A right of residence and a usufruct are two of the most critical entries that can appear in the land register of an auction property. Unlike land charges, these rights do not automatically lapse with the award. Overlook them and you buy a property you may not be able to use for decades.
A right of residence, the Wohnrecht under § 1093 BGB, is the personal right of a named person to occupy a building or part of it as a home. It cannot be transferred and cannot be inherited. It ends when the holder dies.
How it typically arises: parents transfer the property to their children and reserve a right of residence for life. If the property later goes to auction, the right survives, even though a new buyer takes the award.
The buyer cannot use the property, cannot let it and cannot rebuild it, as far as the right reaches. They still bear the maintenance costs and pay the property tax. The right cuts the appraised value considerably, because the property cannot be used commercially.
A usufruct, the Nießbrauch under § 1030 BGB, goes further. The holder may not only live in the property but also let it and keep the rent. They bear the cost of ordinary upkeep, while the owner bears the extraordinary charges.
In practice a usufruct means: the owner holds an empty right. They own the property on paper but draw no economic benefit from it while the usufruct lasts.
| Feature | Right of residence | Usufruct |
|---|---|---|
| Legal basis | § 1093 BGB | § 1030 BGB |
| Own occupation | Yes | Yes |
| Letting by the holder | No | Yes |
| Transferable | No | No |
| Inheritable | No | No |
| Ends | On death | On death |
| Effect on value | High | Very high |
Whether a right of residence or a usufruct survives the award depends on where it ranks in the land register. Two cases:
Case 1: the right ranks ahead of the land charge of the enforcing creditor The right survives. The buyer takes the property subject to it. The creditor accepted the right when the land charge was granted.
Case 2: the right ranks behind that land charge The right generally lapses with the award, because it is subordinate and is discharged out of the proceeds. The holder then receives compensation from the proceeds, if there is enough to go round.
In practice: read the report carefully to see what rank the right holds. Klaava sets out the land register charges mentioned in the report in a structured form.
The value of a lifelong right of residence is calculated as a capitalised value. The basis is the annual value of the right, multiplied by a factor that depends on the holder's age.
Formula: Value of the right = annual value, meaning the annual net rent, × factor from the mortality tables
Worked example:
The holder is 70 years old. The local annual net rent for the flat is 12,000 euros. The factor for a woman of 70 under the current mortality tables is around 9.5.
Value of the right = 12,000 euros × 9.5 = 114,000 euros
If the report values the property at 280,000 euros, the value actually usable by the buyer is only around 166,000 euros, that is 280,000 minus 114,000. That is a discount of roughly 41 per cent.
For a usufruct the annual value is the annual net rent the holder could achieve. Since they may let the property, the economic burden on the owner is the same: no income reaches them.
Bidding despite an existing right of residence or usufruct is rational in only a few situations:
The holder is very old: for a holder of 90 the factor is below 3. The present value of the right is small, and the property comes free within a few years.
The property is an investment and the holder of the usufruct pays rent: rare, but it can make economic sense.
The holder is willing to give the right up: sometimes buyer and holder agree afterwards on a payment to release it. That can be negotiated but never forced.
Never buy a property carrying such a right without calculating its value precisely and taking it off your price first. A bid that looks cheap becomes an expensive purchase once a long-running right of residence is attached to it.
A properly prepared foreclosure valuation report contains:
If that information is missing or the report is incomplete, raise your risk allowance accordingly.
Can I make the holder of a right of residence pay rent? No. The right normally frees the holder from paying rent. They are, however, obliged to treat the home with care and to bear the running service charges.
What if the holder dies before I pay? If the holder dies between the award and the land register entry, the right ends with the death. The tax office and the land registry are informed. The discount then falls away, although you had already calculated it at the moment you bid.
Can the buyer have the right removed from the register? Only with the holder's consent. Without their written release, removal is not possible.
Can a property with a usufruct be financed? Only to a limited extent. Many banks refuse to lend on a property carrying a usufruct, because the lending value drops sharply. Talk to your bank early.
For more on land register charges, see reading a German valuation report. The full course of proceedings is set out in how a German foreclosure auction works.
This article is general information. It does not replace advice from a lawyer or a notary.
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