The land register of an auctioned property often shows more debt than the house is worth: land charges of several banks, compulsory mortgages, plus rights of way, rights of residence and notices in section II. The most common question before a first bid is therefore: do I have to take all of that over? The answer is in the statute and is more reassuring than the land register looks. Almost all land charges are extinguished by the award. But not all of them, and the exceptions become part of the price. This article explains the rank rule, shows which rights survive, what 1,077 evaluated appraisal reports say about them and how to work out the real price before you bid.
The land charge of the creditor who is running the auction, and all rights ranking behind it, are extinguished by the award (section 91 (1) ZVG, the German Forced Sale Act). The creditors are paid out of the proceeds as far as they go. Only rights that are registered ahead of the enforcing creditor survive and pass to the successful bidder (sections 44, 52 ZVG). The nominal amount of a land charge says nothing about the actual remaining debt.
The land charge, in German Grundschuld (section 1191 BGB, the Civil Code), is a right in the property that exists independently of the secured claim. The land register shows its nominal amount, usually the original loan sum, plus in rem interest of often 12 to 18 percent a year and a one-off ancillary payment. On paper, that interest has been running since registration. When a bank files its claim in the procedure, the nominal amount and several years of in rem interest add up. That is how the impression arises that the land charge exceeds the appraised value.
For the bank this is an accounting figure, not a payout. It may keep from the land charge only what it is actually owed under the security agreement, and only out of the proceeds. For you as a bidder, the only thing that matters is whether the right is extinguished or survives. If it is extinguished, its size is irrelevant to you.
Within one section of the land register, the order of registration determines rank; between sections II and III, the registration date decides (section 879 BGB). Ahead of all registered rights stand, by law, certain claims that section 10 ZVG sorts into rank classes: among them arrears of condominium fees owed to a homeowners' association up to 5 percent of the appraised value (rank class 2) and public charges such as property tax (rank class 3). The registered rights follow in rank class 4. These senior claims do not survive; they belong to the cash part of the minimum bid. What that means for apartments is covered in Foreclosure auction of a condominium.
Every right survives that is taken into account when the minimum bid is set and is not to be covered by payment (section 52 (1) ZVG), meaning the registered rights that rank ahead of the enforcing creditor. These are mostly easements in section II such as rights of way, utility easements and rights of residence, more rarely senior land charges. The successful bidder takes them over on top of the cash bid, and their value adds to the price.
| Right | Section | Extinguished or survives | Consequence for the buyer |
|---|---|---|---|
| Land charge or mortgage of the enforcing creditor | III | extinguished | creditor is paid from the proceeds, nothing to take over |
| Junior land charges | III | extinguished | creditors receive what is left by rank, often nothing; the buyer pays nothing |
| Land charge ranking ahead of the enforcing creditor | III | survives | buyer is liable in rem for the nominal amount; clarify remaining debt, redeem or have it assigned to your own bank |
| Right of way, utility easement, other easements | II | survives if senior, extinguished if junior | if senior, to be tolerated permanently, usually reflected as a deduction in the appraisal |
| Right of residence, usufruct | II | survives if senior, extinguished if junior; the holder is then compensated from the proceeds | if senior, restricted use, capitalised value counts towards the bid |
| Ground rent as a real charge | II | survives if agreed under section 9 (3) of the Heritable Building Right Act (section 52 (2) ZVG) | ongoing payment obligation |
| Encroachment and right-of-way annuities | II | always survive (section 52 (2) ZVG) | ongoing payment obligation |
| Auction and insolvency notices | II | cancelled after the award (section 130 ZVG) | none |
The list of surviving rights is not in the appraisal; it is established at the hearing. After calling the case, the judicial officer reads out the filed claims, the minimum bid and the terms of sale (section 66 ZVG). Only here is it binding which creditor is enforcing with which rank, because further creditors can join the procedure right up to the hearing, and the most senior among them shifts the line between extinguished and surviving rights. Questions about individual rights belong in this part, not in the bidding period. The hearing in detail is described in How the auction hearing works.
There are two exceptions to the statutory rule. Any party may demand deviating terms of sale, for example that a junior right of residence survives; the court then offers the property twice, once with and once without the right (section 59 ZVG). And the buyer and the holder of a right may agree that a right due to be extinguished survives, provided they declare this at the distribution hearing at the latest (section 91 (2) ZVG). The cash part of the winning bid then falls by the amount the holder would otherwise receive (section 91 (3) ZVG). In practice this is how a buyer keeps the land charge of their own financing bank in place and saves the cost of creating a new one.
In a partition auction there is no enforcing creditor whose rank draws the line. Section 182 ZVG therefore includes all rights encumbering the applicant's share in the minimum bid. In practice, all land charges survive there. The Federal Court of Justice ruled on 29.01.2016 (V ZR 285/14) that the buyer is liable for the full nominal amount even if the loan was repaid long ago. Why that is and how to recognise it is explained in Partition auction: procedure and differences.
The price of a property is the cash bid plus the nominal amounts of surviving land charges plus the capitalised value of surviving rights of use. Exactly this sum counts as the winning bid for the 5/10 and 7/10 limits (sections 74a (1), 85a (1) ZVG). Anyone who only counts the cash bid underestimates their price and overestimates their distance from the appraised value.
| Item | Amount |
|---|---|
| Appraised value set by the court | 300,000 euros |
| Land charge ranking ahead of the enforcing creditor, survives | 80,000 euros nominal |
| Right of residence in section II, survives | 45,000 euros capitalised value |
| Cash part of the minimum bid (costs, condominium fee arrears) | 9,000 euros |
| Your cash bid | 130,000 euros |
| Your total bid for the purposes of the value limits | 255,000 euros, or 85 percent of the appraised value |
Anyone who sees only the 130,000 euros in this example believes they are bidding at 43 percent of the appraised value and wonders why nobody applies to have the award refused. In fact they pay 255,000 euros, of which 80,000 euros go to the senior bank or are taken over from it, and they still cannot move in because the right of residence remains. How the capitalised value of a right of residence is calculated is covered in Right of residence and usufruct at a foreclosure auction. How the value limits work is explained in The minimum bid at a foreclosure auction.
Financing depends on it too. A bank financing the cash bid wants to know which rights will remain ahead of its own land charge, because it sets its lending value accordingly. A land charge of 80,000 euros taken over reduces the room for the new land charge by exactly that amount.
Klaava is a German platform for forced-sale auction dates and evaluates the appraisal reports of current proceedings in a structured way. The following figures are based on 1,077 reports for upcoming hearings with evaluable full text. As of 05.09.2026.
Section II of the land register appears in 771 of these reports, or 71.6 percent, section III in 543 (50.4 percent). In 330 reports (30.6 percent) the expert states explicitly that the rights in section III are disregarded or assumed to be extinguished, and 323 use the word unencumbered. The phrase "remains in place" appears in only 65 reports, or 6.0 percent. So the report usually tells you that it ignores the land charges, but rarely which rights are coming your way.
| Term in the report | Count | Share of 1,077 |
|---|---|---|
| Section II | 771 | 71.6 percent |
| Section III | 543 | 50.4 percent |
| Right of way, utility easement, right of passage | 244 | 22.7 percent |
| Right of residence | 178 | 16.5 percent |
| Heritable building right | 161 | 15.0 percent |
| Land charge | 160 | 14.9 percent |
| "remains in place" | 65 | 6.0 percent |
| Right of first refusal | 54 | 5.0 percent |
| Real charge | 45 | 4.2 percent |
| Usufruct | 22 | 2.0 percent |
For 695 of the 1,074 fully evaluated properties, or 64.7 percent, the evaluation has captured at least one section II entry in structured form. The most frequent are auction notices, easements for paths and utility lines, and insolvency notices. The notices disappear with the award; the easements mostly stay, because they are often older than any land charge. The expert reflects a surviving section II right as a deduction from value, but at the time of writing has to estimate which creditor will be enforcing at the hearing. How to read the land register section of a report is covered in Reading and understanding the appraisal report.
Once the award is final and the distribution plan has been executed, the enforcement court asks the land registry to register the buyer as owner and to cancel the auction notice and all extinguished rights (section 130 (1) ZVG). The buyer files no application and needs no cancellation consent from the banks. Surviving rights stay registered; a land charge taken over can be redeemed or used for the buyer's own financing.
In practice, several weeks to months pass between the distribution hearing and the correction of the land register. The buyer bears the registration costs. If the cash bid has not been paid in full at the distribution hearing, the court has security mortgages registered in favour of the creditors for the open amount (section 128 ZVG).
For a land charge taken over, the case law of the Federal Court of Justice applies: if the buyer redeems it in full, it passes to them by operation of law and becomes an owner's land charge, which they can have cancelled or assigned to their own bank. If they redeem only part of it, the bank may not consent to cancellation without the former owner's agreement, because that owner's claim to reassignment is protected (judgment of 29.01.2016, V ZR 285/14). The buyer is personally liable for the secured claim only if the bank filed its claim at the hearing before the call for bids at the latest (section 53 (2) ZVG). Otherwise the buyer is liable only with the property.
If the enforcing bank buys the property itself with a bid below 7/10 of the appraised value, it is deemed satisfied under section 114a ZVG to the extent its claim would have been covered by a bid at the 7/10 limit. It cannot pursue the debtor for that difference. This explains why creditors who bid rarely stop below 7/10, and it is a hint for all other bidders: a creditor in the room bids by that arithmetic, not by market value.
Which properties are coming up and which reports have been evaluated is shown in the property overview.
Do I have to take over the land charge as the buyer? Usually not. The land charge of the enforcing creditor and all junior rights are extinguished by the award (section 91 (1) ZVG). You only have to take over rights that rank ahead of the enforcing creditor and are therefore included in the minimum bid (section 52 (1) ZVG). Which those are is read out in the announcement part of the hearing.
What does it mean if the land charge is higher than the appraised value? Usually nothing for the bidder. The nominal amount contains the original loan sum and in rem interest that has been running on paper since registration, often 12 to 18 percent a year. If the land charge is extinguished by the award, its size is irrelevant to you. The bank receives only the share of the proceeds that falls to its rank.
Does a land charge survive a foreclosure auction? Only if it ranks ahead of the enforcing creditor, or if it is a partition auction, where section 182 ZVG includes all land charges in the minimum bid. The buyer is then liable for the nominal amount even if the loan has been repaid (Federal Court of Justice, judgment of 29.01.2016, V ZR 285/14).
Who cancels the land charge after a foreclosure auction? The enforcement court. Once the award is final and the distribution plan has been executed, it asks the land registry to cancel the extinguished rights and register the buyer (section 130 (1) ZVG). No cancellation consent from the bank is needed.
What happens to junior land charges? They are extinguished by the award. The junior creditors are paid from the proceeds as far as anything is left after the senior claims. If the proceeds are insufficient, they receive nothing and can only pursue the personal claim against the debtor. The buyer pays them nothing.
Does a land charge taken over count towards the 7/10 limit? Yes. Under sections 74a (1) and 85a (1) ZVG, the winning bid is the cash bid including the capitalised value of the surviving rights. A cash bid of 130,000 euros with a land charge of 80,000 euros taken over is a bid of 210,000 euros.
The complete process is described in How a foreclosure auction works. How the minimum bid and the value limits fit together is explained in The minimum bid at a foreclosure auction.
This article is for general information only. It does not replace legal advice from a qualified lawyer.
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