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Why Should I buy a tenanted property for own use in Germany?
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Why Should I buy a tenanted property for own use in Germany?
When looking for your dream home most people use the filter to exclude already rented properties.
However, the dream home you’re looking for might actually be rented out. By activating tenanted property filter, you will be excluding properties that are tenanted and sold at reduced prices. When it comes to pricing, tenanted properties are often sold up to 30% below the average price of vacant properties.
Why are tenanted properties sold for less?
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There are several reasons for this, including old rental contracts. This makes these properties relatively unattractive from the perspective of an investor. In major cities like Berlin, the rental yields of some properties have fallen to as low as 1-2%. Rental yield is the key metric that investors look at when evaluating buying properties and their investments.
All tenanted properties for sale, with expected yields that are rather low, leading to a large discount. As a homebuyer buying for own-use, you can use this as an opportunity to acquire your dream home for a lower price.
Cancellation for Own use
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Tenants are well protected by law in Germany. When a landlord rents out a rental property, the tenant becomes the direct third-party owner of the rental property. A landlord can only terminate his tenant’s lease if he has a justified interest in terminating the tenancy. For example for own-use (Section 573 (2) Sentence 2 BGB).
A notice of own need requires that the owner or the beneficiary (person in need) actually needs the apartment. The simple desire to occupy the property is not sufficient. A sufficient reason for a notice of need could be that the owner himself or his dependents are planning a family and need more living space in the future. A notice of own need for use as a retirement residence is also permissible. Similarly, it’s sufficient if you are moving into the city and the property is close to your work.
What are the notice periods for own use?
In the case of a notice of own need, the notice period depends on how long the current tenancy has existed. If the tenant has already lived in the apartment for several years, he also has longer to look for a new apartment. According to the tenancy regulations (Section 573c (1) BGB), the statutory notice periods are three to nine months, depending on the length of the tenancy.
Extraordinary 10-year protection clause
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However, in some cases, where tenants have lived in an apartment building before it was legally partitioned into individual apartments, then they have extraordinary cancellation protection of at least three years and in some cases 10 years, (Section 577a (1) Sentence 1 BGB) depending on the state. Buyers should therefore carefully check which period applies locally to the termination of owner-occupied use.
Seeking legal help to make your claim for own use formally correct
We must stress that each case should be looked at on a case-by-case basis to understand the legal ramifications. Both before you consider buying a specific property as well as before you inform the tenant of the termination. It is especially important that the termination letter is formulated correctly in order to be legally valid. In most cases, a lawyer will also be able to give you a better understanding of your legal claim. This can help you assess the likelihood of the court ruling in your favour.
Reaching a Settlement before Court
In most cases, both the new owner claiming own-use as well as the existing tenant will argue that their claim is valid. To avoid a lengthy court battle, compensation can be offered to help negotiate and speed up the process. The amount can vary depending on the likelihood of the termination being supported in court as well as the time saved. Ultimately, it depends on how badly the owner wants to use it for own-use. But this can be anywhere from a few thousand euros to assist with painting or moving, all the way up to about 5% of the purchase price.
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