German developer loan: due diligence checklist

Land-register extract, rank, permits, valuation, budget, exit plan, security trustee and red flags: the checks to run before lending.

A private loan to a German developer is decided by documents, not by the rate on the page. This checklist is what to collect and ask before any money moves. It goes with how a private loan to a developer is built, which explains the land charge, rank and what happens in a failure. It is information, not legal, tax or investment advice. Have a German lawyer read the documents, and remember that money lent to a developer is at risk of partial or total loss.

1. What you are actually lending against

Write down four things in one sentence each: who the borrower is (usually a project company), which plot and building stand behind the loan, which charge secures you and in which rank, and how you are repaid and when. If you cannot fill all four from the documents, you are not ready to lend.

2. The land-register extract (Grundbuch)

The land register is the single most useful document. Ask for a current extract, not a copy from the start of the deal. A person with a legitimate interest can inspect it (section 12 of the land register code), and a prospective secured lender has one; the inspection can be limited to particular sections. Read three parts.

Section I: who owns the plot. It must be the borrower, or the borrower must be able to charge it. A different owner means a different borrower.
Section II: burdens and restrictions, such as easements, pre-emption rights, notices of priority for buyers.
Section III: mortgages and land charges, in order. These are the claims standing ahead of, and beside, yours.

An extract also answers whether a charge ahead of yours ranks before you today. Ask the lawyer to confirm the current state on the day of the loan and again at registration.

3. Rank and prior charges

Which charges stand ahead of your charge, in what amount, and in favour of whom?
Are they for the full amount drawn, or only for what the bank has lent so far? A bank charge can be registered for a larger sum than the loan.
Does the borrower or the bank have a right to register more ahead of you later (a reservation of rank)? Ask for it to be excluded or limited.
Any rank-back in your favour must be notarised and entered in the register to be effective. A promise in an email is not a rank.
Is your charge the first rank, or are you junior? Price and risk follow the answer.

4. Permits and planning

A plan without a permit is a plan. Ask for the building permit (Baugenehmigung), its date, its conditions and whether it is final. Check whether any neighbour or authority has challenged it, and whether the permit covers the number and type of units the budget assumes. Some platforms that arrange this kind of financing pay out only when a permit exists and the charge is registered. That is a sensible standard to copy: link the first payment to permit and entry in the register.

5. Valuation and loan-to-value

Ask for an independent valuation, who commissioned it and what it values: the plot as it stands, or the finished scheme. These are very different numbers for a building site.
Distinguish market value (Verkehrswert) from lending value (Beleihungswert). The lending value is deliberately cautious and sits below market value; one lawyers' glossary puts it at 70 to 90 percent of market value, which is a description and not a rule. The 60 percent figure belongs to covered-bond cover, not to private lending.
Compute your own loan-to-value: your loan plus all charges ahead of it, divided by the value as it stands. Do it for the finished value too, and for a value 20 to 30 percent lower. If a modest price fall wipes out the cushion, the cushion was not there.
Remember what a forced sale does. The court tests bids against the fixed value, and a bid below half is refused on its own motion, below 70 percent on application, with a new date normally three to six months later. I found no reliable figure for how forced sales usually perform against appraisals, so do not assume one.

6. Budget, equity and cost to complete

A full project budget: land, construction, fees, financing costs, marketing and contingency.
How much equity the developer has really put in, and in what form (cash, or the land valued at what).
Which bank loan sits in the budget, on what terms, and whether it is committed or only expected. In German project developments equity is often only 5 to 10 percent of cost, so a thin equity layer is common; the question is whether the numbers still work if sales are late.
Cost to complete against money still available. A project that needs more cash than is left is one that will ask for another loan.
Who monitors drawdowns against construction progress? A loan paid out in one sum, with nothing tied to progress, is a different risk from one released in stages.

7. The developer and the borrower company

Track record: completed projects, with addresses you can check, and how each ended.
Annual accounts of the borrower and of the group, with a view on guarantees and related-party loans.
The corporate structure: which company borrows, which owns the plot, which builds, which sells.
Any personal guarantee or group guarantee behind the loan. A claim against a project company with no other assets is only as strong as its plot.
Litigation, tax arrears, earlier insolvencies of related companies. The commercial register and the insolvency notices are public.

Market context explains why this matters. A Prognos study reported in the trade press counted 1,414 developer insolvencies in Germany between 2018 and 2025, with numbers rising since 2023, and construction showed 44.0 insolvencies per 10,000 companies in the first five months of 2026 against 29.8 across the economy. These are secondary reports with different definitions, but the direction is clear.

8. The exit plan

How is the loan repaid: unit sales, a bulk sale or a bank refinancing? Ask for the evidence for each, not the assumption.
Pre-sales: how many units are under notarised contracts, at what prices, with what payment terms?
If units are sold one by one, how are they released from your charge, who holds the buyers' money and in what order do you receive it? The regulation on developers' payments (sections 3 and 7 of the Makler- und Bauträgerverordnung) is built to protect buyers' advance payments, and the courts treat it as protective, so buyers have a strong claim to a clean unit.
What happens at the end of the term if the exit has not happened? Extension, extra interest, default: each should be in the contract in advance.

9. Who holds the security

Be clear who is the secured creditor in the register: you personally, or a trustee for several lenders. Platforms that finance projects from many small lenders often have the land charge held in trust for all of them, and the trustee enforces and passes proceeds on in proportion. That structure is not wrong, but then your real position is a claim against the trustee under the trust agreement, with its own conditions. Ask for the trust agreement, the trustee's duties and what happens if the trustee fails. Also ask who holds the notarial submission to enforcement and the original deeds.

10. Insolvency scenarios

Put three scenarios in writing and ask your lawyer to walk through each.

The borrower becomes insolvent during the term. A land charge gives a right to separate satisfaction in the insolvency (section 49 of the insolvency code), realised by forced sale or forced administration. Costs and public charges come out first, and if an administrator is appointed a flat four percent of the fixed value goes to the estate before registered charges are paid. According to one secondary summary, interest is protected only for the current period and the two previous years.
A charge ahead of yours is enforced first. The senior lender decides the timing, and you may find the forced sale called for you.
Contractors are unpaid. They have a claim to a security mortgage on the plot (section 650e of the civil code), which usually ranks behind earlier charges, but they can also stop work, and a stopped building is worth less.

For each, calculate what reaches you, in what order and after how many months.

11. Documents to demand

Current land-register extract and the notarial deed creating your charge, with proof of registration.
The notarial submission to immediate enforcement, and the security agreement (it must say which claims the charge secures).
The loan agreement: term, interest, extension terms, default, what is secured.
Building permit, valuation report, project budget and construction schedule.
Borrower's accounts, shareholder structure and guarantees.
Prior-charge documents, bank agreements and any rank-back or release declarations.
Trust agreement, if a trustee holds the charge.
Evidence of how and when the money is paid out, and against what condition.

12. Red flags

A high advertised rate with a junior position or no land charge. A high advertised rate is itself a risk signal.
Payout before the charge is registered.
No independent valuation, or a valuation of the finished scheme presented as today's value.
Reluctance to show the land-register extract, the accounts or the permit.
A borrower that has just been refused by its bank, or that borrows repeatedly from different lenders.
A promise of a fixed return, or a guarantee of repayment, from anyone but the borrower.
Pressure to transfer quickly.
Unclear who the lender actually is, or who sells the loan and under what authority.

13. Questions for your own advisers

Licensing: whether an individual lender, or the intermediary, needs a licence under section 32 of the Banking Act. A court has held that the duty can arise where an offer from abroad is aimed at the German market, and none of the sources I found answered the private-lender case.
Securities law: whether the loan, if subordinated or sold to the public, falls under the asset-investment act and its prospectus rules.
Tax: for a non-resident, interest on a loan secured by German real estate is treated as German-source income under section 49(1) no. 5 c of the income tax act, according to a Federal Fiscal Court judgment. Treaty relief and tax in your country of residence need an adviser in each country.
Source of funds: bank checks for Russian citizens living in the EU explains what banks and notaries ask. For wider risks see investment risks in German property.

How we help

We can show you the documents and terms of the financing projects we work with, against this checklist: the land-register extract, rank and loan-to-value, the security agreement and the exit plan, so your own lawyer can review them. We do not promise or quote returns, and we do not give legal, tax or investment advice.

Lending to a German developer: a due diligence checklist before you transfer a euro