The nationwide ban on conversion to apartment ownership is supposed to further relieve the real estate market.
Berlin’s housing market is changing. More and more rental apartments are being converted into condominiums. When it became necessary five years ago to have conversions to condominium ownership approved in milieu protection areas, where the composition of the residential population is to be preserved, the number of conversions dropped. In addition, the districts in turn secured a right of first refusal. These policy measures were intended to preserve Berlin’s tenant population and counter the threat of displacement from certain neighborhoods. After all, only when a building is subdivided into condominiums the individual apartments may be sold separately. The trend changed at the start of 2020. The Berlin Senate extended the conversion ordinance for 5 years at the beginning of February 2020. With the rent brake, the rent cap and the ban on misappropriation, the possibilities to make money with rental houses were limited. However, condo prices remain high.
BACKGROUND TO THE LEGISLATION
In addition to the Berlin Senate, the German government now also wants to make it more difficult to generally convert to condominiums in cities with tight housing. On November 4, 2020, the government passed a draft law on the mobilization of building land. This builds on the recommendations of the Building Land Commission and makes it easier for municipalities to provide building land. It is primarily concerned with the importance of housing construction and promoting the acceleration of housing construction. The coalition agreement stipulates that municipalities are to be supported in activating building land and securing affordable housing. To this end, the German government aims to further improve the construction planning law. In particular, the draft law is intended to expand the municipalities’ scope for action under construction planning law.
REGULATORY CONTENT OF THE CONSTRUCTION MOBILIZATION ACT AND PROHIBITION OF CONVERSION IN SECTION 250 OF THE GERMAN BUILDING CODE (BAUGB)
The main regulatory content of the Construction Mobilization Act includes the expansion of the exemption options and facilitation of construction in the inner and outer areas. With the “ban on conversion subject to approval” in § 250 BauGB, the draft also contains a proposal to reduce the possibilities of converting rental apartments into condominiums in the implementation of the resolutions of the Housing Summit. The regulation authorizes the state governments, limited until Dec. 31, 2025, to define by ordinance areas with a tight housing market in which conversion to condominiums requires approval. The list of cases in which approval for conversion would have to be granted is long. Even owners of multi-family buildings need a permit if they want to sell apartments individually.
EXCEPTIONS TO THE Ban ON CONVERSION TO Apartment OWNERSHIP USING THE EXAMPLE OF SECTION 172 IV 3 NO.2 OF THE GERMAN BUILDING CODE (BAUGB)
However, there are exceptions “to protect the legitimate interests of the owners” with which the ban on conversion can be “circumvented”. For example, according to § 172 IV p. 2 BauGB, approval must be granted if the owner cannot reasonably be expected to forego the conversion, even taking into account the general interest, if the property is to be sold to members of the owner’s family for the owner’s own use, or if the property belongs to an estate and condominium ownership or partial ownership is to be established for the benefit of co-heirs or legatees.
CRITICISM OF THE CONVERSION Ban
The prohibition of conversion is accepted in different ways. On the one hand, concerns are expressed: The law neither protects tenants nor solves the housing shortage. Conversion would not be in conflict with tenants’ interests, as they would often be able to obtain housing more cheaply than expensive new-build apartments. A strict ban on conversion would result in many people being discouraged from becoming homeowners. The conversion ban would make condominiums scarcer and more expensive. Rent increases are to be expected if fewer apartments are offered for rent due to the conversion ban.
On the other hand, the ban on conversion is welcomed: the conversion of rental apartments in tight housing markets is a major problem for long-established tenants, who would be forced out of their neighborhoods. According to the tenants’ association, the converted apartments would also mostly be luxuriously refurbished and resold at high prices.
JUR | URBAN ADVISES OWNERS ON REAL ESTATE LAW AND CONDOMINIUM LAW. DO YOU HAVE ANY QUESTIONS?
CONTACT US NOW.