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Buying real estate — especially: Buying a condominium

16. June 2021

When buying a condo­minium, from the point of view of the buyer, it is important that the purchase contract is legally in order and not to the detriment of the buyer.

In addition to the purchase contract, the decla­ration of division (Teilungserk­lärung) must then be examined as a further important document.


On the contract of sale of a condominium

When signing the contract of sale of a condo­minium, it is important to pay attention at least to the condi­tions for the payment of the purchase price (the due date condition) and how or when the transfer of ownership is to take place. It is usual that the condo­minium is sold in the current inspected condition and that the seller excludes any warranty for defects. He is only liable for fraud­u­lently concealed defects. But here, too, caution is required: not every defect that was concealed was also fraud­u­lently concealed and should have been disclosed by the seller.


Encum­brance power (Belas­tungsvoll­macht) and loan agreement

If the condo­minium cannot be financed with the buyer’s own funds, then financing by a banking insti­tution is required, i.e. a loan agreement. In this case, a provision must be included in the purchase agreement stating that the apartment may be encum­bered with a land charge by way of security, even though the purchaser does not become the owner of the condo­minium as a result of the purchase agreement, but only when his ownership is entered in the land register (Grundbuch). Here, on the one hand, it is important to ensure that this so-called encum­brance power (Belas­tungsvoll­macht) of attorney is complete and, if applicable, that it is consistent with the bank’s loan conditions.

It is also important in connection with the loan agreement to ensure that the bank’s disbursement condi­tions can be met at all and in a timely manner with the provi­sions in the purchase agreement. Otherwise, time gaps may open up, so that commitment interest must be paid without disbursement of the loan.


Checking other documents and records

In addition to the purchase agreement, another important document to review is the decla­ration of division (Teilungserk­lärung). The decla­ration of partition sometimes regulates the relationship between the condo­minium owners and the treatment of the common property. In particular, the buyer must undertake to comply with the regula­tions contained in this decla­ration of division. For example, it may be that the decla­ration of division already stipu­lates which further construction measures on the common property are to be tolerated, such as the removal of roof blanks, renovation measures or modern­ization measures. Legal succession clauses are often found in the decla­ration of partition, especially in the case of further construction measures already regulated there. If the buyer wants to resell the condo­minium, the new buyer must also commit to all of the above. This could well make resale more difficult.

It is recom­mended to have the minutes and resolu­tions (Beschlusspro­tokolle) of the last at least five years available from the property management (Hausver­waltung) of the condo­minium owners’ associ­ation (Wohnung­seigen­tümerge­mein­schaft). From the minutes and resolu­tions it can be inferred for example whether larger building projects, e.g. reorga­ni­zation measures, modern­ization measures, at the community property, like for instance the roof, the front or similar are to be expected already decided.

It is also advisable to inspect the building encum­brance register (Baulas­ten­verze­ichnis) in any case. A register of building encum­brances lists oblig­a­tions under public law that may encumber the property. These may be oblig­a­tions to the building author­ities to do, refrain from doing or tolerate certain things with regard to the condominium.


Typical risks

Hidden defects are typical risks, since on the one hand they have to be remedied and on the other hand the seller is not neces­sarily liable for these hidden defects. In any case, the buyer who invokes such a hidden defect has to prove that the seller himself was aware of this defect and was also obliged to disclose this defect.

Another typical risk is that as a buyer and new owner of an apartment, you become a member of the condo­minium owners’ associ­ation (Wohnung­seigen­tümerge­mein­schaft), which votes on the other common property by majority resolution, as in the case of a company. So you can be outvoted to your disad­vantage. Or problems, which was the own dwelling concern, however to the community property is to be assigned, because of the resolution regime of the condo­minium owners’ associ­ation only hesitantly are solved.

Because one becomes indeed owner of the dwelling, thus of the so-called special property (Sondereigentum). However, load-bearing walls, windows, the floor as well as the ceiling and so on are common property (Gemein­schaft­seigentum), and problems with it, for example in the case of lack, must be regulated in the context of the meetings of the condo­minium owners’ association.


Procedure of buying a condominium

The typical steps are, after you have identified a condo­minium as the object of purchase and have agreed to the price, the review of the condo­minium purchase agreement as well as the mentioned documents and — according to experience — always the adjustment of various contractual provisions.

If the condo­minium purchase agreement is then in order for both sides and the buyer has the financing commitment, i.e. the loan agreement with the bank in his pocket, then the condo­minium purchase agreement is notarized before a notary public due to the mandatory formal requirement. The notary then applies to the land registry for the regis­tration of a so-called priority notice for the transfer of ownership (Auflas­sungsvormerkung), which secures the position of the buyer. If the condi­tions for the payment of the purchase price are met, the bank will, if the loan agreement is coordi­nated with the condo­minium purchase agreement and there are no other unforeseen obstacles, pay to the seller, and then after the payment the notary requests to “exchange” the priority notice for the transfer of ownership with a transfer of ownership, so that the buyer becomes the owner of the apartment.

The buyer is therefore respon­sible for ensuring that his bank pays the purchase price on the due date, and the seller is respon­sible for ensuring that he then provides the buyer with (unencum­bered) ownership of the condo­minium, i.e. without encum­brances in the land register that are not expressly assumed by the buyer (because necessary: for example, right of way or right of way).


Rented residential property: purchase does not break rent (Kauf bricht nicht Miete)

According to German law, the principle “purchase does not break rent” applies, so that the tenants of the apartment do not automat­i­cally have to leave the apartment. However, the buyer who wants to occupy the apartment he has bought himself is generally entitled to demand that the tenants vacate the apartment. If the tenants do not volun­tarily vacate the apartment, then the buyer, as the new owner, must file an eviction action with the court if he wishes to occupy the condo­minium; such legal proceedings can be costly and sometimes lengthy.


Attorney-at-law Sascha C. Fürstenow will be pleased to advise you on this matter and offers a free and non-binding initial assessment of your facts in advance.