Lifelong right of residence: what it means and who pays what

What is a lifelong right of residence?

The law speaks of the Wohnungsrecht: the right to use a building or part of a building as a home to the exclusion of the owner (Sec. 1093 (1) sentence 1 BGB). It encumbers the plot of land, but only belongs to a specific person. In the land register, it is entered in Section II (Abteilung II).

The right can cover the whole house, a flat or individual rooms. If it is limited to part of the building, you may also use the facilities intended for all occupants, such as the stairwell or the laundry room (Sec. 1093 (3) BGB).

"For life" is the normal case: the right ends on the death of the holder (Sec. 1090 (2) in conjunction with Sec. 1061 sentence 1 BGB) and can neither be sold nor given away (Sec. 1092 (1) sentence 1 BGB). A right of residence for a limited period is possible if you agree it that way and have it registered.

Right of residence, Wohnungsrecht, permanent residential right: the terms

In everyday language, almost everyone says "Wohnrecht" and means the Wohnungsrecht under Sec. 1093 BGB. Related rights differ in important respects:

Right	Basis	Owner excluded?	Transferable, inheritable?	Applies against buyers?
Wohnungsrecht ("lifelong right of residence")	Sec. 1093 BGB	yes	no (Sec. 1092 (1), Sec. 1090 (2) in conjunction with Sec. 1061 BGB)	yes, if entered in the land register
Right of shared use as a servitude	Sec. 1090 BGB	no, use only "in individual respects"	no	yes, if registered
Permanent residential right (Dauerwohnrecht)	Sec. 31, 33 WEG	yes (Sec. 31 (1) WEG)	yes (Sec. 33 (1) WEG)	yes, if registered
Right of residence only in the contract	agreement	as agreed	as agreed	no

When does a right of residence make sense?

Transferring a house during your lifetime: Parents transfer their house to a child and secure the right to live there until the end of their lives. The process and costs of the transfer are explained in the guide Transferring a house.

Providing for a partner: Anyone who leaves the property to their children can leave a right of residence to their partner as a legacy in their will. The beneficiary thereby receives a claim against the heirs to have the right created for them (Sec. 2174 BGB). More in the guides Legacy and Berlin will.

Selling and staying on: Even when selling to third parties, the seller can reserve a right of residence; the buyer then pays less.

Rights under a lifelong right of residence

Certain rules on usufruct apply to the right of residence (Sec. 1093 (1) sentence 2 BGB), as do rules on easements (Sec. 1090 (2) BGB):

Question	Holder of the right of residence	Owner
Living there yourself	yes, to the exclusion of the owner (Sec. 1093 (1) BGB)	no, not in these rooms
Taking in family and carers	yes, the family and the persons needed for service and care (Sec. 1093 (2) BGB)	must accept this
Letting or leaving it to others	only if permitted (Sec. 1092 (1) sentence 2 BGB)	no
Converting	no (Sec. 1093 (1) sentence 2 in conjunction with Sec. 1037 (1) BGB)	only without impairing the right of residence
Selling, encumbering	no, the right cannot be transferred	yes, the right of residence continues to exist
Fending off interference	yes (Sec. 1090 (2) in conjunction with Sec. 1027, 1004 BGB)	can demand that the right be exercised considerately (Sec. 1090 (2) in conjunction with Sec. 1020 BGB)

The holder must allow the owner to carry out necessary repairs (Sec. 1044 BGB). A general right of inspection is not set out in the law; set it out in the contract.

Right of residence: who pays what?

The law only governs the costs through the reference to the rules on usufruct (Sec. 1093 (1) sentence 2 BGB). Anything not covered there is not allocated to the holder. In the contract, you can distribute everything differently.

Item	Who pays under the law	Basis
Ordinary maintenance: ongoing repairs and servicing	holder of the right of residence	Sec. 1093 (1) sentence 2 in conjunction with Sec. 1041 BGB
Extraordinary renewal: new roof, new heating system	nobody has to under the law; the owner may, the holder must tolerate it	Sec. 1041 sentence 2, Sec. 1044 BGB
Property tax	owner as the taxpayer	Sec. 10 (1) GrStG, Sec. 39 (1) AO; Sec. 1093 BGB does not refer to Sec. 1047 BGB
Buildings insurance	not allocated to the holder by law	Sec. 1093 BGB does not refer to Sec. 1045 BGB
Electricity, water, heating	whoever uses the rooms, i.e. the holder	use
Wear and tear from normal living	nobody compensates for it	Sec. 1093 (1) sentence 2 in conjunction with Sec. 1050 BGB
Rent	none, if nothing has been agreed	agreement

Who pays for the new heating system? Many guides simply name the owner here. The holder only owes renewals insofar as they form part of ordinary maintenance (Sec. 1041 sentence 2 BGB); a new heating system regularly does not. However, an obligation on the owner to pay does not follow from the references in Sec. 1093 BGB either. The holder must report the damage (Sec. 1042 BGB). If they pay themselves, they only receive reimbursement under the rules on agency without specific authorisation (Geschäftsführung ohne Auftrag) (Sec. 1049 (1) BGB), and the claim becomes time-barred six months after the right of residence ends (Sec. 1057 in conjunction with Sec. 548 (2) BGB). So set out in the contract who decides on and pays for major measures. The same situation under a usufruct is described in the guide Usufruct.

Registering a right of residence: notary, land register and costs

A right of residence in rem (dingliches Wohnrecht) comes into existence through agreement and entry in the land register (Sec. 873 (1) BGB). The land registry (Grundbuchamt) makes the entry if the owner consents to it (Sec. 19 GBO), and this consent (Bewilligung) must be publicly certified (Sec. 29 (1) GBO). It therefore cannot be done without a notary. If the house is transferred at the same time, the entire contract must be notarised (Sec. 311b (1) BGB). If the right of residence is granted free of charge, this is a promise of a gift; a defect of form is cured by the registration (Sec. 518 BGB).

What matters is the rank (Rang). It depends on the order of the entries; for rights in different sections, such as a right of residence (Section II) and a land charge (Grundschuld) (Section III), on the date of entry (Sec. 879 (1) BGB). If a land charge ranks ahead of the right of residence, the right of residence can be extinguished in a compulsory auction. So make sure it has the first-ranking position.

What does it cost to register a right of residence?

The basis is the Court and Notary Fees Act (GNotKG). A lifelong right of residence counts at the annual value times 20, 15, 10 or 5 years, depending on age; over 70, times 5 (Sec. 52 (4) GNotKG). The annual value is 5% of the value of the property if no other value can be established (Sec. 52 (5) GNotKG).

Example based on our own calculation: Thomas grants his mother Erika, 72 years old, a lifelong right of residence in his house. The house is worth €400,000.

Item	Amount	Basis
Value of the right of residence	€100,000	5% of €400,000 = €20,000, times 5 years (Sec. 52 (4) and (5) GNotKG)
Land registry: registration	€273.00	1.0 fee (no. 14121 KV), Table B
Notary: notarisation of a separate contract on the right of residence	€546.00	2.0 fee (no. 21100 KV)
Notary: flat-rate expenses	€20.00	no. 32005 KV, at most €20
Notary: 19% VAT	€107.54	no. 32014 KV
Total	around €950	without completion fees and further expenses

If Erika were 65, the right of residence would count at 10 annual values (€200,000), and the land register fee would rise to €435. In a transfer agreement, the notary only counts the higher value of performance and consideration (Sec. 97 (3) GNotKG); the right of residence then does not, as a rule, increase the notarisation fee. Deletion later costs €25 (no. 14143 KV GNotKG).

Calculating the right of residence: value for tax and sale

For gift tax, the capital value of the right of residence reduces the value of the transferred house. This is how the tax office calculates it:

1. Annual value: the customary local rent (Sec. 15 (2) BewG).
2. Cap: at most the tax value of the property divided by 18.6 (Sec. 16 BewG).
3. Multiplier: by age and sex from the table of the Federal Ministry of Finance (Bundesfinanzministerium), which follows the current mortality table (Sec. 14 (1) BewG). The older the holder, the smaller the factor.
4. Capital value: annual value times multiplier.

Example for step 2: With a tax value of €400,000, the annual value may be at most €21,505.38. A customary annual rent of €12,000 counts in full.

The tax-free allowances are €400,000 for children, €500,000 for the spouse and €200,000 for grandchildren (Sec. 16 (1) no. 1 to 3 ErbStG). If the holder dies early, the calculation is redone based on the actual duration, for example at an age of more than 70 up to 75 years if the right of residence existed for no more than 5 years (Sec. 14 (2) BewG). No real estate transfer tax is payable on transfers to children or the spouse (Sec. 3 no. 4 and 6 GrEStG).

How much a right of residence reduces the market value does not follow a fixed percentage. A valuer takes into account the age, the rental value and the scope of the right (Sec. 46, 47 ImmoWertV).

Right of residence and care home: what happens to the right?

The right of residence continues to exist. Under the law, it ends on death (Sec. 1090 (2) in conjunction with Sec. 1061 BGB) or by cancellation (Sec. 875 BGB), not by moving out.

Letting to pay for the home? Only if the contract permits leaving it to others (Sec. 1092 (1) sentence 2 BGB). Otherwise, the rooms often stand empty: the holder may not let them, the owner may not move in. Whether the owner must then permit letting or pay compensation is a question of interpreting the contract. Here, usufruct is more flexible.

Who pays for the care home? First, the person in need of care, from long-term care insurance, income and assets. If they have given their house away and can no longer support themselves, they can reclaim the gift; the recipient can avert this by paying the necessary maintenance (Sec. 528 (1) BGB). This is excluded if ten years have passed since the gift was made when the need arises (Sec. 529 (1) BGB); a reserved right of residence does not prevent the period from starting (Federal Court of Justice, judgment of 19 July 2011, X ZR 140/10). If the social welfare office pays, it can transfer the claim to itself by written notice (Sec. 93 (1) SGB XII).

Caution with a waiver: If the holder gives up their right of residence without consideration, this can be a gift to the owner. Whether the right of residence counts as usable assets (Sec. 90 (1) SGB XII) is an open question.

10-year period with a right of residence: compulsory share, reclaiming, tax

Three ten-year periods are often confused.

Compulsory share: Gifts increase the compulsory share of disinherited relatives. They count in full in the first year before the inheritance, then one tenth less each year; after ten years since the gift was made, not at all (Sec. 2325 (3) BGB). With a usufruct, the period does not, as a rule, begin as long as the donor uses the house. With a right of residence, it is only prevented in exceptional cases (BGH, judgment of 29 June 2016, IV ZR 474/15, headnote). What matters is whether the donor was able to continue using the house essentially as before. If the right of residence only covers part of the house and they may not leave it to anyone else, they are no longer "master of the house", and the period begins with the registration of the new owner (BGH, ibid., paras. 16 f.). With a right of residence in the whole house and permitted letting, this may be different. For gifts to the spouse, the period does not begin before the marriage is dissolved (Sec. 2325 (3) sentence 3 BGB). More in the guides Compulsory share and Compulsory share supplement.

Reclaiming in the event of impoverishment: ten years from the gift being made (Sec. 529 (1) BGB); the right of residence does not change this.

Gift tax: Gifts from the same person within ten years are added together (Sec. 14 (1) ErbStG).

When does a lifelong right of residence end?

• Death of the holder: The right ends (Sec. 1090 (2) in conjunction with Sec. 1061 sentence 1 BGB). Their heirs do not inherit it.
• Period or condition: if agreed and registered, for example on a permanent move into a care home.
• Waiver: The holder gives up the right, and it is deleted (Sec. 875 (1) BGB); their certified consent is required (Sec. 19, 29 GBO). A settlement payment is customary, but neither side has a claim to one.
• Compulsory auction: The right of residence only remains if it ranks ahead of the right of the creditor pursuing the auction and therefore falls within the lowest bid (geringstes Gebot) (Sec. 44, 52 (1) ZVG). Otherwise, it is extinguished with the award (Zuschlag) (Sec. 91 (1) ZVG); it is replaced by a monetary annuity in the amount of the annual value from the proceeds (Sec. 92 (2) ZVG), to the extent that the proceeds are sufficient after the prior-ranking claims (Sec. 11 (1), Sec. 109 (2) ZVG).
• No end through sale or death of the owner: The registered right of residence remains. If several people inherit the house, they form a community of heirs and can only realise it together with the right of residence, including in a partition auction (Sec. 182 (1), Sec. 52 (1) ZVG).

How do you get someone with a right of residence out of the house?

Against their will, in practice not at all. The law does not provide for notice of termination as with a tenancy agreement. Possible options are an agreement with a settlement payment, an agreed condition or period and, if the holder gave the house away themselves, within narrow limits, revocation of the gift for gross ingratitude (Sec. 530 BGB). If living together is "unreasonable", each side can only demand that the other exercises its right considerately and refrains from interference (Sec. 1090 (2) in conjunction with Sec. 1020, 1027 BGB).

Deletion after death: Before one year has passed, the land registry requires the consent of the heirs if arrears cannot be ruled out. This does not apply if the land register states that proof of death is sufficient (Sec. 23 GBO). The fee is €25 (no. 14143 KV GNotKG).

Right of residence or usufruct?

Both rights ensure that someone can stay in a property that no longer belongs to them. Usufruct is broader: it also permits letting and rental income. Details in the guide Usufruct.

Feature	Usufruct	Right of residence
Law	Sec. 1030 to 1089 BGB	Sec. 1093 BGB
Living there yourself	yes	yes, to the exclusion of the owner
Letting	yes (Sec. 1059 sentence 2 BGB)	only if leaving it to others is permitted (Sec. 1092 (1) sentence 2 BGB)
Rental income	belongs to the usufructuary	only if leaving it to others is permitted
Taking in family and carers	yes	yes (Sec. 1093 (2) BGB)
Ordinary maintenance	usufructuary (Sec. 1041 BGB)	holder of the right of residence (Sec. 1093 (1) sentence 2 in conjunction with Sec. 1041 BGB)
Property tax, insurance	usufructuary (Sec. 1045, 1047 BGB)	not allocated to the holder by law (Sec. 1093 (1) sentence 2 BGB does not refer to Sec. 1045, 1047 BGB), usually governed by contract
Transferable, inheritable	no (Sec. 1059, 1061 BGB)	no (Sec. 1092 (1), Sec. 1090 (2) in conjunction with Sec. 1061 BGB)
Land register	Section II	Section II

Rule of thumb: If you only want to stay living there yourself, a right of residence is often enough, and it restricts the children less. If you want to be able to let the property, for example if you later move into a care home, usufruct is the better fit. Which solution is more favourable for tax purposes and for the compulsory share depends on the individual case.

Further alternatives: the permanent residential right can be sold and inherited (Sec. 33 (1) WEG). A tenancy agreement for life cannot be terminated extraordinarily after 30 years (Sec. 544 sentence 2 BGB).

Advantages and disadvantages of the right of residence

For the holder: They can stay living there until the end of their life, protected against buyers as well, may take in family and carers and pay no rent if nothing has been agreed. On the other hand: letting only with permission, so in a care home the right brings in no money without a suitable clause; under the law, nobody has to pay for major repairs; if the holder steps back in rank behind a land charge, they can lose the right in a compulsory auction.

For the owner: They can neither use nor let the rooms, selling and financing become more difficult, and the price falls. Banks usually demand the first-ranking position; for this, the holder must step back in rank (Sec. 880 BGB). The right is only deleted with the holder's consent (Sec. 875 (1) BGB). For the siblings' compulsory share, on the other hand, the period usually begins to run.

Checklist: what belongs in the contract

Not a template, but the points you should clarify before the notary appointment:

• Rooms: the whole house or precisely designated rooms, shared use of garden, cellar, garage.
• Duration: for life or for a limited period, ending on a permanent stay in a care home yes or no.
• Leaving it to others: whether letting is permitted (Sec. 1092 (1) sentence 2 BGB) and who is entitled to the rent.
• Costs: ordinary repairs, major renewals, property tax, insurance, consumption.
• Decisions: who decides on and pays for the roof, heating and refurbishment.
• Access: when the owner may enter the rooms after giving notice.
• Rank: first-ranking position or a reservation of rank (Rangvorbehalt) for a later land charge.
• Spouse: a separate right of residence for the partner that continues after the death of the other.
• Deletion: a note that proof of death is sufficient (Sec. 23 (2) GBO).
• Need for care and tax: clarify rights to reclaim, the value of the right of residence and gift tax in advance.

You will find an overview of all topics relating to inheritance in the guide to inheritance law.