Heritable building rights (ground lease) from a buyer’s perspective: Is a ground-lease property worth it compared to renting?

Updated
30.01.2026

Anyone considering heritable building rights (often colloquially referred to as “ground lease”) usually compares three things: quality of living, predictability, and finances. This article consistently categorizes the topic from the perspective of prospective buyers – especially with families in mind – and includes several sample calculations with curve charts in comparison to renting an apartment.

Note: Sample calculations are model assumptions. Real-world terms (ground rent, indexation, financing, maintenance, taxes, rent increases) can differ substantially. Contracts and taxes should always be reviewed on an individual basis.

Meaning and basic principle: What are you actually “buying” with heritable building rights?

With heritable building rights, you generally acquire a right equivalent to land ownership to erect or use a building on land owned by someone else. You (economically) own the building, but not the land – for that you pay the regular ground rent. The legal basis is the Heritable Building Rights Act (ErbbauRG).

Rule of thumb: House ownership yes – land ownership no. The “land value” remains with the grantor of the heritable building right.

Typical grantors of heritable building rights: municipalities, churches / foundations, public institutions, more rarely private owners.
Terms: often 50–99 years; “99 years” is a common standard framework.
Land register entry: heritable building rights are recorded as a separate right in the land register (relevant for sale / financing).

People often say “ground lease” – what is usually meant is today’s heritable building right. If you want to look up terminology: Ground lease vs. heritable building right – a brief classification.

Heritable building rights vs. renting an apartment: “light ownership” or rent 2.0?

If you want to assess heritable building rights fairly, you shouldn’t compare only “heritable building rights vs. full ownership,” but very consciously heritable building rights vs. renting – because many interested parties primarily want: more stability, more freedom to design, less pressure to move.

Aspect	Rental apartment	Heritable building rights (owner-occupied)
Monthly payment	Rent (may increase)	Loan installment + ground rent + reserves
Predictability	Limited (termination, owner-occupation, rent increase)	High (long term), but depends on contractual rules
Freedom to design	Limited	High (like an “owner,” within the contract)
Maintenance	Landlord bears much of it	You typically bear everything (as with ownership)
Wealth building	No asset	Asset with a “remaining-term effect” (value decreases over time)
Passing on to children	None	Building + remaining term (no land value)

The central misunderstanding is often this: heritable building rights feel like ownership in everyday life, but economically they are time-limited. The closer the contract end approaches, the more strongly the remaining term acts like an “expiration date” for financing and market value.

The cost structure: What do you really pay?

One-time costs: purchase price for the building / existing property (or construction costs), notary / land register, possibly broker, possibly real estate transfer tax (see tax section).
Ongoing costs: interest & principal, ground rent, maintenance / reserves, insurance, property tax.
Risk / contract costs: mechanisms for increasing the ground rent (index / value protection), consent requirements (e.g., for sale / encumbrance), reversion rules (“Heimfall”).

Rule of thumb for realism: Don’t calculate heritable building rights as “just” installment + ground rent. Additionally include maintenance reserves – otherwise the comparison to renting will be unrealistically flattering.

Taxes and charges: property tax, real estate transfer tax, depreciation & deductibility

Property tax: Who pays?

In practice, with heritable building rights it is typically the holder of the heritable building right who is liable for property tax, because the right is treated as ownership-like. This is presented that way by major grantors of heritable building rights and specialist sources, e.g. FAQ on the property tax reform (Klosterkammer) as well as Specialist note on property tax (Haufe).

Important: Whether and how property tax can be passed on to tenants in a rental relationship is a different topic from the question of who is the tax debtor under heritable building rights. In the heritable building-rights setup, it typically hits you directly.

Real estate transfer tax: Does it apply to heritable building rights?

Often yes: When a heritable building right is created / assigned, real estate transfer tax may be due. Specialist sources point out that not only the classic land purchase, but also heritable-building-right transactions are relevant for real estate transfer tax purposes, including Haufe on real estate transfer tax for heritable building rights as well as administrative / specialist notes such as Note on harmonized decrees (NWB).

Practical consequence: Even if you don’t buy the land, you may pay real estate transfer tax – the assessment basis is then different (e.g., via the capitalized ground rent or the consideration).

Tax-deductible? (Letting vs. owner-occupation)

Owner-occupation: Typically no “deduction” of ground rent or depreciation for private use as with letting.
Letting: Depending on the setup, deductible expenses / depreciation may become relevant. This is its own field – tax advice is worthwhile here.
Depreciation (“AfA”): Mainly relevant when letting/in the income sphere; with owner-occupation it is usually not the lever.

Contract clauses that determine whether it “pays off”

With heritable building rights, it’s not only the price that matters – above all the fine print: indexation, reversion, consents, ranking, extension.

Ground rent & increases: Value protection / index clauses (inflation driver). Check whether there are caps, intervals, or special rules.
Reversion (“Heimfall”): Cases in which the heritable building right can revert early to the owner (e.g., breaches of contract). Statutory rules on compensation at expiry can be found in the ErbbauRG; a lot can be structured in the contract. Getting started: ErbbauRG (statutory text), practical: FAQ on reversion (Dr. Klein).
Consent requirements: Sale, encumbrance (land charge), structural changes – often subject to approval.
Financing / lending limit: Banks look at remaining term and ranking; short remaining terms can make financing much more difficult.
Standstill declaration: Relevant in practice when banks want security (bank- and contract-specific).
Pre-emption right / buy-out / redemption: Some contracts offer redemption or purchase options (rarely a “bargain,” but important for exit strategies).

Term, “99 years,” and the question: What happens when the heritable building right expires?

The end is the critical point – especially for families thinking “for the next generation.” When the heritable building right ends due to expiry, the ErbbauRG generally provides for compensation for the building (framework rule), with the specific amount often structured contractually. Entry point via the statutory text: ErbbauRG (Act on Heritable Building Rights).

Family perspective: With heritable building rights, what is inherited is primarily the building plus the remaining term. Without extension or redemption, “inheriting land value” is not possible.

Extension: possible, but terms are a matter of negotiation and can be expensive.
Reversion / compensation: Contractual quotas / mechanisms are common; details vary widely (and are decisive).
Valuation: Appraisal models factor in remaining term and contract clauses; this affects market value and sale price.

Financing: Why banks take a closer look at heritable building rights

The bank is not financing “a plot of land,” but a right with a term – and a building whose value depends on that term. That is why remaining term, ranking, and consent requirements are often the real dealbreakers.

Remaining term: The shorter, the more difficult (higher haircuts, shorter fixed-interest periods, more equity required).
Equity: Often more important than in a classic purchase to reduce bank risk.
Ranking/land charge: Contractual and land-register details influence lendability.
Purchase price allocation: Relevant when letting (tax); with owner-occupation usually secondary, but important for valuation.

Sale, prices, valuation: Why heritable building rights often need a “price haircut”

The market often values heritable building rights at a discount because:

the land value is missing,
the remaining term “erodes” the value,
ground-rent and extension risks are hard to calculate,
the pool of buyers and banks is smaller.

Practical test: If the price advantage versus comparable full ownership is small, you often pay for “almost ownership” – but receive a right with an expiration date.

Sample calculations: heritable building rights vs. renting (with curve charts)

The following model cases compare 30 years of cash flows (cumulative outflows). This is deliberately about cash flow – not about later sale proceeds (which for heritable building rights depend heavily on remaining term and the contract).

Reading tip: If you want to apply the examples to your situation, replace: rent, rent increase, ground rent, indexation, interest rate, repayment, equity, maintenance.

Example A: Family house, mid-sized city – heritable building rights as a “rental upgrade”

Rent: €1,800/month, rent increase 2.5% p.a.
Heritable-building-right purchase (building): €380,000, equity 20% (= €76,000)
Loan: €304,000, interest 3.5% p.a., initial repayment 2.0% p.a. (simplified annuity)
Ground rent: €350/month, indexation 2.0% p.a.
Maintenance: 1.0% of the building value p.a. (= €3,800/year), increase 2.0% p.a.

Year	Cumulative rent (≈)	Cumulative heritable building rights (installment + ground rent + maintenance, ≈)	Comment
10	≈ €247,000	≈ €287,000	Heritable building rights more expensive in cash flow (but “your own” living comfort)
20	≈ €569,000	≈ €605,000	Converges – strongly dependent on rent and index assumptions
30	≈ €990,000	≈ €1,000,000	Similar cash flow – the value/exit question becomes decisive

Interpretation: In this model, heritable building rights are not the “money-saving trick” versus renting, but above all a purchase of stability and quality of life.

Example B: Condominium under heritable building rights – short remaining term as a warning signal

This example shows why search terms like “expires,” “sell,” “lending limit” come up so often: Short remaining terms often make heritable building rights unattractive in practice.

Rent: €1,250/month, rent increase 2.0% p.a.
Purchase price apartment (heritable building right): €280,000, equity 15%
Ground rent: €240/month, index 2.0% p.a.
Remaining term: 45 years (simplified; financing / sale may be made more difficult as a result)
Maintenance / service-charge shares: €2,200/year, increase 2.0% p.a.

What typically tips over here?	Effect	Why relevant?
Bank financing	Higher equity requirements, stricter terms	Remaining term influences lendability and risk
Sale price	Discounts / smaller buyer pool	“Expiration date” gets priced in
Extension	Unpredictable cost block	Exit strategy depends on negotiation outcome

Interpretation: Even if cash flow seems “okay,” a short remaining term can be economically unattractive, because resale and financing become riskier.

Example C: High-rent market (e.g., Munich) – when heritable building rights can tip in favor vs. renting

In high-rent markets, heritable building rights can be more likely to outperform renting – but usually only if the entry price comes with a significant discount and the ground rent remains moderate.

Rent: €2,700/month, rent increase 2.5% p.a.
Purchase price (existing heritable building right): €520,000, equity 25%
Loan: €390,000, interest 3.3% p.a., repayment 2.2% p.a.
Ground rent: €320/month, index 1.5% p.a.
Maintenance: €4,500/year, increase 2.0% p.a.

Year	Cumulative rent (≈)	Cumulative heritable building rights (≈)	Comment
10	≈ €371,000	≈ €335,000	Heritable building rights cheaper in cash flow (moderately indexed ground rent)
20	≈ €856,000	≈ €720,000	Lead grows – but contract / remaining term remains the key
30	≈ €1,490,000	≈ €1,150,000	Cash-flow advantage is clear – still check exit / extension

Interpretation: In expensive rental markets, heritable building rights can win on a cash-flow basis. Whether they “really” win then depends on remaining term, resale perspective, and extension terms.

“Does it pay off with children?” – wealth building vs. housing stability

For families, the decisive question is often not “How much do I save?”, but: How stable is the home – and what will be left later?

If the primary goal is transferring wealth, classic full ownership is usually superior, because land value and unlimited ownership duration are missing. With heritable building rights, you primarily bequeath:

the building (or the share in it),
the contract (with rules, obligations, and risks),
the remaining term (as a “value factor”).

Practical conclusion for families: Heritable building rights can make sense as a deliberate housing decision (stability, space, freedom to design), but are often not an optimal instrument for “leaving something behind” in the sense of land value and a long-term wealth base.

Checklist: 15 questions you should clarify before signing

Topic	Question	Why decisive?
Price discount	How large is the discount compared to full ownership really?	Without a significant discount, you often pay for “almost ownership” without land value
Ground rent	How high, how indexed, are there caps or intervals?	Inflation can drive ground rent strongly in the long term
Property tax	Who is the tax debtor, what is budgeted?	Often hits you directly; compare info e.g. here
RETT	Is real estate transfer tax due – and what is it calculated from?	One-time costs many underestimate; entry point e.g. here
Remaining term	How many years remain – and what does your bank say?	Financing/sale can tip with a short remaining term
Reversion (“Heimfall”)	What reversion grounds exist and how is compensation regulated?	Risk point; starting point: ErbbauRG
Extension	Are there clear extension options or only negotiation “at discretion”?	Determines exit strategy and family perspective
Redemption / buy-out	Are there purchase options for the land or redemption mechanisms?	Can create future security – or become expensive
Consent	Which consents are required for sale / encumbrance/renovations?	Can limit flexibility and slow down processes
Valuation	How is the value determined at contract end/sale?	Decides the realistic sale price
Church / foundation	How is the grantor known (practice, transparency, negotiations)?	“Soft” risk: approach to extension/indexation
Letting	Is letting permitted, and which rules apply?	Important as Plan B; possible tax consequences
Maintenance	What obligations do you have – are there demolition / reinstatement duties?	Heritable building rights are rarely “cheaper” if obligations are high
Standard land value	Which standard land value is the basis, how was the ground rent derived?	Helps classify the level of the ground rent
Legal review	Has a specialist lawyer / notary reviewed the contract with a risk focus?	A single sentence can change the economics

Conclusion: When are heritable building rights “good” compared to renting – and when not?

Heritable building rights are most likely to pay off compared to renting when you see living as a life project: stability, design, space – and when the terms (price discount, ground rent, indexation, term) truly fit.

More sensible: long horizon, secure owner-occupation, moderate ground rent, clear extension perspective, significant price discount.
More risky: short remaining term, harsh indexation without a cap, unclear extension, high ground rent, small price advantage.
For families: often good as a stability decision – often less good as a wealth-transfer strategy.

If you take away just one thing: Treat heritable building rights like a product made of price + contract + term. The best price is of little use if indexation and remaining term later eat up the advantage.