On 1 August 2013, the German Act on Modernisation of Cost Rules (Kostenrechtsmodernisierungsgesetz) entered into force. It has amended - inter alia - the German statutory provisions on notarial costs.

Following this change in legislation, there has now been an outcry in the German press due to a recent press release issued by a German law firm. The press release had claimed that the costs for notarisations of Merger Agreements and Share Purchase Agreements could rise by up to 80 %.

This upset is, however, without foundation. On the one hand, in certain extreme cases, it is true that there may be such an increase in costs. For example, the notarial costs for Merger Agreements basically depend on the actual net worth of the transferring company. Under the old costs regime, there used to be a cap of EUR 5 million. This cap has now been raised to EUR 10 million. Thus, the notarisation of a Merger Agreement for a transferring company with an actual net worth of EUR 10 million has indeed become much more expensive. Also, the costs for notarisations of contracts in foreign languages have increased significantly.

On the other hand, however, for intra-group share transfers a new cap has been introduced. The notarial costs for such transactions basically depend on the purchase price of the shares. Prior to the change in the law, there had been a limit in place of EUR 60 million. For intra-group transactions, this limit has now been reduced to EUR 10 million. Therefore, intra-group restructuring even becomes cheaper as compared with the old costs regime in cases in which the purchase price lies between EUR 10 million and EUR 60 million.

In cases in which under the new law the caps for the value of transactions has not changed, there will be a reasonable increase in notarial fees. For example, whilst under the old law the mere notarisation (without the execution of further duties) of a purchase contract for shares or a property in the value of EUR 2 million would have incurred a notarial fee of EUR 6,114, under the new law the fee would be EUR 6,670. It has to be borne in mind that the last increase in notary fees took place in 1986, so that the latest increase does not even catch up with inflation to-date. Therefore, particularly in connection with real estate purchase agreements, it is not true that there has been an “explosion” of notarial fees.

Therefore, there is, after all, no need to be alarmed by the reform of the German notarial costs regime. Especially in comparison with the notarial costs in countries such as France or Italy, costs in Germany are in most cases still very moderate.

Cord-Henning Brandes                                   Dr Daniel Komo
Notary in Berlin                                               Notary in Frankfurt / Main