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.