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Buying Property at a German Foreclosure Auction: the Rules

Last updated: 12 September 2026 · Reading time approx. 9 minutes

A German foreclosure auction (Zwangsversteigerung) compresses into a single second what an ordinary purchase spreads over weeks: with the award of the bid (Zuschlag) you are the owner, the landlord and the debtor of the costs all at once — with no notary, no withdrawal and no warranty. This article explains the two bidding thresholds the procedure works with, what the award actually costs, and why a tenant stays in the flat you have just won.

What the award does — and what it does not cure

Under § 90 para. 1 of the German Compulsory Auction Act (Gesetz über die Zwangsversteigerung und die Zwangsverwaltung, ZVG), the successful bidder becomes the owner of the property by the award itself. There is no conveyance, no notarial contract and no conditions; the land register is merely corrected, and that happens ex officio: under § 130 para. 1 ZVG the enforcement court asks the land registry to enter the new owner. This is why neither notary fees nor an agent's commission arise here.

The price for that is written in § 56 ZVG. The risk of accidental loss passes with the award, from that moment the benefits are the bidder's and he bears the charges — and sentence 3 is the one that wrecks most calculations: "Ein Anspruch auf Gewährleistung findet nicht statt" — no warranty claim exists. A wet cellar, a dead boiler, a roof at the end of its life: after the award that is exclusively your problem. The only reliable source of information before you bid is the court's valuation report, obtained under § 74a para. 5 ZVG, on the basis of which the court fixes the assessed value of the property.

The two bidding thresholds: 50% and 70%

The procedure protects the debtor and the junior creditors through two thresholds tied to the assessed value, known in German practice as the 5/10 and the 7/10 limit. They work differently, and that difference decides whether a cheap bid survives.

ThresholdWhat happensEffect for the bidder
50% (§ 85a para. 1 ZVG) If the highest bid, including the capitalised value of any rights that remain in place, does not reach half the assessed value, the award must be refused — ex officio A bid below that is worthless at the first hearing; nobody has to apply for anything
70% (§ 74a para. 1 ZVG) If the highest bid stays below seven tenths, a creditor whose claim goes unsatisfied as a result may apply for refusal; the enforcing creditor may object A bid in between can hold — or still collapse during the hearing

If the award is refused on either ground, the court sets a new hearing ex officio; the interval should be at least three months and must not exceed six (§ 74a para. 3 ZVG). And here lies the real point of the procedure: at that new hearing neither threshold applies any more. § 74a para. 4 ZVG and § 85a para. 2 sentence 2 ZVG expressly rule out a refusal on the same grounds. Anyone who stayed below half at the first hearing has therefore not lost — they have three to six months to prepare.

The thresholds do not measure your purchase price. Both refer to the highest bid including the capitalised value of the rights that remain in place under the conditions of sale. If a right of residence or a usufruct survives, its value counts — for the threshold just as for the real-estate transfer tax. What you pay in cash is therefore not the same as what legally counts as your bid.

What you have to bring to the hearing

The hearing must be published six weeks in advance (§ 43 para. 1 ZVG) — that is your window for a survey, financing and a look at the land register. At the hearing itself, at least 30 minutes must pass between the call for bids and the close of the auction (§ 73 para. 1 ZVG); longer is always possible, shorter never.

The security deposit is where unprepared bidders fail. Under § 67 para. 1 ZVG an interested party may demand it, but only immediately after the bid has been made — and under § 68 para. 1 ZVG it amounts to one tenth, that is 10%, of the assessed value, not of your bid. Cash is not accepted; in practice you bring a confirmed Bundesbank cheque or a bank guarantee, or transfer the amount to the court cashier's account in advance. A bidder who cannot provide it has his bid rejected — even if it was the highest.

Under § 81 para. 1 ZVG the award goes to the highest bidder. The cash portion of the bid (Bargebot) must be settled before the distribution hearing under § 49 para. 1 ZVG and, under para. 2, bears interest from the award onwards. Interest therefore runs between award and payment, before you get any economic use out of the property.

The tenant stays. In return you get a special right of termination

The most common misconception is that a foreclosure auction clears the property. It does the opposite: § 57 ZVG orders the corresponding application of §§ 566 et seq. of the German Civil Code (Bürgerliches Gesetzbuch, BGB), and § 566 para. 1 BGB puts the acquirer "in place of the landlord" in the running tenancy. Sale does not break a lease in Germany — and neither does an auction award.

The award order is indeed an enforcement title for eviction under § 93 para. 1 sentence 1 ZVG. Sentence 2, however, removes its force exactly where it would matter: enforcement is not to take place if the occupier holds possession on the basis of a right that has not been extinguished by the award. Against the debtor living in the house himself, the order is an eviction title. Against the tenant it is not.

Instead, § 57a ZVG grants the successful bidder a special right of termination: he is entitled to terminate the tenancy or lease "unter Einhaltung der gesetzlichen Frist" — observing the statutory notice period — and sentence 2 sets a hard cut-off: "Die Kündigung ist ausgeschlossen, wenn sie nicht für den ersten Termin erfolgt, für den sie zulässig ist." Termination is excluded if it is not given for the first date on which it is permissible. Miss that date and the right is spent, permanently.

What this right is worth — and what it is not — follows from § 573d BGB. Under para. 1, §§ 573 and 573a BGB apply correspondingly to an extraordinary termination with the statutory period: for residential property the successful bidder therefore still needs a legitimate interest, for instance his own need for the dwelling. § 57a ZVG is no free pass. The gain lies in para. 2, which defines the period in its own right — at the latest on the third working day of a calendar month, effective at the end of the month after next. The stepped extension in § 573c para. 1 sentence 2 BGB, under which the landlord's period grows by three months after five and after eight years of occupancy, does not appear here. Against a tenant of ten years' standing the period therefore shrinks from nine months to roughly three.

An example of the cut-off. Award on 14 April: the third working day of April is long gone, so the first permissible date falls in May — the notice must reach the tenant by the third working day of May and takes effect on 31 July. If it arrives only in June it is excluded under § 57a sentence 2 ZVG, leaving only ordinary termination with the full periods of § 573c BGB. Whether the three-year blocking period for converted flats under § 577a BGB applies on top depends on whether condominium ownership was created in the let dwelling after it was handed over to the tenant and then disposed of — a question to settle before you bid.

What the award really costs

Incidental costs are lower than in an ordinary purchase, but they are not nil — and their bases of assessment are not the ones you would expect.

ItemBasisAssessed on
Real-estate transfer tax (Grunderwerbsteuer)§ 1 para. 1 no. 4, § 9 para. 1 no. 4, § 11 para. 1 GrEStGHighest bid plus the rights that remain in place; 3.5% under federal law
Court fee for the awardNo. 2214 of the schedule of costs to the GKG, § 26 para. 2, § 54 para. 2 GKGA 0.5 fee on the bid excluding interest; owed by the successful bidder alone
Land register transferNo. 14110 of the schedule of costs to the GNotKGA 1.0 fee; value of the asset under §§ 46 et seq. GNotKG
Notary, agent—None: ownership arises through the award under § 90 para. 1 ZVG

Note the basis of the transfer tax: under § 1 para. 1 no. 4 GrEStG it is already the highest bid that is taxable, not the award, and under § 9 para. 1 no. 4 GrEStG the consideration is "das Meistgebot einschließlich der Rechte, die nach den Versteigerungsbedingungen bestehen bleiben" — the highest bid including the rights that remain in place. The federal rate under § 11 para. 1 GrEStG is 3.5%; the federal states are free to set their own rate under Art. 105 para. 2a sentence 2 of the Basic Law (Grundgesetz, GG) and do so, which is why the following example deliberately uses the federal rate.

Worked example: a flat with an assessed value of €260,000

ItemCalculationAmount
Assessed value of the propertyCourt valuation, § 74a para. 5 ZVG€260,000
Lower threshold at the first hearingHalf of it€130,000
Threshold for an application to refuseSeven tenths of it€182,000
Security depositOne tenth of the assessed value€26,000
Highest bidassumed€180,000
Real-estate transfer tax3.5% of €180,000€6,300
Court fee for the award0.5 of the table fee for €180,000 (€1,898.00)€949.00

At €180,000 the bid is above half but €2,000 short of seven tenths. It therefore holds only as long as no unsatisfied creditor applies for refusal during the hearing. Anyone who would rather not carry that gap simply bids €182,000 — the extra €2,000 buys legal certainty. On top come the land register fee and, once you let the property, the ongoing calculation based on a defensible split between land and building, because even after an auction depreciation is measured on the building share alone.

The condominium trap: the service-charge priority

Anyone bidding on a flat needs to know a rank class that does not exist for a detached house. § 10 para. 1 no. 2 ZVG gives the community of owners a rank ahead of the mortgages for arrears of service charges (Hausgeld) — covering the current amounts and the arrears from the year of attachment and the two preceding years, capped at no more than 5% of the assessed value. For our example property that is up to €13,000, which can sit inside the lowest admissible bid under § 44 para. 1 ZVG and effectively raises the price of your bid. Reading the community's resolutions and accounts is therefore part of the preparation — as is the question of how well funded the community's maintenance reserve is.

What the courts have decided

Two decisions shape practice precisely where the wording of the statute does not get you far enough: on the special right of termination, and on the basis of taxation.

BGH, judgment of 15 September 2021 – VIII ZR 76/20

The previous owner had agreed with his tenant that termination for personal use was excluded. The successful bidder terminated on exactly that ground anyway. The Eighth Civil Senate of the Federal Court of Justice (Bundesgerichtshof, BGH) sided with him: restrictions on termination agreed between the tenant and the former owner do not stand in the way of exercising the special right under § 57a ZVG where the award was made on the statutory conditions of sale. Two things follow for a bidder: a clause in the old tenancy agreement that he never saw cannot take his special right away — but he still needs a ground for termination, since the notice here was given for personal use under § 573 para. 2 no. 2 BGB. The decision carries an official headnote and is recorded in the court's own case-law collection.

BFH, judgment of 2 March 2016 – II R 27/14

The buyer of several flats at auction wanted the real-estate transfer tax reduced by the share of the community's maintenance reserve attributable to them — with highest bids between €18,250 and €52,640 the amounts were material. The Second Senate of the Federal Fiscal Court (Bundesfinanzhof, BFH) refused: when a flat is acquired at a foreclosure auction, the highest bid as the basis of assessment is not to be reduced by the proportionate maintenance reserve, because that reserve belongs to the community of owners and does not pass to the buyer. The practical consequence: an accumulated reserve raises the worth of your flat but does not save a cent of transfer tax — budget the tax on the full bid. The judgment is officially published (V), so the tax authorities apply it to comparable cases.

Frequently asked questions

Do I have a right to view the property beforehand?

The ZVG grants none. Neither the debtor nor a tenant has to let bidders in. You therefore routinely bid on the strength of the court valuation alone — and carry the risk, because under § 56 sentence 3 ZVG no warranty claim exists.

Does the lower threshold apply at the second hearing too?

No. Where the award was refused at the first hearing under § 85a para. 1 or § 74a para. 1 ZVG, it may not be refused again on either ground at the new hearing (§ 85a para. 2 sentence 2, § 74a para. 4 ZVG). There, any bid above the lowest admissible bid can be awarded.

Can I evict the tenant with the award order?

No. The order is an eviction title, but not against someone holding possession under a right that has not been extinguished by the award (§ 93 para. 1 sentence 2 ZVG). The tenancy continues; your instrument is termination under § 57a ZVG.

What happens if I do not pay the cash bid after the award?

You remain the owner — § 90 para. 1 ZVG ties ownership to the award, not to payment. For the claim against you, however, security mortgages are entered on the property you have just acquired under § 130 para. 1 ZVG, and the cash bid has borne interest since the award (§ 49 para. 2 ZVG). Nobody should raise their hand without secured financing.

Do I need a notary?

Not for the acquisition. The ZVG requires publicly certified documents only in special cases, for instance where the highest bidder assigns the rights from his bid or declares that he bid on behalf of another (§ 81 paras. 2 and 3 ZVG).

The real work starts after the award

RenoDiary brings the bid, the incidental costs, the tenancy and the renovation budget together per property — so that a cheap award turns into a sustainable return.

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Sources

This article offers general orientation and does not replace individual tax or legal advice within the meaning of § 3 StBerG. Conditions of sale, surviving rights and the transfer tax rate of the individual federal state differ from case to case; the worked examples are illustrations, not assurances.