Heritable lease with equity capital - claim by the heritable lessee

Hello,

we have shortlisted a house that appeals to us a lot. Now it’s about the financing and there is a leasehold [Erbpacht].

The seller says the leaseholder [Erbpachtgeber] wants equity of at least 1/3 of the purchase price.

My question now:

is such a demand legitimate and what reasons could the leaseholder [Erbpachtgeber] have for this? We are a bit uncertain about it. That the bank could require something like this in the case of a leasehold [Erbpacht] sounds still plausible, but the leaseholder [Erbpachtgeber]?

Best regards Snom

That is normal. Ultimately, you are not mortgaging a plot of land but a right that is worth less than the land itself.
In addition, the leaseholder may have a right of reversion; however, the mortgage rights also fall to them. This also leads to a limitation. This secures them against losing the house and the land to the bank, thus avoiding a total loss.

The bank also depreciates a building on a leasehold plot because, in addition to the usual risks, the rights of the leaseholder must be taken into account.

The bank also devalues a building on a leasehold property because, in addition to the usual risks, the rights of the leaseholder must also be taken into account.

Thank you for the answer. That means, in addition to this requirement, the bank could say we want leasehold x remaining term as additional security as equity or, for example, security over another house as an entry in the land register?

We are a bit uncertain about this. That the bank could demand such a thing for a leasehold is still plausible, but the leaseholder?

Actually totally unusual. I would initially just ignore it and in the end finance it the way you want. In the credit contract, it would probably be an inadmissible restraint.

The bank also depreciates a building on a leasehold property because, in addition to the usual risks, the rights of the leaseholder have to be taken into account.

But this is marginal in the normal single-family house sector since the restrictions through the leasehold contract are also low (as the experts nicely put it: "mercantile depreciation").

Thanks for the answer. That means besides this demand, the bank could say, leasehold x remaining term, we want this as additional security as equity or, for example, a security on another house as a land register entry?

No, the bank values the object (in the lending value with somewhat larger discounts due to the leasehold and the associated pre-emptive right) and then you can finance normally. No additional securities or the like. Full financing or similar shenanigans are also possible on the property. What’s important for the bank is only that the financing runs significantly shorter than the remaining term of the leasehold. That is usually a difference of 10 years.

just as described, we experienced it (also based on leasehold with almost 100% financing).

just as described it, we experienced it (also building on leasehold with almost 100% financing).

We also on leasehold: that depends on the bank. Some/many want more security. But that is not the OP's question. He is asking about the lessors!