Freedom from encumbrances for a higher property value

It is not only material criteria such as location, plot, building and fittings that determine the value of a property. Intangible criteria - such as a right of way or a right of residence - also influence the value of a property. Buyers are interested in such encumbrances. This is because they determine how freely the buyer can dispose of the property.

When purchasing a property, the buyer also acquires the encumbrances and restrictions on the property. These include, for example, land charges or mortgages, but also residential rights or rights of way. These encumbrances and restrictions are documented in section 2 of the land register extract.

Example right of way

A property that is to be sold - let's call it property 1 - is located on a street. Behind property 1 is another property belonging to a neighbor - let's call it property 2, which has no direct access to the street. The neighbor can only reach his property via the property of property 1. He has therefore agreed a right of way with the owner of property 1. This allows him to drive across the land of property 1. He pays the owner compensation for this.

Sample calculation

The plot of land of property 1 is 500 square meters in size. In order for the neighbor of property 2 to reach the road, he has to cross an area of 50 square meters of the property. He paid the owner of property 1 15,000 euros for this.

A local quality estate agent has determined the value of property 1. It amounts to 200,000 euros. The real estate professional estimates the reduction in value due to the right of way at ten percent, i.e. 20,000 euros. The compensation of 15,000 euros paid by the neighbor must be added to the property value of 180,000 euros. This reduces the property value by 5,000 euros to 195,000 euros. The compensation paid is therefore too low and would have to be correspondingly higher for the right of way to be neutral in value for the property.

To be sure of the appropriate amount of compensation for a right of way, owners should seek advice from a real estate professional.

Example right of residence

Families often agree residential rights for relatives. For example, children grant their parents a lifelong right of residence if they give them a property as a gift in order to settle their inheritance early. If the property is then to be sold, this right of residence also reduces the value of the property.

The calculation of such a reduction in value is based on a complex formula, as it depends on various factors. The statistical life expectancy of the parents and how large the proportion of the total living space of the property is play a role here.

Experts recommend seeking advice from a real estate professional at the contract stage for encumbrances such as residential rights or rights of way. This saves stress and protects the value of the property.

Are you unsure whether there are encumbrances on your property and how they affect the value of your property? Then contact us! We will be happy to advise you.

Notes

For reasons of better readability, the generic masculine is used in this text. Female and other gender identities are explicitly included where this is necessary for the statement.

Legal notice: This article does not constitute tax or legal advice in individual cases. Please consult a lawyer and/or tax advisor to clarify the facts of your specific individual case.

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