The usufruct entered in the land register grants the beneficial owner the right to draw use from the land (section 1030 of the Bürgerliches Gesetzbuch (BGB – German Civil Code)). Use includes the fruits of the land and the benefits resulting from land use (section 100 BGB).
However, the benefits can also consist of agricultural products or other “yield” such as sand, gravel or coal.
The usufruct also includes the accessories of the land as defined by sections 97 and 98 BGB. These comprise movable items that serve the economic purpose of the land. Examples of this are an excavator within a gravel extraction operation or the kitchen in an apartment.
The beneficial owner is required to retain the previous economic purpose of the land (section 1036 BGB). In accordance with section 1041 BGB, the beneficial owner must bear the costs serving the retention of the land. It must also pay for repairs and renovations to the extent that these are part of the ordinary maintenance of the land. Insurance, against fire for example, must also be borne by the beneficial owner. The beneficiary also bears ongoing public costs such as property tax. However, the beneficiary does not have to pay extraordinary charges expenses such as development charges and other municipal development charges (section 1047 BGB).1
A restriction of the usufruct right to certain parts of the property, such as an apartment, is not possible. The usufruct is thus a personal right in rem.
It is created by agreement and entry in Division II of the land register (section 873 BGB) and is generally not transferable or inheritable. The beneficiary’s right therefore expires on death, or with the termination of a legal entity. Usufruct can also expire by way of legal transaction, operation of law or possibly foreclosure.2
In practice, usufruct classically occurs in family situations. It has great practical importance for inheritance and tax law reasons, as it is not accompanied by a transfer of ownership.3 More recently, usufruct has also been used to create innovative land transactions. Here the property of usufruct is used to transfer income from property to a person without transferring full ownership. These transactions are therefore sometimes similar to sale-and-lease-back structures. Usufruct is often also used as a financing instrument in combination with a land charge.4