Selling a share of the estate and paying out co-heirs

Share of the estate or property: what you can sell

A community of heirs owns the estate jointly (§ 2032 BGB (German Civil Code)). Nobody owns a specific part of the house. That is why there are two different things that can be sold.

• The share of the estate. This is your stake in the whole estate. It includes the property, bank accounts, household contents and also the debts. You can dispose of it on your own (§ 2033 para. 1 BGB (German Civil Code)).
• The property. The heirs decide on individual items of the estate only jointly (§ 2040 para. 1 BGB (German Civil Code)). When the flat is sold, everyone signs.

What does not work is selling your share of the flat alone. § 2033 para. 2 BGB (German Civil Code) expressly rules this out. If you want to leave the community without the others following, you therefore sell the entire share of the estate.

The buyer therefore does not get a house, but your place in the community of heirs. They can no more dispose of the property alone than you could before. That lowers the price. The basics of the community of heirs are covered in the article Property in a community of heirs.

How does the sale of a share of the estate work?

The contract for the sale of a share of the estate must be notarised (§ 2033 para. 1 sentence 2 BGB (German Civil Code); the same applies to the purchase of an inheritance under § 2371 BGB). The rules on the purchase of an inheritance apply by analogy to other contracts aimed at transferring an inheritance (§ 2385 para. 1 BGB).

In practice, the route looks like this:

1. Clarify the estate. You list what belongs to the estate and what debts exist.
2. Find a buyer. This can be a co-heir or a third party.
3. Instruct a notary. The notary drafts and notarises the contract.
4. Inform the co-heirs. If the share was sold to a third party, the seller must notify the co-heirs of the transfer without delay (§ 2035 para. 2 BGB (German Civil Code)).

As the seller, you owe the buyer what is in the estate at the time of sale (§ 2374 BGB (German Civil Code)). Benefits from the period before the sale stay with you, and you also bear the burdens of that period (§ 2379 BGB). Different arrangements belong in the contract.

Do the co-heirs have a right of first refusal?

That depends on whom you sell to.

• Sale to a third party: The other co-heirs are entitled to the right of first refusal (§ 2034 para. 1 BGB (German Civil Code)). They can step into the contract and take over the share on the same terms (§ 464 para. 2 BGB).
• Sale to a co-heir: The law grants the right of first refusal only on a sale to a third party. The other co-heirs then do not have to be asked.

The period for exercising the right is two months (§ 2034 para. 2 BGB (German Civil Code)). The seller must tell the co-heirs the content of the contract with the third party without delay (§ 469 para. 1 BGB). When the co-heirs exercise the right, a declaration to the seller without any particular form is enough (§ 464 para. 1 BGB). Even after the share has been transferred to the buyer, the co-heirs can still exercise the right against the buyer (§ 2035 para. 1 BGB).

For you, this means: a sale to a third party is only reliable once the period has expired or the co-heirs have waived their right. Allow at least two months.

What is the share of the estate worth?

The value comes from the inheritance quota applied to the estate after debts. A simple example with assumed figures, for illustration only:

• Market value of the flat (assumption): €600,000
• Remaining loan on the flat (assumption): €100,000
• Other estate: none. Four heirs in equal shares.

Calculation: €600,000 minus €100,000 gives €500,000. Divided by four, that is €125,000 per share of the estate. This is the arithmetical share, not the price a third party pays. In our experience, an outsider offers less, because they join a community they cannot control and have to factor in the co-heirs' right of first refusal.

What matters is the figure for the property itself. Without a transparent market value, heirs argue over every amount. The article Valuation methods in Berlin explains how a value comes about. We prepare the market value estimate free of charge, and it gives all heirs the same basis.

How do I pay out co-heirs and keep the property?

If you want to keep the house, you buy out the others' shares. For that you need a value and the money.

The value. All heirs must accept a valuation. In the example above, you pay each of the three co-heirs €125,000, €375,000 in total, and take over the loan.

The money. The amount usually comes from a loan secured on the property. Check with your bank beforehand whether it will finance the payout, because approval takes time, and without it the agreement falls through.

If ownership of the property passes to you, the contract must be notarised (§ 311b para. 1 BGB (German Civil Code)). Settle the value before the negotiations, not afterwards.

Clarify tax questions about the payout in advance with a tax adviser. Inheritance tax must be kept separate from any income tax on a gain from a sale; more on this in the article Speculation period.

Who is liable for the estate's debts?

Selling a share of the estate does not remove the debts. The buyer is liable to the estate's creditors from the time of purchase, without ending the seller's liability (§ 2382 para. 1 BGB (German Civil Code)). This liability towards the creditors cannot be excluded by an agreement between buyer and seller (§ 2382 para. 2 BGB).

As between the parties, the buyer is obliged to the seller to settle the estate's liabilities (§ 2378 para. 1 BGB (German Civil Code)). The seller is liable to a limited extent for defects in title. They guarantee that the right of inheritance is theirs and that certain encumbrances such as legacies, conditions, compulsory-share burdens or division orders do not exist (§ 2376 para. 1 BGB).

Before any sale, you should therefore have an honest overview of loans, outstanding running costs and obligations under the will.

When does selling the whole property pay off?

Selling a share of the estate is an exit, not a route to the best price. It suits those who need money quickly or no longer want to talk to the others.

If everyone sells together, the property achieves the market price, and the proceeds are split by inheritance quota. This requires everyone to agree (§ 2040 para. 1 BGB (German Civil Code)). If the heirs quarrel, anyone can demand the division of the estate (§ 2042 para. 1 BGB). For properties, this ends without an agreement in a forced auction (§ 753 para. 1 BGB; proceedings under § 180 ZVG (Compulsory Auction Act)). There, the bids on the day decide, not the market. How to avoid this is covered in the guide Avoiding a partition auction.

So compare both routes in figures: the price for the share of the estate that a buyer offers, against your inheritance quota of the proceeds from a normal sale. How such a sale works in Berlin is covered in the article Selling a property in Berlin, and the article Documents for the sale lists the papers you need. The situation is similar in a divorce with a jointly owned property. If you have questions about your case, get in touch.

Sources

• § 2032 BGB (German Civil Code), community of heirs
• § 2033 BGB (German Civil Code), co-heir's right of disposal
• § 2034 BGB (German Civil Code), right of first refusal against the seller
• § 2035 BGB (German Civil Code), right of first refusal against the buyer
• § 2040 BGB (German Civil Code), disposal of items belonging to the estate
• § 2042 BGB (German Civil Code), division of the estate
• § 2371 BGB (German Civil Code), form of the purchase of an inheritance
• § 2374 BGB (German Civil Code), duty to hand over
• § 2376 BGB (German Civil Code), seller's liability
• § 2378 BGB (German Civil Code), estate liabilities
• § 2379 BGB (German Civil Code), benefits and burdens before the sale
• § 2382 BGB (German Civil Code), buyer's liability to the estate's creditors
• § 2385 BGB (German Civil Code), application to similar contracts
• § 311b BGB (German Civil Code), contracts concerning plots
• § 464 BGB (German Civil Code), exercise of the right of first refusal
• § 469 BGB (German Civil Code), duty to notify, exercise period
• § 753 BGB (German Civil Code), division by sale
• § 180 Zwangsversteigerungsgesetz (ZVG) (Compulsory Auction Act), termination of a co-ownership