New legal certainty for complex development projects – the neighbouring heritable building right

Large and complex construction projects regularly face the challenge that buildings extend across multiple parcels of land, involve different owners and that a full acquisition of all affected sites is often not possible or economically viable. Against this background, there has long been a significant practical interest in the ability to create a neighbouring heritable building right (Nachbarerbbaurecht). This term refers to a heritable building right granted for a building that extends over adjoining plots of land and cannot be structurally divided along the property boundaries.

However, according to the previous case law of the German Federal Court of Justice (Bundesgerichtshof), the permissibility of such neighbouring heritable building rights was doubtful. This created considerable risks for the structuring, financing and long term usability of cross plot construction projects and often forced developers to rely on complex and economically disadvantageous substitute structures.

By judgment of 19 December 2025 (case no. V ZR 15/24), the German Federal Court of Justice has now ruled that the creation of neighbouring heritable building rights is permissible.

The decision constitutes a significant step forward for real estate development practice: developers are no longer required to be the owners of all project sites themselves. They may now secure third parties plots (which frequently cannot or will not be sold for various reasons) in a legally secure and long term basis by means of neighbouring heritable building rights.

What has changed?

Under the Federal Court of Justice’s previous case law, the establishment of neighbouring heritable building rights had been considered impermissible. This position was based on Section 1 para 3 of the German Heritable Building Rights Act (ErbbauRG), which provides that an heritable building right may not be limited to a part of a building, in particular to an individual storey.

The Federal Court of Justice has now abandoned this earlier approach and clarified that section 1 para 3 ErbbauRG does not apply to the cross property construction and use of a single, integrated building.

By doing so, the Court has eliminated a significant legal uncertainty. Given the prevailing assumption that neighbouring heritable building rights were impermissible, project developers had frequently resorted to highly complex, opaque and legally insecure contractual structures that were difficult to finance.

For practitioners, this decision marks a clear paradigm shift: the neighbouring heritable building right is no longer a legal risk, but a permissible and legally reliable structuring tool for the implementation of complex development projects.

Background to the decision

The decision responds directly to the practical needs of modern project development. The realisation of large scale buildings frequently requires construction that extends across property boundaries. Such projects are often impeded because

• multiple parcels owned by different owners are involved,
• not all owners are willing to grant an overarching heritable building right or
• parts of the land are intended to remain developer’s ownership, while others are to be secured by heritable building rights.

These circumstances were also present in the case decided by the BGH. A unified building complex was constructed across several neighbouring parcels, some owned by the project company itself and others burdened with heritable building rights. The structure could not be physically separated along the property boundaries. From the outset, the cross parcel development was expressly envisaged and contractually approved. Decades later, the validity of the heritable building right was challenged on the grounds that such a neighbouring heritable building right was allegedly impermissible under Section 1 para 3 ErbbauRG.

The BGH took this typical practical scenario as an opportunity to clarify that such project structures must not fail due to an overly dogmatic interpretation of Section 1 para 3 ErbbauRG. Especially in the context of large scale and long term developments — such as shopping centres, urban quarter developments, commercial real estate or mixed use properties — there is a legitimate and legally recognisable need to construct buildings as a functional unit while simultaneously combining different ownership and heritable building right models.

Consequences for Practice:

In practical terms, this means:

• legally secure creation of heritable building rights for buildings extending across neighbouring parcels,
• increased flexibility in structuring complex development projects,
• improved financing capability as a result of clear and legally certain structures,
• a reliable legal basis for long term models combining freehold ownership and heritable building rights and
• planning certainty for existing and long term heritable building right arrangements.

Your next steps

Project developers, investors and landowners should review whether existing or planned projects could benefit from the now confirmed admissibility of neighbouring heritable building rights confirmed by the BGH. This applies both to new developments and to existing structures that were previously subject to legal uncertainty.

We would be pleased to assist you with the conceptualisation, structuring and legally secure implementation of neighbouring heritable building rights—from the initial project idea, through contractual structuring, to registration in the land register.