Partial sale of a property: what the contract says and what it costs

What does a partial sale of a property really cost?

You sell a co-ownership share and then pay a usage fee on the sold part. In the contracts put in front of me so far it has been 3 to 5 percent per year; that is my experience, not an official figure. On a sold share of €120,000 that is €3,600 to €6,000 a year. After ten years you have paid €36,000 to €60,000 without the share coming back. Depending on the contract there is also an execution fee on the later full sale, an annual adjustment of the fee and full responsibility for maintenance.

“I need €100,000, but I do not want to give up my house.” People who come to me with that sentence usually already have a partial sale in mind. The offer sounds like a compromise. In the arithmetic it is not one, and the reason is not in the brochure but in four clauses of the contract.

A partial sale is not a loan that gets paid off. It is a sale, after which a monthly payment starts and never stops.

What you actually sell in a partial sale

The contract has two parts. Both are entered in the land register, both are valued separately. Anyone who reads only the first will not understand the cost.

The co-ownership share (Section 1008 German Civil Code, BGB)

You sell a fraction of your property; I have seen shares of up to half. From the notary appointment on, that fraction belongs to the provider, together with everything attached to it: future growth in value, a say in decisions about the property, and a share of the proceeds when the whole is sold later. You remain the owner of the rest, not of the whole.

And you buy back a right of use (Section 1030 BGB)

So that you can go on living in the house alone, a usufruct is entered for you in section II of the land register. That is what the monthly usage fee pays for. So you pay to use a house you partly own yourself. Whether that right survives a forced auction depends solely on its rank.

And here is the point that explains the whole calculation: in law a partial sale is a purchase contract, not a loan. The rules for consumer credit therefore do not apply automatically (Sections 491 ff. BGB). There is no stated annual percentage rate you could set beside your bank's offer, and there is no repayment of principal. The percentage in the contract looks like an interest rate. It does not behave like one.

What the usage fee costs over the years

Let us work it through on a terraced house in Striesen. Assumed market value €400,000, with 30 percent sold. That means a payout of €120,000. In the partial-sale contracts put in front of me so far, the usage fee has been between 3 and 5 percent per year on that sold share. That is my experience, not an official figure.

€120,000

payout for 30 percent of €400,000

€3,600 to €6,000

usage fee per year, which is €300 to €500 per month

€0

of that goes towards repayment, the share does not come back

Usage fee paid, cumulative
After	At 3 percent	At 5 percent	Measured against the payout
5 years	€18,000	€30,000	15 to 25 percent
10 years	€36,000	€60,000	30 to 50 percent
15 years	€54,000	€90,000	45 to 75 percent

Calculated without an adjustment clause, without an execution fee and without maintenance. Those three items come on top.

After fifteen years at the upper rate you have paid €90,000. Of the €120,000 payout, €30,000 is left on paper, and the 30 percent of the house still belongs to the provider. That is not an exaggeration, it is the multiplication set out in the contract.

One question decides a great deal here, and it is rarely asked: is the fee calculated on the original payout amount or on the current value of the share? Over fifteen years that is a large difference. The answer is in the contract, not in the brochure.

Four items that rarely come first

These four points cost money or decide who owns how much later on. Find them in the draft before you are sitting at the notary's table.

The execution fee on the later full sale

If the house is eventually sold in full, the provider handles the marketing, and the contract sets a fee for that. Find the section on realisation and settle three questions: is it a percentage or a fixed amount? Is it calculated on the entire purchase price or only on the provider's share? And how many euros is that at a price you realistically expect for your house? Only that third answer tells you anything.

The adjustment of the usage fee

Check whether the fee is linked to a consumer price index. Such clauses are not impermissible as such: for certain long-term contracts on recurring payments, the German Price Clause Act allows an index link (Section 3(1) no. 1 PrKG). Whether your clause falls under it depends on how it is drafted. For the arithmetic, something else matters first: if the fee rises by two percent a year, the €6,000 turns into roughly €103,800 over fifteen years instead of €90,000. The two percent is an assumption used for illustration, not a promise.

Who pays for maintenance

As a co-owner you would bear the costs of upkeep in proportion to your share (Section 748 BGB). As a usufructuary you bear ordinary upkeep alone (Section 1041 BGB). Which of the two rules applies to you is decided by the contract. In the drafts I have read, maintenance stayed entirely with the previous owner, even though the provider had become a co-owner. A new roof runs into five figures, and by then the question has long been answered, before the tradesman arrives.

What the minimum value guarantee actually promises

A minimum value guarantee promises minimum proceeds. The question is whose proceeds, and in which case. Check three points: does it apply to your share or to the provider's? Does it apply immediately or only after a minimum term? And is there a promise in favour of the provider in the same contract that cancels the effect again? A guarantee whose conditions you cannot explain in one sentence is, in case of doubt, not one.

The comparison that matters

Not a partial sale against doing nothing, but a partial sale against the two other routes that put the same amount on the table.

Partial sale

€120,000 straight away, you stay in the house and stay a part owner. In exchange, a monthly payment with no end point, no repayment of principal, and a share of the house that only comes back if you buy it back.

A bank loan against the property

An annuity loan costs interest, but it repays and it ends. After that the house is entirely yours again. The catch is age: banks check whether you can carry the instalment permanently, and in my conversations that is the point where a small pension fails. Ask two banks all the same before you write this route off.

A classic sale with a move

The full market value, no monthly burden, complete freedom of decision. In exchange, the move. In my experience, owners from around 70 are left with the most on this route, and in conversation it is the least popular of them all. Both are true at once.

A fair comparison works out all three routes over the same period. Take the number of years you realistically want to stay in this house and add up, for each route, what is left at the end. Only that calculation proves anything. Everything before it is a feeling.

How a partial sale compares with a life annuity, usufruct and sale-and-rent-back is set out in the overview annuity, life annuity and partial sale compared.

How you get out again

Three routes lead out of a partial sale. You should know all three before you go in.

Buying the share back

Whether you can buy the share back is in the contract. Where I have read it, the buy-back applied at the value at the time of the buy-back, not at the original price. So if your house has become more expensive in the meantime, you pay back more than you received. Ask to be shown how that value is determined, who appoints the valuer and whether further fees arise in the process.

Selling the whole property

At some point the whole house is sold, by your heirs at the latest. Each side then receives its share of the proceeds, and the execution fee falls due. Settle in advance who steers the sale, what price must be achieved as a minimum and what happens if you and the provider cannot agree on a price.

Inheritance

Your usufruct ends with your death. Your heirs inherit the remaining share, not the house, and find themselves in a co-ownership community with the provider. Any co-owner may demand that this community be dissolved (Section 749(1) BGB). An agreed exclusion binds your heirs, because they step into your legal position. Against a singular successor, meaning somebody who buys a share later, it only takes effect if it is entered in the land register as an encumbrance on the share (Section 1010(1) BGB).

And even an agreed exclusion does not hold in every case: where there is good cause, dissolution of the community can be demanded regardless (Section 749(2) BGB). Anyone who wants to spare their children a dispute settles in advance what should happen to the share, and writes it down.

When a partial sale does fit after all

That case exists. It is rare, but it is real, and I have agreed to it. Three conditions have to come together.

1You need the sum for something specific, not as a reserve for whatever may come.
2A loan is demonstrably out of reach, after two refusals from two banks and not on a hunch.
3The remaining term is foreseeably short, because a full sale is coming in a few years anyway.

The case I agreed to looked like this: an owner in Blasewitz who had to pay out her brother from a community of heirs and who wanted to move into assisted living in two or three years anyway. Over three years the usage fee is a manageable sum. Over fifteen it is another story.

By contrast, anyone signing at 68 and intending to stay in the house to the end should do the sums over twenty years, not over five. That is exactly where the damage happens: hardly anyone who shows me their papers has multiplied the monthly payment by the number of years they actually intend. This is not a question of trust or mistrust. It is a question of two minutes with a pocket calculator.

The four figures I ask to see before any signature

The percentage of the usage fee and the basis it is calculated on.
The adjustment clause: index, frequency and whether there is an upper limit.
The execution fee: percentage, basis of calculation and the moment it falls due.
The exclusion of the right to dissolve the community: is it only in the purchase contract, or in the land register too?

Before you sell a share

I will work out the partial sale and the classic sale against each other over the same period. Using the value of your house, not a brochure figure. Free and without obligation, even if you go on to do neither.

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Common questions about partial sales

How do I work out my own usage fee?

The sold share in euros times the percentage in the contract gives the yearly payment; divided by twelve, the monthly one. One step is almost always missing when somebody shows me their sums: multiply the yearly payment by the number of years you realistically intend to stay in this house. That sum is the price of the model, and it appears in no brochure.

Can I buy the sold share back later?

Only if your contract contains a buy-back right, and on the terms set out there. Note which way this runs: anyone counting on their house gaining value is at the same time counting on their buy-back becoming more expensive. So if you are firmly planning on a buy-back, plan just as firmly for the money. A loan does not become easier to get as the years pass.

What is an execution fee in a partial sale?

The provider's remuneration for handling the later full sale. It arises right at the end, which is why it rarely shows up in the decision at the outset. Anyone laying two offers side by side has to count it in. Otherwise they are comparing an offer with a closing payment against one without.

Who pays for the new roof in a partial sale?

Whoever the contract names. Behind that are two statutory rules with different outcomes: Section 748 BGB spreads upkeep costs among co-owners in proportion to their shares, while Section 1041 BGB puts ordinary upkeep on the usufructuary. Also ask who decides on a major repair. Paying and deciding are two different things.

What happens to my heirs after a partial sale?

Your heirs do not receive the house but your remaining share and the provider as a co-owner. If they want the share back, they need the money for it. If they do not, the property is sold and the execution fee comes off the proceeds. That decision belongs in a family conversation before the inheritance, not in an argument after it.

Is a partial sale cheaper than a bank loan?

Calculated over a fixed period, usually not, because a loan repays and ends while the usage fee does neither. The arithmetic only favours a partial sale once you cannot get a loan at all. Whether that is the case is settled faster and more cheaply by two conversations with banks than by any brochure.

Partner & Property Adviser

Robert Kramer

Solution-finder with many years of experience as a management consultant and managing director