Grundschuld

Grundschuld is a form of real security right in German private law (BGB) that encumbers real property to secure a monetary claim. It operates as a dingliche Sicherung and is created by contract and entered in the Grundbuch (land register). The creditor gains the right to satisfaction from the encumbered property, for example by sale, if the debtor defaults on the secured obligation.

In practice, Grundschuld is often used in real estate financing as an alternative to a conventional hypotheek. The key difference is that the Grundschuld is not tied to a single loan. It remains in the land register and can be assigned or used to secure multiple loans up to a specified amount. This flexibility makes refinancing easier, since lenders can reuse the existing Grundschuld or adjust the secured amount without creating a new security deed. A Hypothek, by contrast, is linked to a particular debt and is extinguished when that debt is repaid, requiring new security for further financing.

There are common variants, notably the Sicherungsgrundschuld (security Grundschuld), which is created to secure a claim and can be used for future loans. The exact scope and amount are recorded in the Grundbuch and reflected in the loan agreement.

A Grundschuld is canceled by a deletion in the Grundbuch once the secured obligations are satisfied or the lien is otherwise discharged. When property changes hands, the lien must be released to provide the buyer with clear title, unless the buyer assumes the loan or a replacement security is provided.