Equalization of Accrued Gains and Real Property in Germany

Couples married in Germany without a marriage contract (Ehevertrag) are subject by default to the statutory matrimonial property regime of accrued gains (Zugewinngemeinschaft) under Section 1363 of the German Civil Code (Bürgerliches Gesetzbuch, BGB). Under this regime, assets acquired during the marriage are equalized upon divorce, ensuring that both spouses share equally in the wealth built up during the marriage. To calculate each spouse’s share, the initial assets (Anfangsvermögen) at the start of the marriage are compared with the final assets (Endvermögen) at the time the divorce petition is served. The spouse who has accumulated the greater gains is required to pay half of the difference to the other.

All assets are in principle subject to equalization under German law, including real property. In divorce proceedings in Germany, property frequently represents the most financially significant asset at stake and is therefore central to the equalization process. Ownership is determined solely by reference to the land register (Grundbuch): the person registered there is treated as the legal owner, regardless of who financed the property or who has been living in it.

Allocation to one spouse

Where property was owned by one spouse before the marriage — whether acquired by purchase or received through inheritance — it generally remains that spouse’s asset. Its value at the time of the marriage is attributed to the initial assets and is therefore not subject to equalization as such. A direct division of the property does not usually arise in these circumstances.

Co-ownership

Where both spouses are registered in the land register, the property is held in co-ownership. This raises the question of how the property is to be dealt with in the divorce. Liability for any outstanding loans is also a material consideration: the decisive factor is who signed the loan agreement with the bank. Where both spouses are party to the contract, they are generally jointly liable. Given that German properties are frequently financed by loans, the spouses must reach a workable arrangement for continued repayment. One common solution is for one spouse to take over the property, pay out the other’s share, and assume sole responsibility for the loan — a process that typically requires the consent of the lending bank. Where the property in question is the matrimonial home, the decision is often particularly difficult. Personal and emotional considerations add a further layer of difficulty to what is already a complex financial and legal question.

The main options available for dealing with jointly owned property in Germany are as follows:

• Transfer to one of the spouses — In many cases, one spouse wishes to continue living in or using the property. This generally requires the financial means to compensate the other for their share of the co-ownership.
• Sale of the property — Where a buyout is not economically viable or desired by either party, the property is sold and the proceeds divided between the spouses.
• Rental as a transitional solution — Rather than disposing of the property immediately, the spouses may agree to retain joint ownership temporarily and rent the property out, with rental income divided accordingly.
• Separate use through structural modification — In some cases it is possible to reconfigure a property so that each party has a self-contained living area, allowing both to remain in occupation.
• Partition auction (Teilungsversteigerung) where no agreement is reached — Where the spouses cannot agree on any of the above, either party may apply to a German court for the property to be sold by forced auction. This is generally the least favorable outcome financially and is best avoided where possible.

Early legal advice is strongly advisable in order to understand the available options under German law and to reach a legally sound and financially sensible resolution. Our lawyers have extensive experience in handling property-related equalization disputes and will work to secure the best possible outcome for you.

What matters is not only who owns the property, but when and how it was acquired. Depending on the time and manner of acquisition, fundamentally different legal consequences arise under German law.

Where a spouse brings property into the marriage as sole owner, its value at that time is counted as part of the initial assets and is excluded from the accrued gains. Only genuine increases in value that occur during the marriage are subject to equalization — for example, those resulting from construction work or changes in the surrounding location. Increases in value due purely to inflation do not constitute an equalization-liable increase in assets.

Practical example: A wife brings commercial premises with a market value (Verkehrswert) of €390,000 into the marriage. During the marriage, the surrounding neighborhood is upgraded; at the time the divorce petition is filed, the market value stands at €455,000. Only the increase in value of €65,000 is included in the wife’s accrued gains; the husband is entitled to half of this — €32,500 — as an equalization claim.

Where property is acquired during the marriage, its market value at the time of the divorce petition is included in full in the final assets of the owning spouse. In the case of jointly owned property, the value is divided according to the respective ownership shares.

Practical example: A married couple jointly acquires a city apartment during the marriage. At the time of the divorce, the market value is €310,000; the associated loan has a remaining balance of €70,000. After deducting the proportionate liabilities, a net value of €120,000 accrues to each spouse. Since both have achieved the same accrued gains, no equalization claim arises.

Where a spouse inherits property during the marriage or receives it as a gift, this constitutes a privileged acquisition (privilegierter Erwerb) under German law: the property is added to the initial assets and is therefore excluded as such from the accrued gains. Any increases in value are, however, also subject to equalization in this scenario.

Practical example: A husband inherits a terraced house during the marriage with a market value of €330,000. By the time of the divorce, the value has risen to €420,000 as a result of extensive renovation works. The increase in value of €90,000 is subject to equalization; the wife is entitled to half of this — €45,000 — as an equalization claim.

Where a property is owned solely by one spouse, established case law requires that both the initial and final assets be calculated uniformly, with the property’s market value recorded as an asset and the full outstanding loan balance recorded as a liability. This applies regardless of whether both spouses signed the loan agreement as joint debtors. In the internal relationship between the spouses, the liability is borne solely by the owning spouse, who also holds title to the property. The accrued gain is therefore determined by the difference between the net value of the property at the time of service of the divorce petition and its net value at the time of the marriage. Where the market value has risen, and the outstanding debt has decreased through ongoing repayments, the accrued gain of the owning spouse increases accordingly, irrespective of which spouse actually made the repayments.

A practical example: A wife acquired a single-family home before the marriage, with a market value at that time of €420,000; the associated loan liability stood at €280,000, meaning her initial assets attributable to the property amounted to €140,000. At the time of the divorce petition, the market value stands at €510,000, and the outstanding debt has fallen to €130,000. The net value is now €380,000 — the accrued gain from the property amounts to €240,000, and the husband is entitled to half of that amount as an equalization claim.

The Zugewinnausgleich in respect of real property can be modified or excluded by contractual agreement, subject to certain legal requirements under German law.

A marriage contract – prenuptial agreement –  (Ehevertrag) can exclude the equalization of accrued gains — either for specific assets or in its entirety. German law requires that such agreements be notarially certified, and the Federal Court of Justice (Bundesgerichtshof) has consistently held that provisions which place one spouse at an unreasonable disadvantage are contrary to public policy and therefore void. A marriage contract may be entered into either before or during the marriage.

Where divorce proceedings are already underway, a divorce settlement agreement (Scheidungsfolgenvereinbarung) offers a further means of resolving property-related disputes. The spouses can agree on who takes over the property, how the equalization amount is to be calculated, and the timeframe for payment. An agreement of this kind avoids protracted court proceedings and gives both parties a clear and reliable basis on which to plan.

The timing and structure of any property transfer in the course of German divorce proceedings carries significant tax implications. Where property is transferred between spouses as part of the divorce-related division of assets, the transfer is exempt from real estate transfer tax (Grunderwerbsteuer) under Section 3(5) of the Real Estate Transfer Tax Act (Grunderwerbsteuergesetz, GrEStG). This exemption ceases to apply once the divorce has become legally final. A transfer made after that point will attract Grunderwerbsteuer.

An early sale, on the other hand, may trigger capital gains tax (Spekulationssteuer) if the ten-year holding period under German tax law has not yet run and the property has not been used exclusively by the owner for at least the preceding three years. Because these two tax considerations can pull in opposite directions, a careful and individually tailored assessment is essential before any decision is made.

Where the spouses cannot agree on whether to sell, either party may — once the year of separation (Trennungsjahr) has elapsed — demand the sale of the jointly owned property and seek a court order to compel the other’s consent if necessary. Where the property is in the sole ownership of one spouse and represents the predominant matrimonial asset, the other spouse’s consent to any disposal is generally required while divorce and equalization proceedings remain ongoing.

The equalization of accrued gains in respect of real property is among the most complex areas of German divorce law. The correct valuation basis, the treatment of outstanding liabilities, the structuring options available, and the tax consequences of any transfer can only be answered in light of the specific circumstances of each case. Claims that are not asserted in good time also risk becoming time-barred under German limitation rules.