Changes to real property-owning private partnerships under the German Civil Code from 1 January 2024 – Q&A list
On 1 January 2024, the German Act to Modernise the Law on Partnerships (Gesetz zur Modernisierung des Personengesellschaftsrechts, “MoPeG”) is scheduled to come into force. The introduction of a partnership register (Gesellschaftsregister) for partnerships under the German Civil Code (Gesellschaften bürgerlichen Rechts (“GbR”)) will result in far-reaching changes, especially for GbR registered in the land register. The new legislation will offer simplifications for real property-owning GbR, in legal and business transactions, which is why a basic understanding of the matter is worthwhile. With the following questions and answers, we aim to provide an outlook on changes that are of particular practical relevance:
1. Is it obligatory to register a GbR?
Rather yes than no. In principle, the registration of a GbR in the partnership register to be kept as of 1 January 2024 is voluntary. However, Section 47(2) of the amended version of the German Land Register Ordinance (Grundbuchordnung, GBO) will indirectly impose a compulsory registration requirement for GbR. This is because entries in the land register of a GbR will in future only be carried out if the GbR is entered in the partnership register. Consequently, a GbR entered in the land register as a beneficiary under the previous law will have to arrange its entry in the partnership register in order to be able to dispose over its real estate rights and acquire or dispose of real property or other real property-related rights.
Article 229, Section 21(4) of the Introductory Book to the German Civil Code (EGBGB), as amended, establishes a special rule for all priority notices. This particular provision will gain practical relevance in cases priority notices have already been entered in the land register before 1 January 2024 or if registration has been applied for and approved before this date. The claims secured by these priority notices will be satisfied (for land register purposes) in line with currently applicable law, meaning that even GbR that are not registered in the partnership register will be able to dispose over the claims.
2. Is it possible to register a GbR without cause?
Yes, the partners of a GbR do not have to wait for an event requiring a land register entry in order to register the GbR in the partnership register. Each GbR is free to seek entry in the register from the time the MoPeG comes into force.
3. Who has to register the GbR?
Section 707(4), first sentence of the amended German Civil Code (Bürgerliches Gesetzbuch, BGB) states that registration in the partnership register has to be carried out by all partners. The reason for this is that the registration brings the GbR into existence in external relationships (Section 719(1), second alternative of the amended German Civil Code), which entails liability risks for the partners. However, the partners may be represented when registering by authorized persons.
4. What information has to be provided in order to register?
The name of the GbR, its place of domicile and an address in an EU Member State have to be provided. Besides this, the names, dates of birth and places of residence of the partners as well as their powers of representation have to be stated. If one or more partners are legal entities or partnerships with legal capacity, their company name, legal form, registered office and, if applicable, their competent register and register number have to be stated. In addition, when registering, the partners have to confirm that the GbR is not already registered in the commercial register (Handelsregister) or register for partnership companies (Partnerschaftsregister) The information required can be found in Section 707(2) of the amended German Civil Code. Registered GbR will have to add the suffix “eGbR” to their name; the “e” means that the GbR is “eingetragen”, i. e. registered.
The application for entry in the partnership register must be filed electronically in notarially certified form (Section 707b, no. 2 of the German Civil Code, as amended, in conjunction with Section 12 of the German Commercial Code (Handelsgesetzbuch, HGB)). The procedure is the same as the application for registration in the commercial register.
5. How much does the registration cost?
A fee of € 100 is charged for the initial registration of a GbR with up to three partners. This fee increases by € 40 for each additional partner. In addition, there are costs for the required notarial involvement, which correspond to a commercial register application. The financial expenditure is expected to amount within € 150 to € 300 (net), depending on the number of partners.
6. What are the advantages and disadvantages of registration in the new partnership register?
Changes in the partnership’s structure will then only be entered in the partnership register and no longer in the land register. In future, only the GbR will be entered in the land register, and not its partners. Therefore, in the event of a change of partner – unlike in the past – it will no longer be necessary to correct the land register (which is more expensive). In future, representation arrangements agreed for the GbR will be evident from the partnership register. This is intended to promote trust and legal certainty for all parties concerned. Through the entry in the register, the GbR can determine a registered office/place of domicile that may differ from where the management is actually located.
The entry in the partnership register does not result in a GbR becoming a “merchant” (Kaufmann) in the sense of commercial law, meaning that no commercial obligations (such as accounting obligations) arise. Similarly, the legislator has not proposed to change the principles of income tax law with regard to the taxation of partnerships by the MoPeG.
Partners of GbR who are concerned about discretion may see it as a disadvantage that the partners can be identified in the register. Furthermore, registration in the partnership register requires the entry of the partnership’s economic beneficiaries in the transparency register (see amended Section 20 of the German Anti-Money Laundering Act (Geldwäschegesetz, GwG)).
Once it has been entered in the partnership register, the GbR has to report any changes in its partnership structure, location of its registered office/place of domicile/business and any possible changes to the powers of representation of a partner as soon as possible for entry in the partnership register (Section 707(3) of the amended German Civil Code).
7. Can unregistered GbR also acquire and dispose of property rights?
A GbR that is not registered in the partnership register can acquire real estate by succession. In addition to this, other (rarer) types of acquisition are possible that do not require any entry in the land register, such as assigning certificated liens on real property or claims secured by priority notices.
8. What applies if a land register transaction has not yet been executed when the MoPeG comes into force?
Transactions which have to be entered in the land register and which started before 1 January 2024 will continue to be subject to the old law provided that an application requesting entry of this has been filed and this has been agreed or approved. Similarly, there is no obligation to register the GbR concerned after the acquisition has been completed. Such an obligation may only arise if subsequent dispositions take place or changes are made to the partner structure of the GbR.
9. What does a GbR that is registered in the land register, but not yet in the partnership register, have to bear in mind if its partners change?
As of 1 January 2024, the resulting partners after withdrawal or entry must register the GbR in accordance with the Section 707(1) of the German Civil Code, as amended, and thereupon apply for the correction of the land register.
10. What are the consequences of the exit of the penultimate partner of a GbR?
Section 712a German Civil Code, as amended, provides that the withdrawal of the penultimate partner leads to the dissolution of the GbR without liquidation and the partnership assets are transferred to the last remaining partner. partnership being dissolved without any liquidation process and its assets passing to the last remaining partner. The land register has to be corrected to reflect this change. If the GbR has not yet been registered in the partnership register at this point in time, prior registration is not required. If, on the other hand, the GbR was registered in the partnership register, the withdrawal of the penultimate partner has to be registered and the GbR (which then no longer exists) is deleted from the register.
Noerr will continue to keep a close eye on future legal developments concerning real property-owning GbR. Do not hesitate to contact our advisors from our Real Estate Investment Group.