Having a real estate civil-law Partnership (“GbR”) entered in the new company register as an eGbR

The Act on the Modernization of Partnership Law (“MoPeG”) came into force at the beginning of 2024. Since then, numerous new regulations have applied to partnerships, in particular to the civil law partnership (Gesellschaft bürgerlichen Rechts – “GbR”), the general partnership (Offene Handelsgesellschaft – “OHG”) and the limited partnership (Kommanditgesellschaft – “KG”).

Principle: Right to choose GbR registration

Since then, the partners of a GbR have had the choice of either leaving their company unregistered as before or registering it in the newly created company register (“GsR”) and having it issued with a "GsR" number and thus becoming an "eGbR". At least that is what the new version of Section 797 of the German Civil Code (“BGB”) says.

Exception for real estate GbRs

In practice, however, the option is limited in the case of real estate GbRs:

The entry of GbRs in the land register has had an eventful history since 2001. Initially, instead of the GbR, its partners were entered in the land register in a civil law partnership ("in Gesellschaft bürgerlichen Rechts"). Since 2001, the GbR has initially been registered as such, and later with the mandatory entry of its partners. In each case, there were various transitional regulations to the new legal situation. In practice, all variants can still be seen in land registers today.

Since 2024, such GbRs entered in the land register under the old law may exist indefinitely without being entered in the company register and, of course, remain the owners of their property. But only as long as there are no changes to the ownership structure. At the latest when there is a sale or change of ownership for other reasons or another entry in the land register is required (e.g. entry or deletion of a land charge), the GbR must be registered in the company register. The partners previously entered in the land register and the newly registered company itself must then approve and apply with notarized signatures for the eGbR to be entered in the land register as the owner (or land charge creditor, etc.). Only then the sale or the entry or deletion of the land charge can be carried out; prior to this, there is a statutory block on registration (Art. 229 Section 21 of the Introductory Act to the German Civil Code - "EGBGB").

Waiting to register as an eGbR is not a good idea. The new regulation will no longer "go away". Chasing after the signatures to be provided in notarized form years later, when inheritances or other changes in shareholders have occurred and, in the worst case, are even disputed, can be tedious. The shareholders of real estate GbRs can therefore only be advised to take the necessary measures quickly.

Caution with business splits (Betriebsaufspaltungen)

But not too quickly either! Before going to the notary's office, the tax status of properties used for business purposes should be clarified. Creating or even ending a business split for tax purposes can trigger an unwanted tax liability. If, for example, spouses, let's call them M and F, are partners in a real estate GbR that has leased its property to M limited liability company ("GmbH"), whose sole shareholder is M, the tax status of the property depends on the voting relationships in the GbR. If F has the majority and resolutions can be passed with a simple majority, the property can be part of the private assets and, under certain conditions, can later be sold tax-free. In the case of unanimity, however, there is a personal interdependence for tax purposes, resulting in a business split, and the property is part of the business assets and can therefore only be sold at a later date subject to tax. If M and F now register the GbR in the company register in the event of unanimity and have "sole representation" entered there without a tax check, e.g. because it is simply more practical, the business split may end unintentionally and trigger immediate taxation of the hidden reserves.

Practical advice

It is recommended that the partners of real estate GbRs have their GbR entered in the company register, i.e. become an eGbR, and then have the latter entered in the land register. You should not wait too long to do this. In the case of properties used for business purposes, it is advisable to check the tax status beforehand in order to avoid the unintentional creation or termination of a business split with unpleasant tax consequences.