Assignment of land charge: 81 % cheaper than new entry and everything else you need to know!

One Assignment of a land charge is an important step in home financing. When a land charge is assigned, the land charge is transferred from one bank to another. This usually happens when the existing real estate loan is moved to another bank because, for example, a more favorable financing offer has been found.

Assignment of land charge? This is often a good idea, because the assignment of the land charge is faster and cheaper than its cancellation and a new entry. In addition, the assignment enables the renewal of credit!

The assignment of the land charge usually occurs when the borrower is already partially repaying the loan amount and only part of the amount is still encumbered on the land charge. An example of this would be if a homeowner took out a loan of 500,000 euros and has already repaid 100,000 euros. In this case, he can then have the amount of 100,000 euros deleted from the land charge and only transfer the remaining amount of 400,000 euros to a Bank with more favorable interest conditions cede. However, the new bank must agree to such a reduction in collateral.

The assignment of a land charge explained in brief

• When a land charge is assigned, the loan collateral is passed on from the former financing bank to the future lender.
• An assignment of the land charge therefore becomes necessary if you change banks for follow-up financing for a real estate loan.
• No deletion from the land register is required for an assignment of the land charge.
• Therefore, with the land charge assignment you save fees and pay only about a quarter of the costs compared to a cancellation and new registration of the land charge.
• A land charge can also be partially assigned or cancelled, so that you can also contribute part of the debt from equity when switching banks.

The land charge - lien on real estate loans

A land charge is a lien that is mainly used in the area of construction financing is applied. It is used by the bank to provide additional security for the loan. If the borrower is no longer able to pay his installments, the bank can foreclose on the property and cover the remaining loan debt with the proceeds from the sale.

Advantages of the land charge assignment

A land charge assignment allows the property owner to change banks without losing the land charge entry. It is a faster process than deleting and re-registering a land charge. The real estate owner has little or no expense because the banks handle the process among themselves. The borrower's consent is usually not required and the costs are lower than for a deletion and re-registration of the land charge.

An assignment of the land charge is also more favorable by up to 81 % than a cancellation and reestablishment (see section Kosts in the event of assignment of the land charge). In addition, the land charge remains in the land register and can be used again for future borrowing.

Disadvantages of the land charge assignment

Due to the fast and simple process in combination with the low costs, an assignment of the land charge has only a few disadvantages compared to the time-consuming and expensive deletion with new entry.

However, the new bank may have a Reject assignmentIf the collateral is insufficient or if the bank does not agree to the conditions of the land charge. Therefore, you should contact the new bank in advance in a clarifying conversation askwhether it is prepared to assume the land charge.

Another disadvantage of the assignment is the residual risk if loan collateral not utilized remain registered in the land register.

Minimize disadvantages of land charge assignment

In order to protect yourself as a borrower against risks in the best possible way, a Exclusion of assignment make sense. This prohibits the bank from reselling the loan collateral of the land charge without your consent. In addition, it may make sense to Land charge to be assigned only in part and have the amount no longer needed deleted. You should consider this step if the security in the land register is significantly higher than the new loan amount. This also reduces risks for the borrower.

Advantages and disadvantages summarized

In summary, an assignment of the land charge has the following advantages and disadvantages:

Costs in the event of assignment of the land charge

the Assignment of the land charge is subject to costs. This is because the assignment of the land charge must be notarized. This means that fees are charged to the Notary and at the land registry an. These costs must be paid at a Comparison of construction loan conditions be taken into account.

Still you save three quarters of the fees with a land charge assignment compared to a deletion and new registration of a land charge. This is because an assignment of the land charge requires no deletion in the land register with costs required. Thus the Land charge assignment fees 77 - 81 % cheaper (see comparison table below) compared to the alternative cancellation and new registration of the land charge.

If you want to save costs, you should request the draft deed through the bank and also make sure that the banks take care of the execution of the assignment. As a rule, the banks are willing to provide support here and settle the assignment among themselves. However, if a notary is commissioned for a draft contract or its execution, additional costs will be incurred.

The costs of a land charge assignment between banks are governed by the German Law on Court and Notary Costs (Gerichts- und Notarkostengesetz, GNotKG).

Costs land charge assignment

The costs are based on the assumption that the bank prepares and executes the draft deed. If the notary is also commissioned for this, additional costs will be incurred.

For comparison: the costs for new registration of the land charge

In the case of cancellation and new registration of the land charge, the notary and land registry must be paid for both processes. This results in 4 cost items, which together add up to between € 542 (for € 50,000 land charge) and € 2932 (for € 500,000 land charge).

The costs are based on the assumption that the bank prepares and executes the draft deed. If the notary is also commissioned for this, additional costs are incurred. Without letter formation and notary confirmation when the land charge is registered.

Cost comparison: assignment vs. new registration

The following table shows the cost advantage of assigning a land charge compared to cancelling an old land charge and creating a new one. On average you save about three quarters of the costs with a land charge assignment.

Other costs associated with the assignment of the land charge

The costs for the land charge assignment, increase if the notary also prepares the draft deed and supervises the execution at the land registry.

For the drafting of the deed including its execution by the notary, an assignment of a land charge in the amount of €50,000 will incur approximately €60 in additional notary fees. For an assignment of 500,000 €, 473 € are incurred.

Often, however, these costs can be avoided, as banks can also arrange the assignment among themselves. The notary is then only required for the certification.

In addition to the cost of assigning the land charge, borrowers may have to pay an additional Prepayment Penalty pay to the bank for the early repayment of the loan. EHowever, an early repayment penalty is only due if the loan is terminated within the first 10 years after it has been taken out.

Assignment of land charge to a private person

The assignment of a land charge is also possible to a private person. Before the law, it makes no difference whether the land charge is held by a legal entity (bank) or a natural person (private individual). The following apply same legal regulations. However, there are some special features to be considered in the design.

To start the assignment of the land charge to a private person, the borrower must contact the bank and request the assignment of the land charge to a private person. The bank will then issue an assignment of the land charge to the requested private individual. The assignment of the land charge is thus made instead of the corresponding cancellation approval.

Assignment of land charge to a private person: The natural person becomes the beneficiary of the land charge.

The financing bank must agree to an assignment of the land charge to a private individual, provided that all outstanding claims have been settled. This right of the borrower is called Restitution claim. In this case, when the land charge is assigned to a private individual, the beneficiary of the land charge is changed from the bank to the desired natural person. The change from the bank as a legal entity to a natural person does not entail any legal changes.

In the case of complete assignment, the Land charge including the claim to interest contained therein and all other claims assigned by the bank to the private individual. The assignment of the land charge to a private individual must, like the assignment of the land charge to a bank be notarized.

Assignment of land charge to a private person: It is essential to prepare a written declaration of purpose

In the case of assignment to private, it is recommended that a written Declaration of Purpose is created. The declaration of purpose thereby connects land charge with the loan. Thus, the outstanding receivables of the private individual are secured in the event of default by the borrower.

The declaration of purpose for land charges has a decisive advantage for the property owner. In the event of default on payment, the declaration of purpose restricts the lender's right of access on the outstanding amount of the construction financing.

Thus, through the declaration of purpose, the lender can not access the full land charge, but only aThe share not yet repaid. This is because the amount of the registered land charge in the land register remains the same over the duration of the loan. This means that the amount of the land charge can only be determined via the linked construction loan. The declaration of purpose thereby represents the Link between the loan agreement and the land charge.

Without a written declaration of purpose, it is therefore in It is difficult to determine in retrospect when a restitution claim has been exists. This means that it only the declaration of purpose makes it clear when the land charge may be deleted from the land register again.

In addition, the declaration of purpose in conjunction with a loan agreement clearly specifies the amount up to which the lender may liquidate the collateral in the event of default.

Assignment of land charge to a private individual: jointly consider whether paragraphs should be deleted from the assignment to the private lender

In the Construction financing through the bank the borrower is personally liable for outstanding debts and is normally subject to immediate foreclosure. An assumption of this provision in the assignment of the land charge to a known private individual, may reduce the Strain relationship with this person, as they see it as Breach of trust could value.

Therefore, borrowers and lenders should be aware of each other regarding the paragraph of the Foreclosure agree together. It must be remembered that the lender needs security to lend the money, but at the same time there is a relationship of trust with the borrower. It is therefore a Question of the form of the personal relationship, whether or not to assign immediate foreclosure under the contract with the bank to the private lender.

Assignment of land charge to a private individual: Often sufficient collateral available when taking over the loan

There is one more point that should be considered. If the land charge is assigned to a private person, the original loan agreement usually significantly higher than the loan now secured by land charge assignment should be.

Therefore, if the land charge is assigned in full in the original amount, then there is much more security than the lender actually needs.

The high security assignment is a risk for the borrower. This is because the land charge is not dependent on the loan amount granted. Therefore, it can be further assigned, which can put the borrower in unpleasant situations.

If the amount of the land charge and the loan amount granted are very far apart, it may therefore make more sense for the land charge to be partially extinguished. The part that is not cancelled can then be assigned to the private lender.

If the amount of the loan matches the amount of the collateral, immediate submission to foreclosure and personal liability also seems more appropriate.

According to the German Law on Court and Notarial Costs (Gerichts- und Notarkostengesetz, GNotKG), the assignment of the land charge costs exactly the same as its cancellation. It therefore makes no difference whether the land charge is only partially assigned and cancelled or whether it is assigned in full to the desired private individual.

In general, it may make sense, especially when transferring the land charge to a private person, dThe notary may also be commissioned to draw up the deeds and execute them. Additional fees are payable to the notary in the case of both the pro rata and the full transfer of the land charge. When transferring the land charge to a bank, however, the banks usually settle the assignment among themselves. However, banks also have certain notary's offices with which they often work for many years.

The assignment of the land charge to a private person takes place in 6 steps:

• The project should first be discussed with the bank and the private lender. discussed should be made. There should be agreement on the structure of the loan assumption.
• Next The private lender paysr the debts to the bank.
• The bank then assigns the claims under the land charge to the private individual and provides no cancellation authorization out of
• The private person accepts the assignment
• The notary informs the land registry about the change of owner of the land charge
• This is followed by the entry of the new beneficiary of the land charge in the land register by the land registry office

The steps are according to a clarifying discussion with lender, bank and notary public relatively simple. In detail, there are minor differences among the banks. For example, some banks have special forms for the assignment of the land charge, while others require corresponding text modules.

It is advisable to engage a notary for this right at the beginning. The notary has to take care of the further steps anyway and has experience with the formulation of corresponding contracts for the assignment of the land charge to private individuals.

The process of assignment of the land charge

In land charge assignment, the security of a loan land charge is transferred from one bank to another bank (or to a private individual). For this purpose, the borrower informs the new bank of the wish to assign the land charge and submits the required documents. Some banks have ready-made forms for this purpose. Other banks require a corresponding written declaration for the land charge assignment.

The process of assigning the land charge is simple. The banks take care of the formalities among themselves. The notary subsequently certifies the assignment and has the assignment entered in the land register by the land registry office. Therefore, no visit to the notary is required and the assignment of the land charge can be completed in a few days. Nevertheless, the notary is involved in the assignment and has the function of certifying documents. If the land charge is secured by a land charge with letter, the previous bank also assigns the land charge letter.

• The project should first be discussed with both banks.
• There will be a Credit agreement concluded with the new bank
• Next paid dhe new bank the debts with the previous bank.
• The bank enters then the claims from the land charge to the new bank from (and therefore represents no cancellation authorization off)
• The new bank takes the assignment of the land charge at
• The notary informs the land registry about the Change of owner of the land charge
• It follows the Registration of the new bank as the holder of the land charge in the land register by the land registry office

The procedure for assignment of the land charge by letter

In the case of a land charge with letter, the bank must also assign the land charge letter so that the notary can have the land charge transferred in the land register.

What is a Land charge with letter?

A land charge by letter is a special form of land charge in which the loan is additionally secured by a "land charge certificate". This land charge letter is a written document in which the bank records the amount of the loan, the security (the land charge) and the conditions of the loan. The letter is kept by the bank and is the basis for the registration of the land charge in the land register.

Two steps are therefore necessary when transferring a land charge by letter:

• On the one hand, the Assignment of the land charge
• On the other hand, the Assignment of the land charge letter to the new bank

Assignment of the land charge: Is notarial certification necessary?

noThe assignment of the land charge does not require notarization. A visit to the notary can therefore be dispensed with, as the banks can settle the formalities between themselves. The two banks ensure that the assignment of the land charge is notarized by a notary. The notary then instructs the land registry to enter the new owner of the land charge in the land register. However, it is not necessary to go to a notary for this, as everything is done in writing.

In this case, the borrower only has to be included in the assignment, if there is an exchange of assignment. This document prevents an assignment without the express consent of the borrower. If, on the other hand, there is no exclusion of assignment, the borrower does not have to consent to the assignment of the land charge.

In the event of changes to the land charge, notarization is recommended

However, if changes are to be made to the amount of the registered land charge or a pro rata cancellation is to be made, it may make sense to consult a notary. Even if the land charge is to be assigned to a private person, changes to the structure of the land charge are often desired. In addition, in the case of a land charge assignment to a private person, an Declaration of Purpose and a Credit agreement be created. It therefore makes sense in such cases to have a notarial certification performed, even if this is not required by law.

Assignment land charge: sample

To assign the land charge, the following information is required:

• Designation of the land register
• Indication of which local court the land register is kept at
• Land Register Volume, Sheet, Plot and Parcel Number
• The amount of the land charge
• The interest of the land charge
• An indication of which claims are transferred
• The name of the new bank taking over the land charge (assignee)

Sample: Assignment of a land charge between 2 banks (Source: Haufe)

Does the old bank have to assign the land charge?

Yes, if the new bank agrees to accept the land charge, the old bank must agree to an assignment of the loan security funds to the new bank.

In some credit agreements, an additional Exclusion of assignment which prevents assignment without the borrower's consent. This protective mechanism primarily serves to safeguard the borrower so that the bank does not sell the land charge to third parties without the borrower's knowledge. In the case of an exclusion of assignment, the old bank therefore additionally the consent of the borrower before it can assign the land charge.

If there is also a Land charge with letter the bank must also assign the land charge certificate to the new bank so that the notary can have the land charge transferred in the land register.

Does the new bank have to accept the assignment of the land charge?

no, the new bank is not obliged to accept the assignment of the land charge of the old bank. If the conditions of the existing land charge are too weak for the new bank, it may reject the security. In this case, the land charge must then be cancelled. A new land charge must then be registered in favor of the new financing bank.

It is therefore definitely important for real estate owners to clarify the assignment of the land charge with the new bank beforehand. Once the new bank has checked the relevant land register excerpts and given its consent to the assignment, however, nothing stands in the way of the procedure.

If, as with most transfers, the land charge is also significantly higher than the outstanding loan amount, the chances are good that the new bank will accept an assignment of the land charge.

In addition, if the land charge is significantly higher, there is also the possibility of a partial assignment. This means that the land charge is divided into two parts. The first part is assigned to the new bank and the part of the loan security that is no longer required is deleted from the land register. However, there must be agreement on this with the new bank so that it agrees to the partial transfer.

Assign or delete land charge?

When a land charge is assigned from one bank to another, this usually occurs between banks as part of a bank bill of exchange at a construction financing. The new bank gets the land charge assigned. If the new bank accepts the assigned land charge, borrowers can save a lot of money through the simpler and faster assignment procedure.

A land charge assignment is thereby up to 81 % more favorable for the borrower than a deletion and a new order. Therefore, borrowers are often well advised to assign the land chargeif this is possible. In addition, the existing land charge can be used for future borrowing.

This is often advantageous, as land charge loans have particularly favorable interest rate conditions. At the same time, the residual risk when assigning the entire land charge to the new bank is low. This is because the risk would only manifest itself if the declaration of purpose associated with the land charge and the associated loan agreement were lost at the bank, which is very unlikely. This risk can also be further reduced by partially deleting loan collateral that is no longer required when it is transferred.

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