Constellation of building owners' association/financing

Hello everyone,

I have some questions regarding my/our construction project concerning real estate transfer tax, but also contracts and financing.

About the project:

Location: Bielefeld
Development plan: (partial) commercial area
Object: multi-family house with commercial space and basement

The house is supposed to "look" like this:

The basement and ground floor will be used commercially. Half of the 1st floor and the attic will be my apartment (approx. 145 sqm) plus a large roof terrace on the garage and some garden.
The other half of the 1st floor and attic will be small residential units that are to be rented out.

The building consortium consists of me, my father, and his business partner (Peter). The two want to run a company in the commercial part.
The plot on which the building is being constructed is owned half by Peter and half by an uninvolved third party.
To save real estate transfer tax, my father and I now want to buy the half owned by the uninvolved third party and thus only pay real estate transfer tax on that.

The construction is basically supposed to be turnkey executed by a company. However, we will provide extensive own work (my father is self-employed in the field of building components). Besides, I plan to complete my apartment with even more extensive own work.

Is that understandable so far?

Now to my problem...
Originally, I actually did not want to be part of the building consortium because I am afraid of a possible bankruptcy for which I would then be jointly and severally liable with my assets. However, I also want to save the real estate transfer tax amounting to over 11,000 EUR.
My apartment should have cost about 180,000 EUR after completion.

Would there be a way to save the real estate transfer tax and at the same time not be part of the building consortium?

If I were to belong to the building consortium, I could only take out financing together with the other two and not—as I originally planned—alone for myself?!

Would it possibly be feasible to make a partition declaration before the start of construction and then secure the financing via my apartment land register?

I hope that was all somewhat comprehensible...

Best regards
Andy

Hello Andy,

Originally, I didn't really want to be part of the building owners' association because I was afraid of a possible bankruptcy, which would mean that I would be jointly and severally liable with my assets.

I don't understand - you are not a contractor.

Is there a way to save on the real estate transfer tax and at the same time not be part of the building owners' association?

"Wash my fur, but don't get me wet?" Probably not...

If I were to belong to the building owners' association, I could only take out financing together with the other two and not - as I originally planned - for myself alone?!

Why? You can finance your part; not so unusual. It is only necessary to legally document your share of the house properly.

Best regards from the Rhineland

I don’t understand – you are not the contractor.

Well, but if my name is already in the land register, I can hardly say that only this apartment of mine is paid by me and the rest isn’t, can I? A building owners’ association is usually a civil-law partnership (GbR) which – regarding liability – is jointly and severally liable.

"Wash my fur, but don’t get me wet?" Rather less so …

Understood

Why? You can finance your part; not so unusual. For that, it is only necessary to legally document your share of the house properly.

What could such documentation look like? Would that be an advanced declaration of division based on the architect’s building plans?

In advance - I am not allowed to provide legal advice here, this is exclusively reserved for consulting professions in Germany.

Well, but if I'm already listed in the land register, I can hardly say that only this apartment of mine is paid for by me and not the rest, right? A building owner community is usually a GbR which - regarding liability - is jointly and severally liable.

Then all construction projects, which were built as condominiums/semi-detached houses or similar for the purpose of construction, would automatically be a GbR; illogical, right?

If you take on the construction project, you have a builder/general contractor or a construction management contract. So you have to make sure to get the right one. For this, it is useful to check the construction partner themselves, their contract structure, and to have references provided. Pay attention to securities! The same of course applies to your house building partners; they should be demonstrably solvent.

What could such documentation look like? Would that be an early division declaration based on the architect’s construction plans?

You need for your financing the drawings of your part of the construction project, the volumes, and of course the price. The actual division comes later; there will be a notary contract, right?

Rhenish greetings

Then all construction projects, which are built for the purpose of creating condominiums/terraced houses or similar, would automatically be a GbR; illogical, right?

Well, actually not. It is a form of free business structure. This is also stated, among other sources, by Wikipedia...

You need the drawings of your part of the construction project, the volumes, and of course the price for your financing. The actual division comes later; there will be a notary contract, right?

Yes, there will be a notary contract. But where does the bank register its loan? In the land register, where I am listed together with 2 others – who also want to register land charges? That would be unattractive for them.

Well, not really. It is a form of free business structure. That's what Wikipedia, among others, also says...

You always have to be careful with Wiki; the entries are not verified.

I'm not doing this for the first time. Your father & "Peter" of course have a commercial enterprise; you will therefore not automatically become a partner of this company just because you buy a part of the new building. There are certainly important things to consider, but your tax advisor can explain that to you best; the forum or its users are not allowed to provide this advice.

But where does the bank register its loan? In the land register, where I stand with 2 others - who also want to register land charges? That would be unattractive for them.

The bankers here will surely answer that for you.

Rhenish greetings