of use, e.g. arising out of site development measures or state-funded measures?
- What utilities contracts exist?
- In the case of lettings: What tenancy agreements exist? Can they be terminated? How high is the rent and how is it made up? Are there any rent arrears? When was the last rent increase? Have cosmetic repairs been apportioned to the tenants with legal effect? What court proceedings with the tenants are pending? What rent deposits exist? Have the tenants made any investments?
The results of this legal due diligence have considerable influence on the purchase price.
The legal due diligence also helps to determine the design of the contract of purchase. From the point of view of the purchaser there have to be contractual clauses that ensure that the purchaser can reduce the purchase price or withdraw from the contract or demand the removal of building defects or compensation if it should emerge at a later stage that the object of purchase has legal or physical defects or that the vendor deceived the purchaser in the course of the sale negotiations. Since the vendor usually wants an extensive warranty exemption, the conflicting interests of the purchaser and the vendor have to be brought together in an appropriate compromise by means of corresponding contractual clauses. Of particular importance to the purchaser is the procedure for paying the purchase price, the transfer of title, and the means of securing the financing for the purchase price. This is where our legal support really helps the purchaser. We not only ensure that the wishes and intentions of the purchaser are reflected in the wording of the contract. We also make recommendations to the purchaser about what kind of contract design is favourable in view of the particularities of his individual case and which standard clauses should possibly be avoided.
Advice to the vendor
From the point of view of the vendor of apartment houses, flats or commercial units, the following factors have to be considered when designing the contract:
- Is it possible that the legal status and the registered place of business of the purchaser could lead to problems in implementing the contract?
- When is the purchase price due and how is the purchase price going to be paid?
- Is the provision concerning the warranty exemption legally effective?
- When does the transfer of title to the purchaser happen and are, where necessary, particularities in the law relating to flat ownership and tenancy law being taken into consideration?
- What procedure is in place concerning withdrawal from the contract, if the purchaser fails to pay?
- Are there any pre-emption rights and what consequences will this have for the contract if these rights are exercised?
- In the case of lettings: Is there a clear assurance that the vendor is released from his obligations as landlord?
In particular, a corresponding contractual design from the point of view of the vendor has to ensure that the purchase price is paid to the vendor on time and in full and that, after the contract of purchase has been concluded, the purchaser is not able:
- to demand the removal of physical defects,
- to reduce the purchase price,
- to withdraw from the contract or
- to demand damages.
The standard clauses that are suggested by notaries are not sufficient in all cases and need to be adapted to the particularities of the individual case. The legal effectiveness of liability exemptions often depends on what relevant characteristics of the object of purchase were disclosed by the vendor to the purchaser before the contract was concluded and on the extent to which the purchaser’s knowledge of defects can be proved after the fact. Regarding the design of the contract, the notary has to conduct himself in a neutral way and is not allowed to give any indications or make any suggestions that favour one particular party. This is where our legal advice helps.