Real Estate, Germany updates

Formal requirements on agreements to amend real estate purchase contracts after conveyance
  • Germany
  • 16 November 2018

Federal Court of Justice case law suggests that the parties to a real estate purchase contract can in principle immediately change its content without having to comply with notarial form requirements after the notarial certification of the real estate purchase contract containing the conveyance has been concluded. The court's recent decision in this regard is to be welcomed in the interests of the continuity of its case law and in view of the lower courts' increasingly inconsistent case law in the past.

New RETT rules for share deals
  • Germany
  • 06 July 2018

The Ministers of Finance of the Federal States recently agreed on new real estate transfer tax (RETT) rules for share deals. According to official press releases, a fundamental RETT reform that had been previously discussed was not agreed. Rather, the agreement consists of new RETT rules regarding share deals with a lower threshold, longer holding periods and aligning the rules that are applicable to corporations with those that already apply to partnerships.

Sale of real estate by special purpose vehicles
  • Germany
  • 20 April 2018

Transaction structures involving special purpose vehicles, whose main assets after completion of the purchase process consist only of the purchased real estate, are often chosen in Germany. Such structures are used in particular to shield from liability, so that third-party access to the special purpose vehicle's assets is limited. They are also used to facilitate a sale without incurring real property transfer tax for the exit.

Impending terminability of land use agreements for energy plants
  • Germany
  • 08 December 2017

The operation of energy plants usually means securing the required land long term by way of a use agreement. Prematurely ending a use agreement can substantially reduce the profitability of investments in energy plants. Defects in the written form of use agreements therefore constitute a risk for such investments. However, the Federal Court of Justice has decided that written form remedy clauses are invalid and do not prevent a contracting party from terminating a use agreement by invoking a written form defect.

Rental agreement termination for landlord's own use – new case law
  • Germany
  • 16 June 2017

A landlord can terminate a rental agreement for residential premises if he or she has a justified interest in ending the lease. Two recent Federal Court of Justice decisions provide clarification regarding a landlord's needs as grounds for termination. While the change in case law regarding the legal consequences of a breach of the duty to offer is welcome, the judgments also show that there is no one-size-fits-all answer to the question of whether termination due to a landlord's needs can be declared valid.

Benchmark for determination of compensation value for use of residential property
  • Germany
  • 17 March 2017

A residential landlord's right to compensation for use against a tenant who has been given notice of termination but not vacated the property in time is often of concern if the landlord demands compensation to the value of the rent customarily paid in the area. Until now, how to calculate this compensation precisely has been unclear. A recent Federal Court of Justice case has created legal certainty for those applying the law and has strengthened the interests of landlords.

Federal Fiscal Court clarifies trade tax implications of real estate investments
  • Germany
  • 17 February 2017

The Federal Fiscal Court recently clarified previously disputed issues on whether the lease of a shopping centre qualified as trade income or income from property administration. Surprisingly, the court also decided that marketing measures conducted by a centre manager are not detrimental for trade tax purposes, giving real estate investors much more flexibility for existing and future real estate investments in terms of ring-fencing trade tax exposures.

Real estate transactions with sellers outside Germany jeopardised
  • Germany
  • 11 November 2016

The sale of German real estate by companies or natural persons based outside Germany was recently made more difficult by the fact that the German tax authorities have obliged buyers to withhold and pay a lump sum of up to 25% of the purchase price for the account of the seller to secure the income tax incurred on the purchase price. This tax deduction can lead to the transaction failing if the purchase price is insufficient to cover both the seller's financing and the lump-sum tax deduction.

New rent control legislation – major impact on real estate investment market
  • Germany
  • 20 February 2015

The federal government recently published a proposal for tenancy law reform. The new rent control legislation will have a significant impact on prospective investors in the residential tenancy sector and investors are therefore advised to bear this in mind in their business and investment plans.

Liability of party without power of attorney for wasted contract costs
  • Germany
  • 21 June 2013

Land purchase contracts are often concluded by representatives without a power of attorney acting for one or even both parties. However, this is inadvisable. The standard land purchase contract normally includes a provision on who must pay costs. A recent decision shows that ideally, an explicit agreement about the liability for the costs of the notary should be made outside the notarised contract in case approval is refused.

Land defective if contaminated water flows through residential plot
  • Germany
  • 14 June 2013

The Federal Court of Justice recently ruled that a plot of land used for residential purposes has a material defect if underground water contaminated with toxic substances flows through it. The court stated that the land was defective because it was adjacent to a contaminated plot, which emitted pollutants via underground water. It considered that the toxic substances involved dangers which a purchaser would not normally accept.

Revision of landlord and tenant law: content and progress
  • Germany
  • 22 March 2013

Parliament recently voted to adopt the draft of the Tenancy Law Amendment Act. The proposed changes will apply immediately to all rental contracts as soon as they come into force. Measures for energy-efficient modernisation have been defined for the first time and are set to be integrated into other laws. Current court proceedings and enforcements should be reviewed to see how these revisions can be used to good effect.

Can an online advertisement act as a binding offer to conclude an agency contract?
  • Germany
  • 04 January 2013

The Federal Court of Justice recently decided that an online advertisement by an estate agent constituted a binding and sufficiently defined offer for the conclusion of an agency contract. This decision is particularly surprising as, until now, the court had not regarded an internet advertisement as a binding offer and the court placed far lower demands on the clarity of commission compared with its previous case law.

Vendor must be informed of property defect before accepting offer
  • Germany
  • 26 October 2012

In a recent decision the Federal Court of Justice decided that if the offer by the purchaser and acceptance by the vendor are notarised separately in a property purchase contract, the time when the purchaser is assumed to be aware of a defect is not the time of acceptance, but rather the time of notarisation of the offer.

Balancing photovoltaic installations and owner easements
  • Germany
  • 17 August 2012

The Munich Higher Regional Court recently had to decide whether, and in what circumstances, a landowner which wishes to erect a photovoltaic installation on its own land and not on third-party land is entitled to approve and register an owner easement to ensure that it can continue to operate the installation even after the sale of the land.

Floor area deviation in commercial lease agreements
  • Germany
  • 06 July 2012

The Dusseldorf Higher Regional Court has followed Federal Court of Justice case law on residential rental law and decided that it is also a defect in commercial lease agreements if the declared floor area differs from the actual area by more than 10%. The court explained that applying the case law to lease agreements for commercial premises is justified because the economic aspect plays an important role in such agreements.

Restaurant heating failure was valid reason for termination
  • Germany
  • 09 March 2012

In a recent ruling, the Dusseldorf Higher Regional Court interpreted the concept of defects and the possibility of termination considerably more strictly than in previous case law. The court ruled that a notice of termination given by a restaurant because a temperature of 20 degrees Celsius (which is considered necessary in shops) was not guaranteed during August and September was valid.

Restrictions for landlords when adjusting pre-payments of operating costs
  • Germany
  • 20 January 2012

According to Section 560(4) of the Civil Code, both tenants and landlords can unilaterally demand a reasonable level for the pre-payment of operating costs after an account settlement, so that the pre-payments by the tenant are as close as possible to the actual costs.

Entry of land purchase in Land Register by partnership under civil law
  • Germany
  • 14 October 2011

A partnership under civil law is a popular legal structure for companies that wish to purchase real estate because such entities are easy to establish without strict formal requirements, involve a relatively small amount of administrative work and offer tax advantages. The Federal Court of Justice recently found a practical solution to the controversy surrounding the legal capacity of a partnership under civil law.

Obligation to grant local community consent by way of substitution
  • Germany
  • 26 August 2011

The Federal Court of Justice has ruled that building permit authorities are obliged to grant local community consent in building permit proceedings if such consent has been refused unlawfully. The fact that the district administration offices are now obliged to provide unlawfully withheld consent by way of substitution is a welcome development, although it remains to be seen whether the ruling will have the desired effect in practice.

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