Transfer of Benefits and Burdens in Real Estate Purchases – Timing, Taxes, and Practical Issues

Transfer of benefits and burdens usually before land register entry

The transfer of benefits and burdens is particularly relevant for issues relating to property tax, rental income, renovations, insurance, tax law, and liability. Since it regularly does not coincide with the entry in the land register, misunderstandings and disputes often arise.

In many cases, it is not the transfer of ownership in the land register, but the transfer of benefits and burdens that determines who is economically “in control of the property”.

What does the transfer of benefits and burdens mean?

The transfer of benefits and burdens describes the point in time at which, in a real estate purchase:

• the benefits (e.g. owner-occupation, rental income) pass to the buyer
• the burdens (ongoing costs, public charges, obligations) shift from the seller to the buyer
• the economic risk (transfer of risk) passes to the buyer

From a legal perspective, this concept is based on the transfer of risk and burdens pursuant to Section 446 of the German Civil Code (BGB). In real estate transactions, however, this point in time is usually specifically defined by contract in the notarized purchase agreement.

When does the transfer of benefits and burdens occur?

The exact timing depends on the purchase agreement. In practice, several variants have become established.

Transfer upon payment of the purchase price

Most commonly, it is agreed that benefits and burdens transfer to the buyer upon full payment of the purchase price. Until that point, the seller continues to bear:

• ongoing costs
• traffic safety obligations
• the risk of accidental damage

Transfer before payment of the purchase price

In individual cases, the transfer of benefits and burdens occurs even before the purchase price is paid, for example in the event of early handover. This is legally permissible, but entails increased risks – especially for the seller.

Transfer independent of land register entry

The transfer of benefits and burdens is not identical to the transfer of ownership. The latter only takes place upon entry in the land register, often weeks or months later.

Graphic illustration: timeline

Transfer of benefits and burdens and tax law

The transfer of benefits and burdens also plays a decisive role for tax purposes. Tax authorities often focus on the economic transfer – not on the land register entry.

Property tax

Property tax is allocated on a pro rata basis to the party who economically uses the property. From the transfer of benefits and burdens onward, this is generally the buyer, even if the property tax assessment notice is still formally addressed to the seller.

Depreciation and income

For rented properties, the depreciation for wear and tear (AfA) generally begins for tax purposes with the transfer of benefits and burdens. The same applies to the allocation of rental income and deductible expenses.

Further tax-related details can be found, for example, in the explanations provided by Haufe.

Letting, renovation, and refurbishment

Rented properties

In the case of rented properties, the following transfer with the transfer of benefits and burdens:

• rental income
• obligations arising from existing tenancy agreements
• ongoing costs (e.g. service charges)

The buyer economically assumes the role of landlord, even if the formal transfer of ownership has not yet occurred.

Renovation or refurbishment before the transfer

Renovation or refurbishment measures before the transfer of benefits and burdens should be clearly regulated by contract. Without an explicit agreement, the seller generally bears the costs and risks.

Special cases: foreclosure auction and gift

Foreclosure auction

In a foreclosure auction, the transfer of benefits and burdens regularly occurs upon the date the bid is accepted. From this point onward, the successful bidder bears the economic burdens.

Gifting of real estate

The transfer of benefits and burdens is also relevant in the case of a gift of real estate, in particular for:

• tax allocation of income
• start of depreciation
• allocation of costs

A clean contractual arrangement is essential here as well, as recommended, among others, by notaries.

Common mistakes and practical tips

Helpful practical guidance can also be found at ImmobilienScout24.

Conclusion

The transfer of benefits and burdens is a central element of every real estate purchase. It determines from when buyers are economically responsible – often long before the land register entry. A clear contractual arrangement and tax advice are crucial to avoid risks and ensure legal certainty.