GIFT OF AN ENCUMBERED FLAT TO A MINOR

Gifts to minors can generally raise many legal questions. Often these are merely legally advantageous and therefore do not require approval according to § 107 BGB.What is the situation when encumbered property is involved? The BGH recently had to decide on the donation of an encumbered flat to a minor.

FACTS OF THE CASE

In the case at hand, a woman gave a condominium to her step-grandson, who was only 5 years old at the time of the gift. After agreement with the child’s parents on the gift, it was notarised that the donor could use the flat herself and, under certain conditions, also demand retransfer of the condominium. They agreed on the registration of the usufruct and a priority notice of reconveyance. However, only the change of ownership was entered in the land register, not the usufruct. The child’s parents wanted to apply for the registration about half a year later, but the land registry office refused the registration. They demanded approval from the family court. As the Court of Appeal ruled in favour of the land registry, the donor turned to the Federal Supreme Court.

NECESSITY OF FAMILY COURT APPROVAL

It had to be clarified whether such an authorisation of the family court was required in the present case. In principle, according to § 1643 Abs. 1 BGB in conjunction with § 1821 Abs. 1, Nr. 1 BGB parents require the permission of the family court to dispose of their child’s home. In the case at hand, it was already doubtful whether the creation of the usufruct and the registration of the reconveyance constituted a disposition. In principle, the encumbrance of the child’s property with a usufruct is a disposition requiring approval, since such a disposition is not merely legally advantageous for the minor. However, approval is not required if the encumbrance of the property already takes place upon acquisition by the minor. If the encumbrance takes place with the transfer of ownership, this is to be equated with the acquisition of property already encumbered. The decisive factor here was therefore whether there was no direct connection between the acquisition and the encumbrance of the property.

BGH, DECISION OF 11.03.2021 – V ZB 127/19

The decision of the V. Zivilsenat of the BGH states:In the case of a gift of an encumbered dwelling to a minor, no approval of the family court is required if the donor wishes to retain the usufruct of it. All that is required is the approval of the parents. The content of the deed of gift, which showed that the flat had already been given away encumbered with the usufruct and the conditional priority notice of reconveyance, was relevant for the decision of the Federal Supreme Court. Section 1821 (1) no. 1 of the Civil Code only protects the minor’s existing real property. In this case, the encumbrance of the condominium was already part of the acquisition process, the conveyance was declared at the same time as the in rem agreement on the encumbrance. The minor’s existing assets were therefore not affected..

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