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Owner Mother - Borrower Mother - Installment Payer Son - Future Constellation

January 21, 2013 | 40,00 EUR | answered by Jan Wilking

Question about real estate
Owner: Mother
Borrower: Mother
Resident of the property: Son
Son is paying the installments because he was not able to obtain his own financing at that time (just recently self-employed).
Now the extension of the loan is due and the question arises as to how the situation will continue in the future.
There are the following considerations:
Since the mother is not getting any younger, the question arises as to how the ownership of the property will affect a possible situation of receiving Hartz4 benefits or needing care (property value approx. €160,000 - remaining loan approx. €125,000).
It must be assumed that in case of emergency, a sale may be required here.
The son naturally wants to protect "his assets" and has the following idea (with the mother's agreement):
The loan will continue to be in the name of the mother (it will be extended, as the son is still self-employed and financing would only be possible at worse conditions).
The son will become the owner of the property - however, not as a gift, transfer, or similar (due to the 10-year "recapture right"), but he will officially purchase the property for €125,000 (no money will change hands).
The loan of €125,000 will remain with the mother secured by a mortgage on the property. In the event of a sale by the son, the bank would need to be paid first, making the mother debt-free in case of a sale (as long as the sale price is at least equal to the loan amount).
Now the following questions arise:
1. Can the mother eventually demand payment of the €125,000?
(Son will become the owner with a notification of "payment received" to the notary in the land register)
2. What options would "authorities" have in this situation?
3. Is there anything else to consider?
4. Would another option be possible?
In short:
Son wants to become the owner without having to take over the loan and without having to eventually pay "twice" or have any "issues" with authorities.

Jan Wilking

Dear inquirer,

I am happy to answer your inquiry taking into account the description of the situation and your input as follows:

As long as the purchase price claim has not been fulfilled, your mother can demand the full amount of 125,000 EUR from the contract. If your mother becomes a welfare case, the state authorities (social welfare office, job center, etc.) can reclaim this purchase price through social welfare recovery. In case of non-payment by mutual agreement, the authorities may also argue that it was actually a gift and therefore a claim for recovery under § 528 of the German Civil Code exists.

Therefore, your idea may not help you. Instead, it should be considered to agree on a consideration for the transfer of the property not to be a purchase price of 125,000 EUR (which is then not paid at all), but for example the assumption of loan installments, possibly other valuable benefits (usufruct, right of residence, etc.). Corresponding contracts should be drawn up by a lawyer to protect your assets as much as possible (bearing in mind that the state authorities may also have claims against you as the obligated to provide maintenance, see § 94 SGB XII). Therefore, I recommend (especially considering the considerable sum), to commission a colleague locally to examine the specific options and prepare corresponding contracts. For further reading, the following link may also be helpful: http://deutsches-erbrechtsinstitut.de/fileadmin/user_upload/pdf/Vermeidung%20eines%20Sozialhilferegresses.pdf

I hope to have provided you with a helpful initial orientation. If you have any uncertainties, please use the free inquiry function.

Please note that within the scope of an initial consultation without knowledge of all circumstances, I cannot give you a conclusive advice. If you wish for a final assessment of the situation, I recommend contacting a lawyer and discussing the situation with them after reviewing all documents.

Best regards