Buying a house despite registered right of residence

Hello everyone.

My wife and I are considering purchasing the neighboring house of my parents. The current owner can no longer keep the house and therefore wants to sell. The key data about the house:

Year of construction 1963
approximately 250 sqm living space
approximately 3000 sqm plot
3 garages, 2 carports
no registered land charge

The ground floor and upper floor are fully habitable, the attic has been converted into a "youth room," meaning living and sleeping area as well as a small bathroom (only washbasin and toilet, no shower, therefore cannot be rented out separately).

The property is "in good condition," not dilapidated or similar.

The upper floor is occupied by an approximately 70-year-old woman who has a lifelong right of residence on the upper floor as well as the use of one garage. Size of upper floor approximately 100 sqm.

We could acquire the property cheaply (around 35,000 EUR), additional costs include fees for notary and property transfer tax, as well as amount X for minor renovation measures, so in total a loan requirement of 60,000 EUR. My wife and I are both employees, permanently employed, so regulated and secure income.

Can we get a loan for the 60,000 EUR since the market value of the property is significantly higher, or will there be problems because the right of residence is registered? We assume that the right of residence is registered first in the land register and must remain so. The bank would thus only be found in second place.

Hi,

first of all, you should have the COMPLETE and CURRENT land register shown to you, i.e. all 3 sections. Then it will also become clear whether the right of residence (usufruct) is even registered in the land register or contractually regulated in another way. Land charges are listed in the 3rd section, usufruct in the 2nd section. So that does not interfere with the bank.

Just a gut feeling: if the usufruct is registered, but there is also a rental agreement that documents the regular rental income, there should be no problems with the bank.

Oh, and make sure to go through the house with an expert. They see more than you laypeople.

Of course, residential rights registered in Section II of the land register are an obstacle for the bank; however, whether and in what form this actually represents an obstacle in the current case can only be told to you by the bank.

Example:
A residential right for an entire property for an 18-year-old is assessed by a bank significantly more severely than the residential right for a 2-room apartment of a 90-year-old in an 8-unit multi-family house.

The residential right will probably be senior in rank in any case and is therefore to be regarded as a depreciation and is treated by the bank in the same way as a senior mortgage in favor of another bank. The "value" of the residential right is usually based on the market rent and the average life expectancy of the usufructuary right holder and, if not excluded, his legal successors plus a generous surcharge.

If the property is sold far below market value, I would become alert, because no one has money to give away. Or the assumed market value does not correspond to the actual market value.

Of course, residential rights registered in Section II of the land register are an obstacle for the bank, but whether and in what form this actually represents an obstacle in the current case can only be told to you by the bank.

Example:
A residential right for an entire property for an 18-year-old is assessed by a bank much more severely than a residential right for a 2-room apartment of a 90-year-old in an 8-unit multi-family house.

The residential right will probably be senior in rank in any case and is therefore to be considered as a depreciation and treated by the bank just like a senior mortgage in favor of another bank. The "value" of the residential right is usually based on the market rent and the average life expectancy of the usufructuary holder and, unless excluded, his legal successors plus a generous surcharge.

If the property is sold significantly below market value, I would become suspicious because no one gives money away. Or the assumed market value does not correspond to the actual market value.

Nothing more to add! Well explained.

Hello h34dson,

I have the following questions off the cuff:

1. Do you want the house as a rental property or for personal use?
2. Are there reliable information on why the owner can no longer keep the house?
3. With the size (250sqm) and the description "in good condition," in my opinion the purchase price doesn’t fit, or it must be quite remote!?
Option 3.1 You have been withheld facts.
Option 3.2 You define "in good condition" extremely generously.

@toxic has explained everything so far regarding the usufruct, but I would add that the usufruct right can also be capitalized. You may need to keep an eye on when the usufruct right was registered – it is possible that the state (long-term care insurance) insists on the capitalization of the usufruct if the elderly lady has to go to a nursing home. This is legally potentially tricky or must be well secured or it must be ensured that you as the house purchaser are not held liable in this case.

Best regards
Dirk Grafe

Hello!

Thank you first of all for the responses, now to the questions:

We want to partially occupy it ourselves, later then, when the right of residence no longer applies, rent out a part.

The house including the property is simply too large for two people; and that is also the problem of the current owner. Simple profession with very low income plus a long commute to the workplace, so that it is no longer cost-effective for them. The current owner is well aware of the depreciation caused by the right of residence, so concessions have already been made on the price here as well.
In addition, the property is located in a small village, about 15 km from the nearest town.

"Good condition" can of course be defined differently. I am fully aware that it is not a new building, on the other hand it is also not dilapidated. For example, there is an older heating system in the house that runs on oil. Still fully functional at the moment, but sooner or later investment will also be necessary here. Behind the house on the slope, excavation work must be done and a drainage system installed, as mold forms due to moisture. We know that this is the cause. The owner already has a cost estimate for this measure, but also cannot afford it himself.

There are still various, really small points that all contribute to a reduction in value.

I would estimate the value of the property at around 150,000 - 200,000 EUR, but due to the poor location and the right of residence, this value cannot be achieved. A realistic purchase price given the location would be approximately 100,000 to max 125,000 EUR. Minus the right of residence leaves 55,000 - 80,000 EUR. (According to the mortality tables and low rent; rural area; I have estimated about 45,000 EUR deduction here). Drainage and renovation measures amount to just under 15,000 EUR, so for me a purchase price of 40,000 - 65,000 EUR would be appropriate.

The price is therefore under certain circumstances only slightly below the value of the property.