Real estate law attorney: Contact person for real estate law

Real estate law is a complex area of law that consists of various sub-areas, such as construction law, tenancy law, residential property law, land law, brokerage law and other special areas.

Topics in our legal advice

The Herfurtner law firm has a team of competent attorneys who are familiar with these sub-areas and who will assist you in solving legal issues relating to real estate. We attach great importance to personal support, comprehensive advice and individually tailored solutions.

Table of Contents

1. The cornerstones of real estate law
2. Public and private building law
3. Real estate law and construction contracts
4. Tenancy law and tenancy agreements
5. Condominium law and declarations of partition
6. Property purchase contracts and land register law
7. Real estate agent law and real estate agent commission
8. Real estate financing and mortgage law
9. Development and environmental law
10. Expropriation and compensation law
11. Real estate law and renewable energy subsidies
12. Tax aspects of real estate law
13. How can a real estate law attorney help you?
14. Use our support

The cornerstones of real estate law

Real estate law encompasses several areas of law that deal with the legal side of real estate transactions, the use of real estate, and its construction, management, and financing. In this section, we will look at the various cornerstones of real estate law.

Legal sources in real estate law

Real estate law is governed by a large number of laws and regulations at the federal, state, and local levels. Here are some of the most important sources of law:

Civil Code (BGB): The BGB contains basic regulations on real estate law, particularly in the areas of tenancy law, condominium law and land law.

Building Code (BauGB): The BauGB regulates public building law, in particular urban land use planning and the building permit procedure.

State Building Codes (LBO): The state building codes contain regulations on building law, such as provisions on structural installations, building products and building procedures.

Code of Civil Procedure (ZPO) and Code of Administrative Procedure (VwGO): These two laws regulate the procedure in civil and administrative disputes in real estate law.

Typical issues in real estate law

Numerous issues arise in real estate law that affect both the legal and economic aspects of real estate transactions. Here are some typical examples:

• How can a property be acquired or sold, and what legal formalities must be observed?
• What rights and obligations do landlords and tenants have under a lease?
• How can building projects be approved and realized, and which building regulations must be observed?
• What legal principles apply to the financing of real estate projects, and how can borrowers and lenders protect their interests?

Legal challenges in real estate law

Real estate law is characterized by a variety of legal challenges arising from the complexity of the subject matter, the constant evolution of the law, and the economic interests of the parties involved. Some of these challenges include:

• The delineation of public and private construction law and the coordination of the various procedures and responsibilities.
• The interpretation and application of laws and regulations that are enacted at different levels and sometimes contain unclear or contradictory provisions.
• The management of conflicts of interest between the various parties involved, such as developers, architects, tenants, landlords and neighbors.
• Adapting real estate law to new developments, such as digitalization, the energy transition or demographic trends.

Role of the real estate lawyer

A real estate law attorney can help you successfully navigate the legal challenges of real estate law. The responsibilities of a real estate law attorney include:

• Advising clients on drafting and reviewing contracts, such as land purchase agreements, leases, and construction contracts.
• Representing clients in disputes in and out of court, for example in enforcing claims for rent or damages.
• Advising clients on obtaining building permits and implementing construction projects in compliance with building regulations.
• Assisting clients in financing real estate projects and securing loans by means of real estate liens.

In our law office we have an experienced team of real estate lawyers who can provide you with competent assistance in all legal issues related to real estate. Contact us for comprehensive legal advice.

Public and private building law

Construction law includes both public and private construction law. Public building law is primarily concerned with building permits, such as planning permission, while private building law regulates the legal relationships between building owners, architects, engineers and construction companies.

Public Building Law

Public building law concerns the regulations governing the permissibility of construction projects, particularly in connection with urban land use planning, building permits and building regulations. Some important laws and regulations in public building law are:

1. Building Code (BauGB): The BauGB regulates the essential framework for urban land use planning, such as the preparation of land use plans and development plans.
2. State Building Codes (LBO): The LBOs of the individual federal states contain regulations on building construction, structural installations and building products.
3. Building Use Ordinance (BauNVO): The BauNVO defines the type and extent of building use, the areas of land that can be built over, and the position of structures on the property.

Private building law

Private building law covers the legal relationships between the parties involved in construction, such as builders, architects, engineers and construction companies. Some important regulations in private construction law are:

1. German Civil Code (BGB): The BGB contains regulations on contracts for work and services (§§ 631 ff. BGB) and architects’ and engineers’ contracts (§§ 650p ff. BGB) as well as on warranty claims and claims for damages.
2. German Construction Contract Procedures (VOB): The VOB is an important set of rules for awarding construction contracts and handling construction contracts. It consists of three parts: VOB/A (General Provisions for the Award of Construction Contracts), VOB/B (General Contract Conditions for the Execution of Construction Work) and VOB/C (General Technical Contract Conditions for Construction Work).

Real estate law and construction contracts

Construction contract law is a branch of real estate law that regulates the contractual relationships between building owners and building contractors. There are different types of construction contracts, which contain different rights and obligations for the contracting parties depending on the type and scope of the construction project. The most important types of construction contracts are:

The BGB construction contract: It is based on the German Civil Code (BGB) and is a special form of the contract for work and services. It is mostly used when private builders commission a new construction or renovation of an existing building. Since 2018, consumers have been afforded special protection by the consumer construction contract, which provides for, among other things, a construction description, a revocation instruction and a right of the builder to issue instructions.

The VOB construction contract: It is based on the German Construction Contract Procedures (VOB), which is a general business condition. It is mostly used when public-sector clients or commercial builders want to have a construction project implemented. It contains detailed regulations on changes to services, acceptance, warranty and remuneration.

The developer’s contract: This is a hybrid form of purchase contract and contract for work and services in which the developer hands over both the land and the turnkey building to the buyer. It is subject to the German Real Estate Agents and Property Developers Act (MaBV), which requires, among other things, construction completion insurance, payment planning and a warranty bond.

The following points should be considered when drafting and reviewing a construction contract:

• The construction services should be described as precisely as possible in the real estate law to avoid later disputes. This includes details of the materials used, quality standards and execution deadlines.
• The remuneration should be appropriate and based on the actual work involved. Partial payments linked to the progress of construction work should be agreed. In addition, a security deposit should be agreed in the event of defects or delays.
• The warranty should be clearly regulated and based on the statutory requirements. A distinction should be made between liability for defects during the construction period and the warranty after acceptance. It should also be specified how notices of defects are to be handled and what rights the client has in the event of defects.
• Liability should be distributed appropriately and be based on fault. It should be taken into account that the contractor is liable for his vicarious agents and that the owner is liable for his duties to cooperate.
• Termination should only be possible for good cause and the consequences of termination should be regulated. It should be noted that the builder has a right of cancellation in the case of a consumer construction contract.

Tenancy law and tenancy agreements

Tenancy law regulates the legal relationships between landlords and tenants in real estate law. Our attorneys advise both landlords and tenants on drafting rental agreements, enforcing claims for rent and termination, or asserting claims for damages.

Residential tenancy law is the most important area of law in this field. Residential tenancy law relates to the legal relationships between landlords and tenants of residential space. The main regulations in this regard can be found in the German Civil Code (BGB), in particular in Sections 535 et seq. of the German Civil Code (BGB). BGB.

Important aspects of residential tenancy law include:

• Drafting of rental agreements: this includes the agreement of rent, ancillary costs, security deposit, cosmetic repairs and other contractual components.
• Rent increases: Statutory regulations on rent increases can be found in Sections 558-560 of the German Civil Code (BGB), which regulate, among other things, the tenant’s consent, the justification for the rent increase and the so-called “capping limit”.
• Termination of the tenancy: The termination of residential tenancies is regulated in §§ 573 ff. BGB and requires a justification by the landlord, for example due to own need, breach of contract or economic exploitation of the property.
• Rent brake: The rent brake is a statutory regulation (Section 556d of the German Civil Code) that limits the permissible level of rent for new leases of residential space in areas with a tight housing market.

There is also commercial tenancy law. It concerns the legal relationships between landlords and tenants of commercial properties. In contrast to residential tenancy law, many provisions in commercial tenancy law are dispositive, i.e. they can be modified or excluded by contractual agreements. Important aspects of commercial tenancy law are:

• Drafting leases: these include, in particular, the agreement of rent, ancillary costs, term and notice periods, as well as the regulation of maintenance obligations and costs.
• Rent increases: In commercial tenancy law, rent increases are often regulated by contractual index rents, graduated rents or turnover rents.
• Termination of the lease: In commercial leases, notice periods and grounds for termination can be contractually agreed. In the absence of such an agreement, the statutory provisions of Section 580a of the German Civil Code (BGB) apply, which provide for a notice period of six months to the end of the quarter.

The rental agreement

Rental agreements are contracts that transfer the right to use a property in return for payment of a fee (rent). They can be concluded in writing or orally and are subject to the provisions of the German Civil Code (Bürgerliches Gesetzbuch, BGB) as well as the rent brake and protection against termination.

In the event of disputes between landlords and tenants in real estate law, various legal remedies may be invoked, such as reduction of rent, termination without notice, action for eviction or action for damages. Attention must be paid to the current case law of the courts, which may vary depending on the facts of the case and the federal state.

Condominium law and declarations of partition

Condominium law concerns the legal relationship between the condominium owners of a residential complex as well as between condominium owners and the manager. It is regulated by the German Condominium Act (WEG).

The main provisions of the WEG concern the establishment of condominium ownership, the rights and obligations of the condominium owners, the management of the common property and the implementation of resolutions in the owners’ meeting.

Declarations of division and common rules

The declaration of division is a central instrument in condominium law that establishes the separate ownership of the individual apartments as well as the common ownership of the common parts of the residential complex (e.g. property, facade, roof).

The declaration of division must be notarized and entered in the land register in the case of real estate law. It often also contains community rules, which define the rights and obligations of the apartment owners as well as the regulations for the management and use of the common parts of the residential complex.

Examples of subjects of regulation in the declaration of division and common rules are:

• The division of the residential complex into separate property and common property.
• The regulation of the distribution of costs for maintenance, repair and administration
• The appointment and dismissal of the property manager and the regulation of his duties and powers.
• The regulation of voting rights and decision-making in the owners’ meeting

Legal disputes in condominium law

Various legal disputes can arise in condominium law, such as disputes about the effectiveness of resolutions of the owners’ meeting. However, disputes about the rights and obligations of condominium owners, e.g. regarding the use of separate property and common property, are also common.

In addition, conflicts may arise in real estate law concerning the management of common property, in particular with regard to the appointment and dismissal of the manager or the implementation of maintenance and repair measures.

Property purchase contracts and land register law

Numerous legal aspects must be taken into account when buying and selling real estate. The main regulations can be found in the German Civil Code (BGB), in particular in §§ 433 ff. BGB (contract of sale), §§ 873, 925 BGB (transfer of ownership of real estate) and §§ 873, 883 BGB (land register law).

1. Land purchase contract

A land purchase agreement is a contract by which the seller undertakes to transfer ownership of a plot of land to the buyer. In return, the buyer undertakes to pay the agreed purchase price. Pursuant to Section 311b (1) of the German Civil Code (BGB), the land purchase agreement must be notarized. Important subjects of regulation in a land purchase agreement are, among others:

• • The exact designation of the property (parcel, district, land register sheet)
  • The agreed purchase price and the terms of payment
  • The regulation of ownership, usufruct and encumbrances
  • The regulation of warranty claims in case of material defects and defects of title

2. Land register law

The land register is a public register in which the ownership of land and any encumbrances (e.g. land charges, mortgages) are entered. Entries in the land register serve to ensure legal certainty and enjoy public trust (Section 891 of the German Civil Code (BGB)), i.e. they are deemed to be correct and complete unless the contrary is proven. The responsible land registry office is responsible for the entry.

Real estate agent law and real estate agent commission

Brokerage law regulates the legal relationships between brokers, sellers and buyers of real estate. The main regulations can be found in the German Civil Code (BGB), in particular in §§ 652 ff. BGB (brokerage contract) and in the Residential Mediation Act (WoVermRG).

In addition, the regulations of the “Bestellerprinzip” according to § 2a WoVermRG are of importance, according to which, in the brokerage of rental apartments, in principle the person who has commissioned the broker pays the brokerage commission. The most important point in this respect is the brokerage contract.

The brokerage contract is a contract in real estate law by which the broker undertakes to provide evidence or mediation services for the client in relation to the conclusion of a contract, usually for the purchase or rental of a property. In return, the client undertakes to pay a commission if a successful outcome is achieved (§ 652 BGB). Important regulation subjects in a brokerage contract are among other things:

• The exact designation of the property to be brokered
• The amount of the commission and the due date for payment
• The type and scope of the services to be provided by the broker
• The term of the contract and termination modalities

The broker’s claim to commission arises pursuant to § 652 (1) of the German Civil Code (BGB) if the contract proven or brokered by him comes into effect and is based on his activity. The claim for commission is due as soon as the main contract has been concluded.

The causality between the brokerage activity and the conclusion of the main contract is important here. The claim to commission may lapse if the main contract is invalid or if there is a right of withdrawal. More on this in Real Estate Law.

Real estate financing and mortgage law

Real estate financing and mortgage law are two important areas in connection with the acquisition and financing of real estate. The following section discusses legal principles, laws, examples and recent court decisions that are relevant to understanding these topics.

Legal foundations

Mortgage law in Germany is governed by the German Civil Code (BGB). The most important regulations can be found in §§ 1113 to 1203 BGB. These regulations concern the creation, transfer, realization and cancellation of mortgages as well as the rights and obligations of the parties involved.

Types of mortgages

There are two main types of mortgages in Germany: the book mortgage (§ 1114 BGB) and the letter mortgage (§ 1116 BGB). In the case of the book mortgage, the entry is made in the land register, while in the case of the letter mortgage, a mortgage certificate is issued.

Land charges

In addition to mortgages, there are also land charges (§§ 1191 ff. BGB), which are another form of real estate financing. Land charges are independent of the owner’s personal debt and can be handled more flexibly, which is why they are more common in practice than mortgages.

Realization of mortgages and land charges

If the borrower does not meet his payment obligations, the creditor has the right to liquidate the property by forced sale (§ 1147 BGB) or forced administration (§ 1148 BGB). The proceeds from the realization are used to repay the claims in real estate law.

Development and environmental law

The building law comprises the building planning law and the building regulation law. Building planning law regulates the permissibility of uses on land through the municipalities’ urban land use planning (land use plan and development plan) and the German Building Ordinance (BauNVO), which defines various types of building areas with different requirements for the type and extent of building use.

The Building Code regulates the technical requirements for buildings and structural facilities, such as clearance areas, fire protection or barrier-free access. Building regulations are issued by the federal states and can therefore vary from region to region.

Environmental law, on the other hand, comprises a large number of laws aimed at protecting environmental media (air, water, soil) as well as biodiversity. These include, for example, the Federal Immission Control Act (BImSchG), the Federal Water Act (WHG), the Federal Soil Protection Act (BBodSchG), the Recycling Management Act (KrWG) or the Federal Nature Conservation Act (BNatSchG).

Among other things, these laws contain regulations for the construction and operation of facilities that cause emissions or generate waste, as well as for the management of water bodies or the protection of species and habitats.

When planning and implementing construction projects, both zoning law and environmental law must be observed. This can lead to conflicts or the need for coordination, e.g. if a construction project conflicts with a development plan or an environmental impact assessment (EIA) is required. In such cases, various legal remedies can be sought, such as an objection, a lawsuit or an emergency appeal.

The responsibility for deciding on such appeals lies with various administrative authorities or administrative courts, depending on the nature of the project.

Expropriation and compensation law

Expropriation and compensation law is a branch of public law dealing with the conditions, procedure and consequences of expropriation of private property or other rights in favor of the state or a third party. This automatically makes it a part of real estate law. The following aspects should be noted:

• Expropriation is only permissible for the public good and must be carried out by law or on the basis of a law regulating the type and extent of compensation (Article 14 (3) of the Basic Law).
• As a rule, it requires legitimation under planning law, which decides on the admissibility and the general welfare of the expropriation. This can be, for example, a planning approval decision that has a preliminary effect under expropriation law (Section 19 (1) sentence 2 FStrG).
• Expropriation may only be used as a last resort if there is no other legally and economically justifiable solution that does not interfere or interferes less severely with the rights affected. The developer must therefore first make an appropriate offer to acquire the required land or rights.
• The expropriation procedure is applied for and carried out at the competent expropriation authority. The parties affected are heard and a hearing is held with the parties involved. The expropriation committee decides on the expropriation application and the compensation to be paid.
• The compensation must be adequate and replace the full value of the expropriated property or right. It may be paid in money or in another form. The amount of compensation shall be based on the market value of the property or right at the time of taking possession or transfer of ownership (Section 95 BauGB).
• In the case of urgent measures, the expropriation authority can assign the developer to possession of the required land ahead of time so that he can start construction work. However, this presupposes that the admissibility of the expropriation is obvious and that the parties affected receive an appropriate security deposit (Section 18a FStrG).

Examples of expropriations are:

1. The expropriation of land for the construction of roads, railroads, airports, waterways or power lines.
2. The expropriation of homes or businesses for the construction of public facilities such as schools, hospitals or sports facilities.
3. The expropriation of property rights, such as leases, rights of use or rights of way, for the purpose of carrying out construction work on land owned by others.

Real estate law and renewable energy subsidies

As part of the Climate Protection Program 2030, the German government has further developed the subsidy for energy-efficient buildings in real estate law. The Federal Support for Efficient Buildings (BEG) applies to all residential and non-residential buildings that want to save energy costs and thus protect the climate.

BEG consists of three subprograms: BEG Residential Buildings, BEG Non-Residential Buildings and BEG Individual Measures. Depending on the subprogram, applications are submitted to the Federal Office of Economics and Export Control (BAFA).

BEG offers various funding opportunities for new construction or renovation of buildings that support the use of renewable energy. These include, for example:

• The installation of heating systems based on renewable energies such as solar thermal, biomass or heat pumps. These are subsidized with a grant or a low-interest loan with a repayment subsidy.
• The optimization of existing heating systems by replacing boilers, pumps or control technology. These receive a subsidy.
• Improving the building envelope by insulating the roof, facade or basement. These are subsidized with a grant or a low-interest loan with a repayment subsidy.
• The use of optimized plant technology such as ventilation systems with heat recovery or lighting systems with LED technology. Here, too, you can receive a grant.

In real estate law, the amount of the subsidy depends on the type of measure, the efficiency standard achieved and the type of building. For residential buildings, for example, the lower the energy requirement of the building, the higher the subsidy. For non-residential buildings, for example, the higher the share of renewable energy in the building’s heat and power supply, the higher the subsidy.

The tax incentive for energy-efficient building renovations complements the BEG and enables owners of owner-occupied or rented residential buildings to deduct part of their expenses for energy-efficiency measures from their taxes. The tax incentive applies to measures started after Dec. 31, 2019, and completed by Dec. 31, 2029. For example, the tax incentive includes:

• The renewal or installation of a ventilation system.
• The replacement of windows or exterior doors
• The insulation of walls, roof surfaces or floor ceilings
• The renewal or installation of a heating system
• The optimization of existing heating systems

The tax subsidy amounts to 20% of the expenses, limited to a maximum of 200,000 euros per building. The tax incentive is spread over three years: 7% of the expenses can be claimed in the first year, 7% in the second year and 6% in the third year.

KfW subsidy

The KfW subsidy was a program of the Kreditanstalt für Wiederaufbau (KfW), which granted subsidies to private individuals and companies for various purposes, such as the construction or purchase of residential buildings, energy-efficient renovation, barrier reduction or burglary protection. However, the KfW subsidy was discontinued on Jan. 24, 2022, and replaced by the federal subsidy for efficient buildings (BEG) .

All three areas are affected:

• EH / EG55
• EH / EG40
• energy renovation projects

Legally, this means that KfW funding can no longer be applied for, only the BEG. The BEG has different requirements and conditions than the KfW funding. Depending on the subprogram, the application can be made either through the KfW grant portal or through a bank or savings bank.

Some examples of the differences between KFW funding and BEG in real estate law are:

• The KfW subsidy offered a grant of up to 10,000 euros for the installation of a fuel cell, while the BEG offers a grant of up to 45 percent of eligible costs.
• KfW funding offered a grant of up to €5,000 for the installation of a charging station for electric cars, while BEG offers a grant of up to €900 per charging point.
• KfW funding offered a grant of up to €15,000 for barrier reduction, while BEG offers a grant of up to 20 percent of eligible costs.

Tax aspects of real estate law

The following section explains various tax aspects related to the acquisition and ownership of real estate. These include real estate transfer tax, income tax on rental income, sales tax on commercial real estate transactions, and speculation tax on real estate sales within the speculation period.

These tax issues are critical to fully understanding the financial impact of a real estate investment and making an informed decision about buying or selling a property.

Real Estate Transfer Tax

The real estate transfer tax is a tax that is incurred when purchasing a plot of land or real estate. It is a significant cost factor in real estate transactions and ranges from 3.5% to 6.5% of the purchase price, depending on the state. There are some exceptions to the real estate transfer tax, for example, in the case of real estate transfers within the family or in the case of certain restructurings.

Income tax

Income from renting and leasing real estate is subject to tax under Section 21 of the German Income Tax Act (EStG). This includes rental income as well as income from the leasing of real estate. The income is determined by deducting the income-related expenses from the income. Income-related expenses include, for example:

• Depreciation (AfA) on the building
• Property tax
• Costs for maintenance and repairs
• Interest on loans to finance the property

Sales tax

Commercial real estate sales or rentals may be subject to sales tax. However, rentals of residential real estate are generally exempt from sales tax under Section 4 No. 12 of the German Sales Tax Act (UStG). In the case of commercial rentals, the landlord can waive the tax exemption and report the sales tax (option pursuant to § 9 UStG). This can offer tax advantages, especially for tenants entitled to deduct input tax.

Speculation tax

The so-called speculation tax is an income tax on the profit from the sale of a property within a certain period (speculation period). The speculation period is ten years in accordance with Section 23 (1) No. 1 of the German Income Tax Act (EStG).

The speculation tax does not apply if the real estate was used exclusively for own residential purposes in the period between acquisition and sale or was used for own residential purposes in the year of sale and the two preceding years.

How can a real estate law attorney help you?

A lawyer for real estate law provides comprehensive legal advice and representation for all questions concerning real estate and its economic use. Typical tasks of a lawyer for real estate law include:

• The drafting and review of contracts related to real estate, such as purchase agreements, rental agreements, lease agreements, construction agreements, architect agreements or loan agreements.
• The enforcement or defense of claims arising from real estate contracts, such as warranty claims, claims for defects, claims for damages or claims for rescission.
• Advising and representing clients in matters of construction law, such as applying for or contesting building permits, compliance with building regulations or remedying construction defects.
• Assistance with tenancy law issues, such as termination or eviction of tenancies, rent reduction or service charge billing.
• Advice on questions of condominium law, such as the declaration of division, the owners’ meeting, the housing allowance or the special property.
• Support in matters of land register law, such as the registration or deletion of mortgages, easements or rights of first refusal.

Use our support

Our law firm offers you comprehensive legal advice in all areas of real estate law. With our competence and experience we are at your disposal for legal questions concerning real estate. If you have any questions or would like individual advice, please do not hesitate to contact us.

We look forward to assisting you with your real estate legal concerns throughout the German-speaking world.

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