Loan paid off—now what?

When a loan is finally paid off, many owners wonder what happens to the land charge registered for it. Does it have to be deleted or can it simply remain in the land register? Contrary to popular belief, leaving it in place only has advantages in a few cases, but at the same time carries considerable risks for a later sale or transfer of the property.

Deletion of the land charge

„Once a loan has been repaid, the land charge registered for it does not automatically expire. In order to have a land charge deleted, you first need a certified deletion authorization from the bank and a notarized declaration of consent from the owner,“ explains notary Dr. Irene Kämper, press spokesperson for the Rhineland Chamber of Notaries, adding: „In the case of a so-called registered land charge, the original land charge certificate must also be presented.“

Sale of the property

If the property is sold, existing land charges must generally be deleted, as otherwise the buyer would run the risk of foreclosure after paying the purchase price due to the seller's outstanding debts. If the seller does not (yet) have the deletion authorization and any land charge certificate at this point in time, for example because the loan has not yet been paid off, the notary is usually commissioned to obtain these documents.

„Often, the cancellation authorization and any land charge certificate are sent to the borrower as soon as the loan has been repaid. If these documents are not submitted immediately to the land registry office and the cancellation is not carried out, there is a high probability that they will be lost over time—possibly over generations. If a land charge certificate is lost, a lengthy and expensive public notice procedure must be initiated before the deletion can take place. This delays the processing of the real estate purchase agreement by many months or, in the worst case, years, and can result in non-acceptance compensation or additional rental costs for the buyer, for which the seller may be liable,“ warns Kämper. The rule here is: if you cancel quickly, you avoid the risk of not being able to find the necessary documents many years later. Land charges with land charge certificates in particular should therefore be canceled immediately after the loan has been paid off.

Transferring property to children

Even if parents want to transfer their property to their children, in most cases it makes sense to „clean up“ the land register and delete any land charges. Parents often want to reserve rights of use for the property, such as a right of usufruct or right of residence. „Under certain circumstances, there is a risk that the purchaser will reuse the land charge for a new loan. If they do not repay the new loan properly, there is a risk of enforcement by the bank and, as a result, the parents“ right of use will expire," explains Kämper.

Leave the land charge in place in individual cases

„It is rarely advisable to leave the land charge in place. This is the case if another loan is to be taken out in the near future, for example to modernize the property. Under certain circumstances, the bank may accept the existing land charge as collateral again under the same conditions. In this case, you save on notary and court costs for canceling the old land charge and creating a new one,“ concludes Kämper.

Notaries provide support in the decision-making process

Whether it makes sense to leave the land charge in place depends on individual circumstances. Notaries are happy to advise on this, provide information on the costs of cancellation on request, and obtain the necessary cancellation documents.