In its judgment of 19 December 2025 (V ZR 15/24), the Federal Court of Justice resolved the decades-long debate concerning the lawfulness of neighbouring heritable building rights. Overturning its earlier case law, the Court confirmed that a heritable building right may cover an existing or future structure spanning multiple properties, even if the right only encumbers some of those properties.
Background to the decision
In the 1960s, the plaintiff’s legal predecessor intended to build a department store and agreed with a community of heirs, including the defendant, to create a heritable building right to a property owned by that community of heirs. The agreement included the heirs’ consent to incorporate further plots of land into the scope of the heritable building right. From the 1970s, the plaintiff’s legal predecessor gained access to a consolidated number of adjacent properties through a mix of direct ownership and separate heritable building rights in their favour. In the 1980s, a shopping centre was built at the site, spanning five properties and incapable of being separated at the property boundaries without demolition. The heritable building right was subsequently transferred to a subsidiary of the original holders. Simultaneously, they agreed to joint and several liability for the services to be rendered on the basis of the heritable building right agreement, for which they accepted immediate enforcement. The current heritable building right holder is an intervener supporting the plaintiff. In February 2021, the plaintiff ceased ground rent payments. The defendant then sought enforcement of the outstanding ground rent against the plaintiff. The plaintiff brought an action to prevent the enforcement. While the Regional Court initially upheld that action, the Higher Regional Court dismissed it on appeal. The plaintiff then sought to reverse that decision in an appeal on points of law.
Key points of the decision
Neighbouring heritable building rights
In its judgment, the Federal Court of Justice clarified that the heritable building right at issue is what is known as a neighbouring heritable building right (Nachbarerbbaurecht). The Court defines this as a heritable building right created for an existing or future building that extends over multiple neighbouring properties – only some of which are encumbered by the heritable building right – and which is indivisible at the property boundaries. The Federal Court of Justice identifies the essential characteristic as the fact that only part of the building sits on the encumbered property, while other parts of the building are or will be constructed on one or more neighbouring properties. It is irrelevant whether the holder of the heritable building right owns these properties, holds further building rights over them, or has access to them through other legal means.
Lawfulness of heritable building rights
According to the Federal Court of Justice, the principles of good faith (section 242 German Civil Code, “BGB”) do not prevent the plaintiff from challenging the lawfulness of the heritable building right agreement. In cases such as this, a balance must be struck between the specific principles of property law and the broader need for legal certainty and the protection of acquired rights. However, where parties have developed over a long period a reliance on the legal validity of an agreement intended to create an in rem right that violates the “closed list” (or numerus clausus) principle under property law (Typenzwang), such reliance does not merit protection. Furthermore, denying a party the right to plead that the limits of contractual autonomy – as defined by the numerus clausus of property law – have been exceeded would create a permanent synallagmatic imbalance in heritable building right agreements. This is because the (alleged) holder of the building right would remain obligated to pay the ground rent without ever receiving a valid heritable building right.
Lawfulness of neighbouring heritable building rights
The Federal Court of Justice affirmed, however, that the parties (or their legal predecessors) had created a valid (neighbouring) heritable building right. Under section 1(3) German Heritable Building Rights Act (Erbbaurechtsgesetz, “ErbbauRG”), a heritable building right cannot generally be limited to a specific part of a building, in particular an individual floor. However, in a significant departure from its previous case law – most recently affirmed in 2016 – the Court has now ruled that this prohibition does not prevent the valid creation of a neighbouring heritable building right.
It reasoned that the wording of section 1(3) ErbbauRG actually supports the lawfulness of neighbouring heritable building rights. While the statute is intended to regulate the spatial restriction of such rights, the Court clarified that this only applies when the right is limited to a specific portion of the relevant property, which is precisely not the case with a neighbouring heritable building right. Rather than being spatially restricted, the holder’s powers in this scenario were effectively expanded across multiple properties.
In addition, the legislative materials indicate that the original lawmakers did not intend to prohibit the creation of neighbouring heritable building rights, but rather wanted to prevent the creation of “storey ownership” (Stockwerkseigentum) – which was abolished by the BGB – through the back door by granting heritable building rights. Lawmakers had essentially sought to avoid the difficulties in defining boundaries and the legal conflicts among holders of in rem rights that stem from splitting a building into different areas of ownership. However, the creation of a neighbouring heritable building right does not lead to such a coexistence of different right holders; instead, it enables one single right holder to construct a building across multiple properties. The lawmakers did not aim to prevent possible boundary complexities arising from building across property lines. As a result, section 1(3) ErbbauRG does not address these specific issues. Based on the original legislative intent, the restriction of a heritable building right is only considered unlawful if it occurs within the confines of a single encumbered property.
- Moreover, the special provision of section 39(3) Property Law Adjustment Act (Sachenrechtsbereinigungsgesetz, “SachenRBerG”) does not imply that neighbouring heritable building rights are generally unlawful. While lawmakers were aware of the controversy regarding these rights when they introduced this provision in 1994, it is incorrect to assume they only intended them to be used for the specific types of adjustment cases covered by that act. At that time, the legislature was working under significant time pressure and aimed to resolve specific land-title issues in East Germany rather than overhaul general heritable building rights. Neighbouring heritable building rights were simply viewed as an essential tool for those specific circumstances. Section 39(3) SachenRBerG therefore does not provide a definitive statement on the lawfulness of such rights across the rest of the country.
- The underlying spirit and purpose of section 1(3) ErbbauRG does not justify expanding its application beyond its explicit text. The establishment and ongoing use of a neighbouring heritable building right do not create the kind of boundary confusion that the statute’s rules on spatial restrictions were meant to address. On the contrary, the subject matter remains clear, as the spatial limits of the right are defined by the cadastral boundaries of the property. There is also no inherent risk of conflict between the property owner and the heritable building right holder. Admittedly, allocation of ownership upon termination of the heritable building right – whether by cancellation, expiry or reversion – could prove complicated, especially if the structure is indivisible at the property boundaries. However, this is a challenge common to all buildings across property lines. Ultimately, the allocation of structures across multiple properties is a general issue of property law.
- There is also a practical need for recognising neighbouring heritable building rights as lawful. While there is an adequate regulatory alternative to the restriction covered by section 1(3) ErbbauRG in the form of residential property ownership (Wohnungseigentum), no such equivalent exists for constructing a single building across property lines. Since establishing a collective heritable building right is not always possible, a ban on neighbouring heritable building rights would hinder the overarching goal of supporting development in the construction sector.
In its concluding remarks, the Federal Court of Justice held that any reliance on the unlawfulness of neighbouring heritable building rights – which might now be undermined by this change in case law – does not merit protection. The Court reasoned that legitimate expectations regarding a specific judicial interpretation of the law only merits protection if specific rights were established based on the assumption that the existing case law would continue. However, as the Federal Court of Justice had previously considered these rights unlawful, it is impossible for rights to have been established in reliance on such case law. In any event, reliance on the non-existence of a legal right is not worthy of protection, the Court held.
Conclusion
The decision has considerable practical implications beyond the fact that the Federal Court of Justice has, for the first time, established authoritative legal certainty on the lawfulness of existing neighbouring heritable building rights. The decision makes clear that the neighbouring heritable building right (where only part of a building is located on the property covered by the heritable building right) will in future be recognised as an equal structuring instrument alongside the traditional heritable building right (which enables the construction of one building within the boundaries of one property) and the collective heritable building right (which enables the construction of one building on multiple properties on the basis of a single heritable building right).
On the face of it, the decision establishes greater scope for structuring land arrangements for major construction projects such as department stores, shopping centres or office complexes when it is not possible to acquire ownership of every necessary property – especially if a collective heritable building right is not feasible because not all owners agree on its terms. In such instances, projects will be able to proceed under a heritable building right that covers only a portion of the building’s footprint as long as the remaining areas are owned by the developer or they possess additional heritable building rights or other rights of use.
However, creating neighbouring heritable building rights still requires careful, far-sighted contractual structuring. As the Federal Court of Justice emphasises, the creation of neighbouring heritable building rights will not generally generate conflicts between different rights holders. However, issues as to the allocation of rights under land law and building law may arise on termination of a heritable building right, for example upon its reversion. It is therefore essential to make adequate provision for the event of premature termination of a heritable building right by means of clear contractual provisions when the heritable building right agreement is concluded. If that is not done, the risks inherent to the establishment of a neighbouring heritable building right will not be mitigated, but rather deferred until its termination.
The Federal Court of Justice’s decision therefore shifts the focus away from the question of the lawfulness of neighbouring heritable building rights towards the practical consequences, particularly what can be done to make contract drafting as forward-looking as possible. In practice, the acceptance of neighbouring heritable building rights will depend significantly on whether a dedicated contractual standard emerges for this specific form of heritable building right. By finally confirming the lawfulness of these rights after decades of debate, the Court has likely opened the door to a range of new legal issues.
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