Changes looming in New Year for owners of German residential property
Apart from the turbulent changes that everybody involved in real estate has already been experiencing this year, REFIRE readers should be braced for several further innovations in 2021, which will usher in significant changes in Germany in particular.
Among those are: the recently approved building land mobilization law (Baulandmobilisierungsgesetz) with its controversial new regulations; the residential property modernization law (Wohnungseigentumsmodernisierungsgesetz) which came into effect on 1st December; the new regulations surrounding the payment of brokers commissions, which comes into effect on 23rd December; and a possible increase in mortgage interest rates due to developments in the COVID-19 vaccine world
According to Rudolf Naßl, board member at Hausbank München, a Bavarian co-operative property financing bank, what’s been a tough year is about to get tougher for many of his investing customers. "With the measures now adopted by the Federal Cabinet, a situation that was already tense for real estate owners and buyers will become even more difficult. In particular, the introduction of the conversion prohibition (Umwandlungsverbot) albeitwith small restrictions, but also some innovations passed with the WEG reform, pose greater challenges for our customers.”
Conversion Ban: The German government passed the Building Land Mobilisation Act on November 4th, a measure which also brings into effect the long-disputed ban on conversion of property uses – with a time limit set for December 31st, 2025. What this means is that – with some few exceptions – local councils or municipalities may then prohibit the conversion of rented apartments into condominiums in housing markets defined as ‘tight’. This has consequences particularly for owner-occupiers, and is likely to increase the probability of further price rises.
Furthermore, the new ‘building law’, or Baugebot, may oblige property owners to build apartments on vacant land within certain time limits. With the introduction of the new “Village Living” building category, building residential housing on the outskirts of smaller villages is supposed to become less complicated, and more consensual. The law, however, is still awaiting ratification by the Bundsestag.
WEG-Reform: The WEG-Reform (residential property law) came into force on December 1st, and with it countless new regulations relating to residential property ownership. These largely have to do with removing obstacles to building changes and refurbishments. Hence an individual apartment owner can demand from fellow apartment owners improvements such as the installation of e-charging stations or fibre optic connections, but at his own expense.
Larger refurbishment works, such as refreshing a property’s façade, will require a majority vote from the other owners. If that’s just a simple majority, then those who voted for the measure will share the costs among themselves. Where there is a two-thirds majority, including at least half of the co-ownership shares, then all the owners are liable for the costs.
And, while owners’ meeting are not planned to be exclusively online, individual owners can opt to participate online in future. This will obviously require the provision of the appropriate digital tools.
Brokers’ Commissions: As discussed in a lengthier article elsewhere in this issue of REFIRE, the new law on sharing broker commissions between buyer and seller, already common practice in ten of Germany’s federal states, will now apply across the whole country from 23rd December. It will mostly affect transactions in the remaining six states – Berlin, Brandenburg, Bremen, Hamburg, Hesse and Lower Saxony.
And while interest rates remain at record lows, and have been held extra-low as the country grapples with the COVID-19 pandemic, next year may see a heightened need to act speedily when fixing terms for the building or buying of any form of property. If the corona vaccine distribution goes ahead faster than expected, banks might be very tempted to inch those interest rates upwards.