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Term Explanation and Overview: ‘Stock’ in the Legal Context

The term “Stock” is used in German law in various legal contexts. Its meaning varies, in particular depending on whether it is in the context of real estate, tenancy, construction, or property law. Generally, the word refers to a part of a building, commonly a floor or story, but in legal doctrine, statutes, and contracts it may have a more precise definition linked to legal consequences.

Below are the key legal aspects and meanings of the term “Stock” systematically presented.

Stock in Real Estate Law

Condominium ownership (Stockwerkeigentum)

Condominium ownership is one of the central conceptual fields in which the term ‘Stock’ appears. It refers to the co-ownership of real property as governed by the Condominium Act (WEG), combined with exclusive ownership of certain rooms of a building, often a “floor” or parts thereof. The legal structure of condominium ownership is as follows:

• Definition under the WEG: Exclusive ownership of an apartment or rooms of a building not used for residential purposes, combined with a co-ownership share in the common property.
• Formation: Condominium ownership is established through a partition declaration and entry in the land register, thereby becoming legally effective (§ 8 WEG).
• Legal consequences: The owner of condominium ownership possesses transferable and inheritable ownership of a specific, self-contained unit, which is usually located on a particular floor of a building.

Significance in Land Register Law

When entering condominium ownership in the land register, it is specified in detail which part of the building (usually a floor or subdivision of a floor) becomes exclusive property. The precise designation of a floor is essential for the legally secure demarcation of the exclusive ownership unit.

Stock in Tenancy and Lease Law

In leases, residential or commercial premises are often designated and allocated by floor. The precise definition of the rented area, e.g., “third floor on the left,” is especially crucial in cases of dispute regarding area allocation and use.

• Legal consequences: The designation of a floor in the contract can affect questions of accessibility, rights and duties (such as use of elevators, escape routes, communal areas).
• Demarcation: If a floor is used by several tenants (e.g., multiple parties), clear contractual demarcation is required.

Stock in Building and Public Law

In the context of construction law, ‘Stock’ describes the individual levels of a building. Building codes of the federal states define how a floor is to be counted and what requirements apply to the construction or use of individual floors.

• Definitions: State building codes regulate the permissible number of upper floors (stories) and their construction requirements (e.g., minimum height, fire protection, escape routes).
• Permit law: The permissibility of construction projects depends on compliance with the number of floors as stipulated in the development plan.

Practical Examples

• Height restrictions: Urban planning regulations often limit the number of floors for reasons such as protection of the local appearance, fire safety, or to safeguard neighbor rights.
• Special regulations: Certain uses of floors (such as attic conversions or basement use) are subject to specific legal requirements.

Stock and Condominium Ownership

In condominium law, the autonomy and separateness of an apartment is regularly described by its location in the building, i.e., the “Stock” (floor). The term is fundamentally important for distinguishing and allocating exclusive property within the meaning of § 3 WEG.

• Allocation: By designating the floor in the partition plan, a clear allocation of the apartment to the respective owner is achieved.
• Partial ownership: In addition to apartments, exclusive property may also be granted for non-residential units (e.g., shops, offices, workshops), which are likewise located on specific floors.

Distinction from Similar Terms

Floor

The term “floor” is to be understood as synonymous with “Stock” and describes the level of a building, but is particularly preferred in technical construction law and building codes.

Story

The term “story” (Geschoss) is often the more precise term in building code law and is defined differently depending on the federal state. In civil law, “Stock,” “floor,” and “story” are, however, often used synonymously.

Particularities in Property Law

In property law, the term ‘Stock’ is understood as part of a building that can be legally separated and independently transferred, e.g., through partition, sale, or encumbrance of ownership.

• Partition auction: When dividing an entire property, each floor can also become an independent unit, provided the WEG applies.
• Heritable building right: A heritable building right may be restricted to a single floor (Stock) of a building and must then be defined accordingly in its scope and content.

International Comparisons

Condominium ownership is found in a similar form in Swiss law (Art. 712a et seq. ZGB), where condominium ownership of individual floors is expressly recognized as an independent right.

Significance in Case Law and Literature

The precise definition of “Stock” can be relevant in individual legal disputes, for example when demarcating exclusive ownership, neighbor rights, or rental area calculations. Case law refers to the contractual or land register definition of the relevant floor and examines the actual constructional separation.

Summary

The term ‘Stock’ has a variety of meanings in German law and is especially relevant in real estate, tenancy, building, and property law. Its exact definition, delineation, and legal effects depend each time on the relevant area of law, the contractual and land register designation, as well as regulatory building requirements. A clear, legally secure designation of a floor is particularly crucial for establishing condominium ownership, the allocation of areas in rental law, and when partitioning or selling parts of property.

References

• Condominium Act (WEG)
• Model Building Code of the Länder
• Land Register Code (GBO)
• Swiss Civil Code (Art. 712a et seq. ZGB)

Further Topics:

• Partial ownership
• Exclusive ownership
• Common property
• Heritable building right

This article provides a systematic overview of the legal aspects of the term “Stock” and serves to improve the understanding of its meaning in German law.

Frequently Asked Questions

Who is the legal owner of a stock in a stock corporation?

The legal owner of a stock (shareholding) in a stock corporation is generally the person or entity registered in the share register. For registered shares, entry in the register is a prerequisite for exercising all shareholder rights. For bearer shares, ownership is based on possession of the physical share certificate, making the bearer the legal owner in case of doubt. For holdings via securities deposit accounts, the custodial bank holds the shares formally, while the account holder (the beneficial owner) is considered the owner. Issues may arise in the case of so-called “short sales” or pledging, where ownership and disposal rights may temporarily diverge. In disputes, the determining factor is who is entered in the share register or can prove possession at the time of exercising rights.

What rights and obligations arise from legal ownership of a stock?

Ownership of a stock is associated with numerous statutory rights and obligations. Fundamental shareholder rights include the right to vote at general meetings, the right to information, the right to receive dividends, and the preemptive right in capital increases. There is also the right to participate in general meetings and to challenge resolutions under the conditions of the Stock Corporation Act (in case of violation of law or articles of association). Obligations primarily include payment of the issue price of the share; additional payments are not required in Germany if the share is marked as fully paid. Shareholders are also obliged to notify the company’s governing bodies and, if necessary, supervisory authorities of substantial holdings that exceed certain thresholds (so-called notification requirements under the Securities Trading Act). In addition, shareholders with significant influence have special duties regarding transparency and the prevention of insider trading.

What statutory formalities must be observed when transferring a stock?

Depending on the type of share (bearer share or registered share), the legal procedure for transferring a stock differs. In the case of bearer shares, transfer usually takes place by mere delivery and, if applicable, agreement (transfer of the share certificate or book entry in the securities deposit system). Registered shares additionally require a written assignment declaration (endorsement) and registration of the acquirer in the share register. Without this entry, the acquirer is not fully legitimized as a shareholder. For listed shares, transfer is generally carried out electronically via securities settlement, regulated by the Depository Act and relevant EU directives. The transfer of membership rights associated with the stock takes place legally with the transfer of ownership and proper registration, where required by law.

How are dividends legally treated and how can they be claimed?

Dividends are legally considered part of a stock corporation’s distributable profits, which are paid out to shareholders by resolution of the general meeting. Entitlement lies with those shareholders who are registered or in possession of the share on the so-called ex-date. Payment is made by operation of law; a separate dividend application is not necessary. Dividend claims expire after three years (statute of limitations) in accordance with § 195 BGB. Payment is the obligation of the company, usually processed technically via the custodial banks. The dividend is taxable income from capital assets; the company must withhold capital gains tax. Shareholders have no entitlement to reinvestment or accumulation unless this is separately resolved by the general meeting.

Do obligations law (Schuldrecht) or property law (Sachenrecht) apply to shares (stock)?

Legally, shares are subject to the law of special assets (Sondervermögensrecht): they are neither classic things within the meaning of the BGB nor mere claims. Instead, they are regarded as “membership securities.” The transfer and legal relationships are governed by the Stock Corporation Act, Securities Act, and specific statutes (such as the Depository Act). Property law applies where the transfer and ownership of physical share certificates is concerned (for effective share certificates), otherwise, obligations and registry law provisions are generally applicable (especially with book-entry securities).

What notification requirements exist for large share acquisitions or participations?

The German Securities Trading Act (WpHG) requires shareholders who exceed certain thresholds of voting rights (3%, 5%, 10%, 15%, 20%, 25%, 30%, 50%, 75%) by acquisition, disposal, or otherwise to notify both the company and BaFin without delay. Failure to comply can lead to severe penalties including loss of voting rights or fines. The notification requirement applies to both natural and legal persons who hold own or attributed voting rights. There are also special reporting obligations under the Takeover Act and in the context of mandatory offers and delisting proceedings.

Under what legal conditions can a shareholder’s stock be redeemed?

The redemption (amortization) of shares is only permissible under strict statutory and constitutional circumstances in German stock corporation law. It generally requires a resolution of the general meeting by a qualified majority and can be carried out either with compensation or—under special circumstances—without compensation. The requirements and procedures are set out in § 237 AktG. Redemption is only permitted if the articles of association expressly provide for it or the affected party consents. In the case of mandatory or compulsory redemption, the law must be observed, especially regarding compensation for the redeemed share value. Affected shareholders have the right to judicial protection against arbitrary or unconstitutional redemptions.