Usufruct: what it means and who has to pay what

What is usufruct?

The law defines usufruct as follows: a thing is encumbered in such a way that the beneficiary is entitled to take the emoluments of the thing (Sec. 1030 (1) BGB). Emoluments are the benefits a thing brings: living in the house, the rent from a let flat, the lease payment for a field. The beneficiary is called the usufructuary (Nießbraucher), and the right is also called the right of usufruct (Nießbrauchrecht). Both mean the same thing.

Usufruct is a right in rem (dingliches Recht). It is attached to the thing, not to a contract between two people. For a plot of land, it is entered in Section II (Abteilung II) of the land register, among the encumbrances (Sec. 10 (1) GBV). It therefore also applies against every later owner.

Usufruct does not only exist in real estate. It is also possible in rights, for example in company shares or securities (Sec. 1068 BGB), in an entire estate of assets (Sec. 1085 BGB) and in an inheritance (Sec. 1089 BGB). In practice, however, it is almost always about houses and flats. That is what this guide is about.

Usufruct can be restricted by excluding individual uses (Sec. 1030 (2) BGB), for example letting. And it is strictly personal: the usufructuary cannot sell it, give it away or pass it on by inheritance (Sec. 1059 sentence 1, Sec. 1061 sentence 1 BGB). They may, however, leave the exercise of it to someone else (Sec. 1059 sentence 2 BGB), for example by letting.

Who owns the house under a usufruct?

The owner, i.e. the person entered in the land register as owner. Usufruct separates ownership and use: the owner has the house, the usufructuary has the use and the income.

Question	Usufructuary	Owner
Living in it themselves	yes, they may possess the thing (Sec. 1036 (1) BGB)	no, as long as the usufruct exists
Letting	yes, they conclude the tenancy agreements (Sec. 1059 sentence 2 BGB)	no
Keeping the rent	yes, the rental income belongs to them	no, unless agreed otherwise
Converting or making substantial changes	no (Sec. 1037 (1) BGB)	yes, but the usufructuary only has to tolerate necessary repairs and renewals (Sec. 1044 BGB)
Selling	no	yes, the usufruct continues to exist
Encumbering with a land charge	no	yes, but the new land charge (Grundschuld) ranks behind the usufruct (Sec. 879 (1) BGB)
Management	must maintain the previous economic purpose (Sec. 1036 (2) BGB)	can demand security if their rights are endangered (Sec. 1051 BGB)

For the children, owning a house subject to usufruct therefore means: they are the owners, but for the time being they have neither the home nor the rent. The house already belongs to them today, but they can only use it once the usufruct ends.

Types of usufruct

These terms do not appear in the law. They describe who grants the usufruct to whom and on what occasion.

Reserved usufruct (Vorbehaltsnießbrauch)

The owner transfers the property and reserves the usufruct for themselves. This is the most common case: parents transfer the house to a child during their lifetime (anticipated succession, vorweggenommene Erbfolge), continue to live there or keep the rent as provision for old age.

Granted usufruct (Zuwendungsnießbrauch)

The owner keeps the property and grants the usufruct to someone else, for example to a child who is to use a let flat as a source of income. Whether this happens free of charge or against payment matters above all for tax purposes.

Usufruct by way of legacy (Vermächtnisnießbrauch)

The testator directs in the will that the heir must create a usufruct for another person. The legacy only gives the beneficiary a claim against the heir (Sec. 2174 BGB); the usufruct only comes into existence when it is created and entered in the land register. This is often the usufruct solution for married couples: the children inherit the house, and the surviving spouse receives the usufruct. How it differs from the Berlin will is explained in our guide to the Berlin will. What the notary charges for a will is set out in the guide Will at the notary: costs.

Quota usufruct and fractional usufruct

With a quota usufruct (Quotennießbrauch), the beneficiary only receives a share of the emoluments, for example half of the rent. With a fractional usufruct (Bruchteilsnießbrauch), the usufruct only encumbers a co-ownership share.

Usufruct for the surviving spouse

Married couples can agree that, after the death of one of them, a separate usufruct begins for the other. Because every usufruct ends on the death of its holder (Sec. 1061 BGB), the spouse needs a separate right subject to a condition precedent.

Usufruct: who pays what?

The BGB only governs what the usufructuary must bear in relation to the owner. Everything else remains with the owner unless otherwise agreed. In the contract, you can allocate the costs differently.

Item	Who pays under the law	Basis
Ordinary maintenance: running repairs and servicing	usufructuary	Sec. 1041 BGB
Buildings insurance against fire and other accidents	usufructuary, if it is in line with proper management	Sec. 1045 BGB
Property tax and other ongoing public charges	usufructuary	Sec. 1047 BGB
Interest on land charges that were already registered when the usufruct was created	usufructuary	Sec. 1047 BGB
Repayment of these loans	owner	Sec. 1047 BGB
Extraordinary charges on the capital value, for example development charges (Erschließungsbeiträge)	owner	Sec. 1047 BGB
Consumption costs such as electricity, water, heating	whoever uses the property, i.e. the usufructuary or their tenants	use
Extraordinary renewal: new roof, new heating system	nobody has to under the law; the owner may, the usufructuary must tolerate it	Sec. 1041 sentence 2, Sec. 1044 BGB
Wear and tear through normal use	nobody compensates for it	Sec. 1050 BGB

Who pays for the new heating system? Many guides get this wrong. The usufructuary only owes repairs and renewals insofar as they form part of ordinary maintenance (Sec. 1041 sentence 2 BGB). Replacing the heating system or a new roof regularly does not. However, an obligation on the owner to pay for the renewal is not found in Sec. 1041 to 1050 BGB either. The usufructuary must report the damage (Sec. 1042 BGB). If they pay for the heating system themselves, they can only demand reimbursement under the rules on agency without specific authorisation (Geschäftsführung ohne Auftrag) (Sec. 1049 (1) BGB), and this claim becomes time-barred six months after the usufruct ends (Sec. 1057 sentence 2 in conjunction with Sec. 548 (2) BGB). Without an agreement, there is therefore a risk of deadlock. So set out in the contract who decides on, commissions and pays for major measures.

Creating a usufruct: notary, land register and costs

A usufruct on a plot of land requires two things: the agreement between the owner and the usufructuary and the entry in the land register (Sec. 873 (1) BGB). The land registry (Grundbuchamt) only 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 given away or transferred at the same time, the entire contract must be notarised (Sec. 311b (1) BGB). This transfer agreement (Übergabevertrag) then also contains the reserved usufruct.

This is how it works:

1. Clarify the goal: Who becomes the owner, who receives the usufruct, for life or for a limited period, with or without letting?
2. Draft from the notary: The notary drafts the transfer agreement with the usufruct and the consent. Have it checked before the appointment if you are unsure.
3. Notarisation: All parties sign at the notary's office.
4. Registration: The notary applies to the land registry for the transfer of ownership and the entry of the usufruct in Section II.

What does a usufruct cost at the notary?

The notary and the land registry charge under the Court and Notary Fees Act (GNotKG). An example based on our own calculation: Erika, 68 years old, transfers a house with a market value of €400,000 to her daughter and reserves a lifelong usufruct for herself.

Item	Amount	Basis
Notary: notarisation of the transfer agreement	€1,570.00	2.0 fee (no. 21100 KV) on €400,000, Table B €785; the transaction value is the market value, the usufruct is not deducted (Sec. 38, 46 (1), 97 GNotKG)
Notary: completion at the land registry	€392.50	0.5 fee (no. 22110 KV), only if the notary takes on completion work on instruction, for example requests deletion documents (preliminary remark 2.2.1.1); if they only obtain certificates from authorities or courts, at most €50 per activity (no. 22112 KV)
Notary: flat-rate expenses	€20.00	no. 32005 KV, 20% of the fees, at most €20
Notary: 19% VAT	€376.68	no. 32014 KV
Land register: daughter as owner	€785.00	1.0 fee (no. 14110 KV) on €400,000
Land register: entry of the usufruct	€435.00	1.0 fee (no. 14121 KV) on €200,000: annual value 5% of €400,000 (Sec. 52 (5) GNotKG) times 10 years for an age of over 50 up to 70 years (Sec. 52 (4) GNotKG)
Total	around €3,580	without further expenses, for example for land register extracts

If the beneficiary is older than 70, the land registry only counts the usufruct at the value of 5 years (Sec. 52 (4) GNotKG), and the fee falls. If a different annual value can be established, for example the actual rent, this applies instead of the 5% (Sec. 52 (5) GNotKG). Deleting a usufruct costs €25 at the land registry (no. 14143 KV GNotKG). No real estate transfer tax is payable on a transfer to children or to the spouse (Sec. 3 no. 4 and 6 GrEStG).

Usufruct in a let property

If the flat is already let when the usufruct is created, the usufructuary takes over the tenancy agreement if exercising the usufruct would deprive the tenant of the use of the flat (Sec. 567 sentence 1 BGB in conjunction with Sec. 566 BGB). From then on, they are the landlord: they receive the rent, they prepare the service charge statement, they are the point of contact for defects.

If the usufruct ends, for example through death, the owner takes over the current tenancy agreements (Sec. 1056 (1) BGB). They may give notice with the statutory period (Sec. 1056 (2) BGB). For residential space, according to a widely held view, they nevertheless need a reason for giving notice such as own use. If the usufructuary has waived the usufruct, the owner may only give notice with effect from the date on which the usufruct would have ended without the waiver (Sec. 1056 (2) sentence 2 BGB).

As a rule, the usufructuary pays tax on the rental income as income from letting and leasing.

Gift with usufruct: 10-year period, compulsory share and need for care

Anyone making a gift has to keep three different ten-year periods in mind. They are often confused.

Compulsory share: when does the 10-year period begin with a usufruct?

Gifts increase the compulsory share (Pflichtteil) of disinherited relatives. They count in full in the first year before the death and one tenth less for each further year; once ten years have passed since the gift was made, they are disregarded (Sec. 2325 (3) BGB). If the donor reserves the usufruct, they have not given up the house in economic terms. According to case law, the period then does not, as a rule, begin to run as long as the usufruct exists (Federal Court of Justice (BGH), judgment of 27 April 1994, IV ZR 132/93; confirmed by BGH, judgment of 29 June 2016, IV ZR 474/15). Anyone who wants to keep the compulsory share small by making a gift will therefore usually not achieve this with a reserved usufruct. More on this in the guide to the compulsory share. For gifts to the spouse, the period does not begin before the marriage is dissolved in any case (Sec. 2325 (3) sentence 3 BGB).

Need for care and the social welfare office

If the donor later becomes needy, they can reclaim the gift insofar as they can no longer pay for their reasonable maintenance (Sec. 528 (1) BGB). The recipient can avoid handing it back by paying the necessary maintenance. Reclaiming is excluded if ten years have passed since the gift was made when the need arises (Sec. 529 (1) BGB). A reserved lifelong right of use does not prevent this period from beginning (BGH, judgment of 19 July 2011, X ZR 140/10). If the social welfare office (Sozialamt) pays, for example, help with care costs (Hilfe zur Pflege), it can transfer this claim to itself by written notice (Sec. 93 (1) SGB XII). The social welfare office counts rental income from the usufruct as income (Sec. 82 (1) SGB XII).

Gift tax

Several gifts from the same person within ten years are added together (Sec. 14 (1) ErbStG). The tax-free allowances can therefore be used again every ten years. This period has nothing to do with the compulsory share.

Calculating usufruct: value and tax

Usufruct has a monetary value. It reduces the value of the gift, because the children receive an encumbered house. This is how the tax office calculates it:

1. Determine the annual value: For owner-occupation, the usual local rent (Sec. 15 (2) BewG); for letting, the average expected income (Sec. 15 (3) BewG).
2. Cap it: The annual value may not exceed the tax value of the property divided by 18.6 (Sec. 16 BewG).
3. Look up the multiplier: For a lifelong usufruct, a multiplier based on the usufructuary's age and sex applies. The Federal Ministry of Finance publishes the table every year on the basis of the life table (Sec. 14 (1) BewG); a new table applies to gifts from 1 January 2027. The older the usufructuary, the smaller the factor.
4. Capital value: annual value times multiplier.
5. Deduct: The capital value is deducted from the tax value of the property, and the tax-free allowances from the remainder.

Example for step 2: If the house has a tax value of €400,000, the annual value may be at most €21,505.38 (€400,000 divided by 18.6). A usual annual rent of €18,000 is below this and 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).

Caution in the case of early death: If the usufructuary dies shortly after the gift, the tax is recalculated on the basis of the actual duration. This applies, for example, to a usufructuary aged over 65 up to 70 if the usufruct has not lasted more than 6 years (Sec. 14 (2) BewG). The children then pay additional tax.

Reduction in value on a sale: For the market value of the property, what counts is not the tax formula, but what a buyer will pay for an encumbered house. A valuer takes into account the usufructuary's age and the rental value for this.

Advantages and disadvantages of usufruct

Advantages for the transferors

• They continue to live there or keep the rent, for life and secured in the land register.
• The assets already pass to the children during their lifetime; the tax-free allowances can be used again every ten years.
• The value of the usufruct reduces the gift tax.

Disadvantages for the children as owners

• They can neither use the house themselves nor let it as long as the usufruct exists.
• A sale is difficult: the buyer takes over the house with the usufruct. The right can only be deleted if the usufructuary declares that it is cancelled (Sec. 875 (1) BGB).
• For a loan, banks usually require first rank. For this, the usufructuary must step back in rank with their right (Sec. 880 BGB).
• For major repairs, the children are in practice on their own if nothing has been agreed (see "Who pays what?").
• If the usufructuary dies early, gift tax may become payable retrospectively (Sec. 14 (2) BewG).

Disadvantages for the transferors

• Ownership is gone. They can no longer sell, mortgage or convert the house on their own.
• Without a reclaim clause, they do not get the house back if the child becomes insolvent, divorces or dies before them.
• If the child becomes subject to enforcement proceedings, the usufruct can lapse if the auction is conducted on the basis of a claim that ranks ahead of it (Sec. 10, 44, 52, 91 ZVG).

Disadvantages for other heirs

• The siblings' compulsory share usually cannot be reduced by the gift with usufruct, because the 10-year period does not begin to run. Anyone left empty-handed under the rules of succession can find out what they are entitled to in the guide to intestate succession.

Usufruct or right of residence?

Both rights ensure that someone can stay in a property that no longer belongs to them. The right of residence is narrower, however. In legal terms, it is called Wohnungsrecht and is a limited personal servitude (beschränkte persönliche Dienstbarkeit) (Sec. 1093 BGB).

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.

When does a usufruct end?

• Death of the usufructuary: The usufruct ends (Sec. 1061 sentence 1 BGB). The usufructuary's heirs do not inherit it. If it belongs to a company, it ends with the company.
• Expiry of a period or occurrence of a condition: if this has been agreed and registered, for example on remarriage (Sec. 158 (2), 163 BGB, Sec. 24 GBO).
• Waiver: The usufructuary declares that they are giving up the right, and it is deleted (Sec. 875 (1) BGB). For the deletion, the land registry needs their certified consent (Sec. 19, 29 GBO). A waiver can be a gift to the owner.
• Compulsory auction: The usufruct ends with the award of the property to the highest bidder (Zuschlag) if it is not included in the lowest bid (geringstes Gebot) (Sec. 52, 91 ZVG).
• No end through sale or death of the owner: If the owner sells or dies, the usufruct continues to exist. If several people inherit the encumbered house, they form a community of heirs and can only realise it together with the usufruct, including in a partition auction.

Clearing up the land register after death: The owner applies for deletion with the death certificate. Before one year has passed since the death, the land registry also requires the consent of the usufructuary's heirs if arrears of payments cannot be ruled out; the same applies if the heirs have objected to the deletion. 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).

Checklist: what belongs in the agreement

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

• Duration: for life, for a limited period or until an event such as remarriage or a move into a care home.
• Scope: the whole house or part of it, letting permitted or excluded (Sec. 1030 (2) BGB).
• Costs: who bears ordinary repairs, major renewals, property tax, insurance and the repayment of existing loans.
• Decisions: who decides on, commissions and pays for the roof, heating, facade and energy-efficiency refurbishment.
• Reclaiming: in which cases the transferors can demand the house back, for example in the event of insolvency, divorce, the child dying first or a sale without consent, and whether this is secured by a priority notice (Vormerkung).
• Spouse: whether the surviving partner receives a separate usufruct.
• Deletion: a note that proof of death is sufficient for deletion (Sec. 23 (2) GBO).
• Compulsory share and siblings: whether an equalisation payment or a waiver of the compulsory share is to be agreed; questions of drafting are covered in the guide Writing a will.
• Tax: have the value of the usufruct and the gift tax calculated in advance.

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