Selling an inherited property with right of residence

An inheritance community usually decides to sell a jointly inherited property. Often, this is the simplest and fairest way to reach an agreement. But what if someone else is still living in the property with a right of residence? Does that reduce its value?

A right of residence registered in the land register means that one or more people are allowed to live in the respective property for a limited period or until their death. This right remains valid even if the property is sold. First, however, one should determine what type of right of residence exists.

Temporary or permanent – ​​what type of tenancy right applies?

A temporary right of residence, as the name suggests, is only valid for a specific period. In the case of a planned sale, it can be worthwhile to offer the holder of the right compensation due to its limited duration, as this makes the property easier to sell. If, on the other hand, a right of residence for life exists, it is "sold along with the property." Only the owner changes; the resident remains. It's important to know that the resident does not have to consent to the sale, and the right of residence becomes invalid upon their death; it cannot be transferred or inherited.

Special case: forced auction

If, for whatever reason, the property is subject to forced auction, the right of residence is thereby revoked. The banks' claims take precedence over the owner's rights in this case. The resident receives compensation equal to the value of the right of residence. This value must also be taken into account when selling the property and deducted from the total value.

Right of residence – what is it worth?

To determine the value of a property with a right of residence, the age and gender of the holder of the right must be taken into account. This is done using tables provided by the Federal Statistical Office. Let's assume a 75-year-old man lives in a property worth €300,000. He pays a hypothetical net rent of €700 per month. His average life expectancy of 86 years is also considered in the calculation.

To determine the value, the so-called capital value multiplier is multiplied by the annual rent (this is a key figure that helps to relate the property value to the rental income generated). In our calculation, the value is 8.271. Multiplying the annual rent of €8,400 by this value yields €69,476. The property value is therefore reduced by this amount, resulting in a value of €230,524.

Sale with right of residence – how it can succeed

No one can know how old the person with the lifelong right of residence will actually become. The seller therefore cannot predict when the property will be habitable, which poses a certain risk for the buyer. One solution could be to register the right of residence for a separate apartment – ​​this way, the owner can use the rest of the property. A local, reputable real estate agent can advise you on the most advantageous solution in your specific situation. As a neutral third party, they can assist you in dissolving the community of heirs, calculating the property's value, and, if necessary, reaching an agreement with the holder of the right of residence.

Have you inherited a property and would like to know its value? Contact us! We'd be happy to advise you.

Note:
For the sake of readability, this text uses the generic masculine form. Female and other gender identities are explicitly included where relevant to the statement.

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

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