Pre-emption rights when buying propertywho gets first refusal

How a pre-emption right works

A pre-emption right only comes into play once a valid purchase contract has been concluded with a third party. The entitled person can then declare within a deadline that they will buy on the same terms. The original buyer goes away empty-handed; depending on how the contract is drafted, their notary costs are either reimbursed or remain with them.

The municipality's pre-emption right

Under the Federal Building Code (Baugesetzbuch, BauGB), municipalities have a statutory pre-emption right, among other things

• for land earmarked for public purposes in the development plan,
• in redevelopment and development areas,
• in areas with a pre-emption by-law (§ 25 BauGB),
• for undeveloped residential land in the outer area according to the land use plan.

The municipality's statutory pre-emption right does not apply to the purchase of owner-occupied flats (§ 24(2) BauGB). For developed plots, it plays a role mainly in redevelopment areas.

Procedure: The notary (Notar) notifies the municipality of the purchase contract. The municipality has two months to exercise its pre-emption right. In most cases it issues a negative certificate (Negativattest) – confirmation that there is no pre-emption right or that it will not be exercised. Only then does the purchase price become due.

The tenant's pre-emption right

Tenants have a pre-emption right if their rented flat was converted into owner-occupied property (Wohnungseigentum) after it was let to them (or is to be converted) and is sold to a third party for the first time (§ 577 BGB, German Civil Code). There is no pre-emption right if it is sold to family members, or if a whole apartment building that has not been divided is sold.

The deadline for exercising the right is two months from notification of the purchase contract. Sellers must inform the tenant of their pre-emption right.

Co-heirs' pre-emption right

If a co-heir sells their share of the estate to a third party, the other co-heirs have a pre-emption right (§ 2034 BGB) – also with a two-month deadline. If the whole community of heirs sells the property together, the heirs have no pre-emption right.

Contractual pre-emption rights

Pre-emption rights can also be agreed by contract and entered as a real pre-emption right (dingliches Vorkaufsrecht) in Section II of the land register (Grundbuch) – for example in favour of neighbours, family members or former owners. A look at the land register extract shows whether such a right exists. More under The land register explained simply.

What does this mean for buyers and sellers?

• Buyers: Allow for the time until the negative certificate; the purchase price only becomes due after that. Plan loan commitment interest and your move accordingly.
• Sellers: Inform tenants in good time if a pre-emption right exists. Mistakes can lead to claims for damages.

All pre-emption rights at a glance

A Bavarian special case: nature conservation and water

In Bavaria there is also a pre-emption right under the Bavarian Nature Conservation Act (Bayerisches Naturschutzgesetz). It concerns plots on which surface waters are located or which border on them, as well as land in nature reserves, national parks and natural monuments. In Upper Franconia, with its many streams, ponds and protected areas in the Fichtelgebirge and Frankenwald, this happens more often than many people expect.

In practice, this right is mainly exercised when the land is needed for renaturation or flood protection. For normal residential plots by a stream, the authority usually waives the right quickly. The notary checks this automatically.

Agricultural land

Anyone buying meadows, fields or woodland above a certain size needs approval under the Land Transactions Act (Grundstückverkehrsgesetz). The authority checks whether the land is being sold to a non-farmer although a farmer urgently needs it. In this case, a rural settlement company can exercise the pre-emption right and pass the land on to the farmer. For buyers of farmsteads and smaller former farms in rural Upper Franconia, it is therefore worth checking the plots for their type of use in advance.

The timeline in practice

Important for buyers: the purchase price only becomes due once all pre-emption rights have been cleared. Agree a sufficiently long commitment-fee-free period with the bank. More on the overall process under How a property purchase works and The notary appointment.

If the pre-emption right is actually exercised

If an entitled person exercises their right, a purchase contract on the same terms comes into being between them and the seller. For the original buyer, this means:

• No ownership: They do not receive the property, and any priority notice of conveyance (Auflassungsvormerkung) already entered is deleted.
• Costs: Whether notary and financing costs are reimbursed depends on how the contract is drafted. Good contracts include a provision for this, such as a right of withdrawal with reimbursement of costs by the seller.
• Agent's commission: A customary commission clause contained in the purchase contract may, under certain circumstances, also bind the person exercising the pre-emption right. This depends on the individual case.

So the rule is: check before the notary appointment whether a pre-emption right is realistically likely – for example with plots in a redevelopment area, by water, or with converted rented flats. The land register extract and a call to the municipality usually bring clarity quickly.

Practical examples from Upper Franconia

Case 1: Detached house in a redevelopment area. A house in the old town of a small Upper Franconian town lies in a formally designated redevelopment area. The notary sends an enquiry to the town. The town checks whether it needs the house for its redevelopment goals – for example for a square or a passageway. After three weeks the negative certificate arrives, and the purchase continues as normal. For buyers, a redevelopment area also means that building work requires approval under redevelopment law and that a compensation payment may be due at the end. At the same time, there are increased depreciation allowances and subsidies.

Case 2: Converted rented flat. Some years ago, an owner divided his apartment building in Bayreuth into owner-occupied flats. A let flat is now being sold for the first time. The tenant has a pre-emption right and must be informed about the purchase contract. He considers it for two months, but then decides against buying. The buyer receives the flat – with the existing tenancy agreement.

Case 3: Meadow by a stream. A residential house in the Fichtelgebirge comes with a meadow along a stream. The notary obtains a declaration under the Bavarian Nature Conservation Act. The authority waives its right; the procedure takes four weeks. Had the buyer known about this beforehand, he would have planned his moving date in a more relaxed way.

Checklist: checking pre-emption rights before the notary appointment

• Check Section II of the land register for registered pre-emption rights
• Ask the municipality: redevelopment area, pre-emption by-law, development plan with public land?
• Is the plot by a body of water or in a protected area?
• Does the purchase include agricultural land?
• For owner-occupied flats: was the flat converted after the tenancy began?
• For shares of an inheritance: sale to third parties or to co-heirs?
• Purchase contract: provision for the case that the right is exercised (withdrawal, costs)

Pre-emption rights for commercial and investment property

Pre-emption rights also play a role with commercial and investment property – for example where tenants have had a contractual pre-emption right registered, or where the municipality wants to secure land for urban development. Investors check this in their due diligence. A tenant's contractual pre-emption right can shrink the pool of buyers, because prospective buyers fear ending up empty-handed. More under Valuing commercial property.