Buying Property in Germany: 6 Things You Need to Know

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Stephan Raczak

Mar 22, 2019
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Our partners Anne and Tina from b.p.s Berlin Property Services specialize in helping the foreign community in Berlin access the local market to find a home or investment property and also provide expert support throughout the conveyance process until the handover of the keys. In this interview, they dive into the intricacies of viewing properties in Berlin. Here are the top 6 issues you should watch out for when viewing properties to ensure you avoid unforeseen pitfalls, such as unexpected costs, and have a safe home buying experience.

1) I've arranged an apartment viewing tomorrow, anything I should be on the lookout for?

Don't assume that you'll have a second chance to view, apartments without a fault are often reserved during the first round of viewings. Take photos if permitted and make notes. Ask yourself: will the layout and space distribution work for me; the ceiling heights, brightness, access from room to room. Many of Berlin's old apartments reflect generations very different to today's, and despite the old-fashioned charm, layouts can be uneconomic and not meeting the mod-con box to tick.

TIP: Buy an inexpensive and simple laser measuring device or download an app on your smartphone. The agent will not necessarily have all details and dimensions.

  • Have a look into the electric meter box. The age and the quality of equipment might tell you something about when and to whatever extent the electrics have been updated.

  • Fix a beady eye on the condition of the building, both inside and out. Any flaking of the facade, balconies with signs of water damage, rotting window frames? Very often, the common entrance hall will tell you about how much loving care the building has received over time, or not.

TIP: Make sure to notice the doorbell plate on the way into the building: heaps of paper name tags jammed into the frame could mean holiday lets, noise and partying. Proper property management shows on the doorbell list and in the courtyard.

  • In particular, take a hard look at the windows and walls: is the lacquer/paint coat chipped? Are there spots on walls and ceilings caused by humidity? In the case of period buildings "Altbau", are the ceiling mouldings in good shape and original? What's the quality of the floor finish and is it original?

  • How close are the opposite buildings and what's the view? Most of all, how do you feel about the general brightness and light?

  • If there is a lift, take the stairs at least one way up or down; is there a runner and what's the condition? If nothing else, this may tell you the noise level and tidiness of your fellow apartment dwellers.

TIP: If you're really interested, come back at a later point and ring the bell, explain that you're considering moving in. Would they be prepared to tell you about what it's like living there? It may take a bit of an effort, but if they agree to talk to you, that's where you'll get the real get-down-and-get-dirty. If that unnerves you, take someone with you (who speaks good German), or ask them to do it on your behalf. 

  • Is there 'stuff' left outside, either within the property itself or on the pavement outside? Mattresses and furniture? This could tell you something about the quality of property management as well as the habits of shared building occupants!

  • Basement beware! There's an old saying: if potential German buyers don't ask to see the basement after viewing a flat, they're not interested! Insist on having a look at that valuable storage space in the cellar. Does it "smell" dry? Are pipes and wires installed in an orderly way, insulated and reasonably new? A good storage space in the cellar or elsewhere in the building can make the difference between comfort and clutter after you move in.

  • Think about the view out from the inside, you'll be seeing it every day! Are there trees outside the windows (good!), but are they close and will they block the light in spring and summer? nbsp;Conversely, in winter when there's more light, what do the leafless trees reveal? 

TIP: Visit on a gray day if you can. When the sun shines, (almost) every apartment is bright. And, come back to check out the area at different times of the day to see whether you're comfortable there day and night. 

2) What do I need to know about in terms of property documents due diligence?

  • Protocols of owners' association (Eigentümerversammlungs-Protokolle) meetings may list past and future renovations and maintenance issues leading to an overall or even specific impression of the building which may not be discovered during a viewing. They can hint at problems within a building or infighting between various owners, even reveal legal battles; often tedious, dry and langweilig, but it can be like visiting other occupants of the building. It's worth reading between the lines! 

  • Deeds of division (Teilungserklärung) can tell you, as an example: does a majority owner have the right to change the deed without approval from others? Is the addition of a lift pre-approved? Are the basement storage units assigned or owned? The permitted use of the property (commercial, residential or both), internal house rules, possible units owned by the owners' association providing rental income or future sales proceeds. 

  • The budget plan (Wirtschaftsplan) will tell you how much money is going into and what is the balance of the building management fund for future repairs etc. If the terms of reference are unclear, find someone with a good command of German who can explain these to you.

TIP: The more documents of various properties you've gone through, the more you know what to look out for.

TIP: If the due diligence of documents has not been conducted properly, a new owner may, e.g., find that extraordinary payments (Sonderumlagen) are to be made for maintenance and repairs which could have been detected in the property papers. This is relatively easy to anticipate at the outset with a little support.

3) What common mistakes should I avoid with the purchase contract?

  • It's critical for buyers to realise that, in many cases, they can influence/change the purchase contract. Someone once said: 'the only time you get a pay rise is when you change jobs.' The same is true when buying an apartment. The only time you can move the odds in your favour is at the beginning, when you are negotiating with a seller. 

  • Another important issue to look out for is the seller's liability; what is it in particular as it relates to building guarantees? (Remember, when you as a buyer sign the purchase contract you are taking over liabilities along with the property). 

  • There are complicated conveyance situations where it is advisable for a buyer to be represented by a specialist lawyer to look after their interest. It is important to note that in Germany the notaries who administrate the sale/purchase do not represent either party. They only represent German law! They are therefore impartial, and while they have a duty to explain the contract, their primary role is to uphold the law.

  • A frequent mistake by buyers unfamiliar with German property law is to commit to spending both time and agency commissions, and even in the final stages, the notary fees and property transfer tax, before thoroughly completing research on the legal issues affecting the property purchase. 

TIP: If in any doubt about the paragraphs and conditions of the contract, get advice. Once you've signed the contract, you're committed to whatever it says.

4) What should I pay attention to during the actual property transfer?

The different steps of conveyance are often confusing. Why am I not the owner immediately after signed the purchase contract or at least after I paid for the apartment in full? Here is a timeline for after you've reserved a property or declared your intention to buy:

  1. Review of final property documents 

  2. Mortgage approval from mortgage lender if applicable

  3. Authorisation of a notary to draft the contract and scheduling appointment

  4. Review and possible negotiation of the contract (mandatory 14 days period if contractual partners are a company and a consumer)

  5. Signing of the mortgage contract before the notary appointment (you have a 14-day cancellation right after signing your mortgage and you want the notary appointment to be scheduled in that 14-day period) 

  6. Signing and notarisation of purchase contract

  7. The notary will request for the priority notice (Auflassungsvormerkung) to be entered into the land registry

  8. When the priority notice has been entered, the notary will issue a notice to the buyer to pay the purchase price (variations may apply e.g. if buying off-plan or through an escrow account)

  9. After the seller confirms receipt of the purchase price and the buyer has paid the property transfer tax, the property is handed over, the ownership and obligation are transferred to the buyer and the notary applies for final change of title to the land registry.

TIP: check your mail box regularly in order not to miss any correspondence from the notary, tax offices or other authorities. If you are travelling after signing a purchase contract, ensure your mailbox is monitored by trusted friends or family and mail forwarded to you.

5) What property maintenance fees and utility costs will I be responsible for?

As an owner, you are responsible for all operating and management cost, maintenance of the building as well as utilities proportionately to the size of your unit.  The summary of these costs is called "Hausgeld", and in case of an apartment building are to be paid to the property management company. When you rent out the property, costs other than maintenance, contributions to the maintenance fund, bank and management fees can be charged to the tenant. This list may not be exhaustive and depends on the specifics of the building. Electricity, telephone fixed lines and internet are always separate and need to be hooked up by the occupant, whether owner or tenant.

TIP: if the "Hausgeld" listed in the documents seems higher than normal, it could either indicate inadequate insulation, and therefore above-average heating costs, or include a relatively high contribution to the maintenance fund "Instandhaltungsrücklage" to finance major repairs to the building. 

6) What costs can I expect as a property owner in Germany? Are there unexpected costs?

You're probably aware at this point of the price of the property, the property transfer tax, agency commissions as applicable, the Notary and other Legal fees, and you may be wondering what other regular costs, apart from the payments to the property management company, you will face in addition:

  • There is the property tax, and you can ask the seller or agent for the current assessment (note: There will be a change in the law by the end of 2019 as to how this tax will be calculated). n case you decide to rent out: keep in mind that you pay tax on rental income in Germany. 

  • Should the building need major repair which cannot be covered by the maintenance fund, extraordinary payments due from the owners may be unexpected if you didn't catch the announcement in the owners' association meeting protocols.  

TIP: Read the building documents carefully so that you won't be surprised by additional costs.

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Stephan Raczak

Stephan is one of Hypofriend’s Mortgage Experts.