What I have learnt from my experience, it is not always easy for foreigners to understand the überdetailed German legal order. Simple answers to basic legal questions are, however, sometimes necessary long before an investment, a transaction or a development takes place. For this reason, I have put together a couple of common questions which arise in our daily consulting practise as well as their answers. I hope this will help to simplify your access to the German real estate market.
If you have further questions, feel free to message me and, if applicable, I will add your question to this list.
1. Are foreigners allowed to hold real property in Germany?
Yes. Unlike in some other jurisdictions (e.g. Russia, Indonesia), there are generally no restrictions under German Law which relate to the nationality or the citizenship of a real property holder.
2. Do I have to live in Germany in order to be eligible for buying real property?
3. What are the legal requirements for buying real property?
For purchasing real property in Germany, you will have to conclude a notarised purchase agreement. This is required by Sect. 311 b of the German Civil Code (“BGB”). In order to fulfill this contract the competent authority will change the ownership in the land registry. When this is done, you are the property holder.
4. What are the additional costs of purchasing real property?
This essentially depends on where the property is located within Germany, since nearly all price-building factors vary from region to region. Usually, you will have to pay at least the notary fee, the commission for the agent and the property transfer tax (PTT). If you would like to purchase real property for example in Berlin, count as follows:
- circa 2 percent notary fees
- usually 7,14 percent commission
- currently 6 percent PTT
The additonal costs in Berlin consequently add up to circa 15 percent of the purchasing price.
nota bene: the PTT is with 3,5 percent the lowest in Bavaria (e.g. Munich) and Saxony (e.g. Dresden) and with 6,5 the highest in Brandenburg (e.g. Potsdam) and North Rhine-Westphalia (e.g. Düsseldorf, Cologne).
5. What are the legal ways to lower the additional costs?
The commission for the real estate agent can be subject of negotiations. This of course depends on several factors, such as the type of property, the region, your personal market volume and resale options. There are some legal loopholes which, however, depend on specific formal circumstances.
The property transfer tax (PTT) can be avoided through share deals, if you purchase no more than 94,9 percent of a property company. It is common practise in Germany and our daily business.
The notary fees are generally non negotiable. If you purchase through a share deal the questions as for the “whether” and the “how” of the notary fees depend on the legal nature of the company. There are many legal possiblities.
6. How do I become the official owner of real property?
The land registry is uniquely and exclusively authoritative for the ownership of real property in Germany, which is represented by the local court (Amtsgericht) of each region.
Even if the land registry contains wrong information, e.g. a wrong person, it is legally assumed under Sect. 891 of the German Civil Code (“BGB”) that he/she is the owner. The assumption can, however, be rebutted.
7. How do I figure out the name and contact details of current owners of real property?
For accessing information of the land registry you need to substantiate your “legitimate interest” in the information under Sect. 12 of the Land Registry Law (“GBO”). The German High Court of Justice has ruled that “simple” interest in purchasing property or the interest to figure out the name and contact details of the current owner does not constitute a “legitimate interest”. This interest is given e.g. when the vendor has granted exclusivity.
If not provided for by the real estate agent or research in public sources turns out to be fruitless, the current ownership can be indicated in the real estate cadaster which freely accessible without a “legitimate interest”.
8. What are the legal requirements for leasing property?
Unlike other jurisiditons, under German law tenancy contracts – apart from a few exceptions – do not need to be notarised or officially registered.
Broadly speaking, German Tenancy Law is divided into two areas: Commercial and Residential Tenancy Law, to which different sets of rules apply:
- Commercial Tenancy Law: Contracts can be concluded for a duration for up to 30 years, however, very strict legal formalities apply and these contracts need to be individually drafted in detail. You are usually free to negotiate the rent, and rental increases are not as such limited by law. If you invest into a decent long running contract with detailed rent increasing mechanisms, your asset is secured.
- Residential Tenancy Law: Concluding contracts for a long period of time is usually not possible when you lease apartments. Rent and rental increases are subject to statutory law and are generally restricted in favour of the tenant. Terminating the contract by the landlord is tied to stringent rules and very difficult to enforce.
9. What are the “new rules” on subletting and airbnbing?
Due to housing shortage some areas, such as Berlin, have recently introduced strict rules on short-term sublets (“Zweckentfremdungsverbot”). To sum up: Short-term subletting is generally only possible if you have a permission by the authority. There are some legal loopholes but note that the administrative fine can be up to EUR 50,000.
10. Where do I get further market and legal information?
One of the leading journal for the German real estate market is the Immobilien Zeitung http://www.immobilien-zeitung.de/ (in German).
Real estate relating judgements by the High Court of Justice (“Bundesgerichtshof”) are accessable over the Court’s website: http://www.bundesgerichtshof.de/EN/Home/home_node.html (in German).
If you have any further questions, please do not hesitate to contact me.