Leasehold vs Freehold in Germany Erbbaurecht (Simple & Clear)
- Dec 2, 2025
- 2 min read
When searching for houses in Germany, you may see the term Erbbaurecht or Erbpacht in adverts. This means the property is on leasehold land rather than freehold. Understanding the difference is crucial before you sign anything.
What is freehold (Volleigentum)?
With freehold ownership you buy:
The land, and
The building on it
You have full control, within planning rules. You do not pay ground rent to anybody. This is the most common form of ownership in Germany and usually the easiest to finance with a bank.
What is leasehold / Erbbaurecht?
Under Erbbaurecht, you buy the right to use the land for a long period, but the land itself belongs to someone else, such as the city, church or a private owner.
Key points:
Contract length is often 50–99 years.
You pay an annual fee called ground rent (Erbbauzins).
You own the building and can sell or inherit it, but always subject to the leasehold contract.
Advantages of leasehold
Lower purchase price – because you are not buying the land, initial costs are lower.
Lower taxes and fees – the transfer tax and notary costs are usually calculated on the lower price.
Good for high-price areas – leasehold is often used in expensive cities to make housing slightly more affordable.
For buyers with limited equity, it can be a way to enter the market.
Disadvantages and risks
However, leasehold also comes with drawbacks:
Ongoing ground rent – this behaves like an extra monthly cost and can increase over time.
Financing difficulties – some banks lend less on leasehold, especially if the contract is already quite old.
End of contract – once the lease term expires, the landowner can:
Extend the contract, often at a higher ground rent, or
Take over the building with compensation rules set out in the contract.
This makes long-term planning more complex than with freehold.
What should buyers check?
If you consider buying an Erbbaurecht property, always ask:
How many years are left on the lease?
How much is the annual ground rent and how often is it adjusted?
Who is the landowner (city, church, private)?
Does the bank have any special conditions for financing this property?
Ideally, get independent legal advice before signing.
Conclusion
Leasehold homes in Germany can look attractive because they are cheaper to buy. But they are not the same as full ownership. For immigrants planning long-term security, it is important to understand the contract in detail and weigh the lower entry price against the ongoing ground rent and future uncertainty.
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