Due diligence when buying apartment buildings - here: rent

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If the rental price brake was not taken so seriously at first, that has now changed. A key focus of the property inspection when buying real estate portfolios and apartment buildings today is the question of how resilient the agreed rents are and how high the potential for relapse in the event of rent price complaints.

For a brief overview, as it were Checklist for brokerage houses and buyers, here are the most important facts again:

  • The rental price brake does not apply to new buildings with initial readiness for occupancy from October 2, 2014 and thereafter (556f BGB). However, if the rental agreement was concluded after 2018, this must be expressly mentioned in it, otherwise the landlord cannot invoke it (§ 556g BGB).
  • The exception that the rental price brake for the first rental after "extensive modernization" does not apply (§ 556f BGB), is dead in my opinion. On the one hand, the criterion can hardly be fulfilled from a structural point of view (BGH VIII ZR 73 / 19). It is much more serious, however, that modernization is only comprehensive if more than 1/3 of the new building costs were spent on it. According to case law, only "pure modernization costs" may be applied. These are those that are actual (LG Berlin 63 S 293/17) and fictitious (BGH VIII ZR 81 / 19) repair costs have been adjusted. Because such cases cannot be clearly determined in practice, but always have to be estimated, this leads to a kind of bazaar situation in the oral hearing before the court, which, depending on its character, can lead to more or less high deductions up to a complete omission of the costs to existing components according to the motto: there were already windows in the apartment, and the fictitious repair costs would have been just as high as replacing them with modern insulating glazing; the example can be repeated with electrics, heating, interior plaster, floors, bathroom and kitchen and everything that already exists. Only completely new things, such as a previously non-existent elevator, are not subject to a deduction. The judicial handling is unpredictable in advance. In any case, the deductions are usually so high that 1/3 of the new construction costs cannot be achieved with the remainder.
  • A pre-rent is only reliable if it does not in turn violate the rental price brake. This sometimes leads to the fact that the previous rents have to be checked back to June 01.06.2015st, XNUMX - the entry into force of the rental price brake.
  • A modernization surcharge (according to § 556e Abs. 2 BGB) suffers from the same problems as the calculation of the modernization shares in comprehensive modernization (see above). In addition, the documentation effort is enormous. Buyers often do not have the complete construction documents (inventory of the old condition, work and costs in detail), so that procedural disadvantages follow. In addition, the modernization surcharge could only be added to the local comparative rent + 10% of the unmodernized condition, which is capped at 8% and a maximum of 2 to 3 euros/sqm (§ 559 paragraph 1 and paragraph 3a BGB) does not calculate.
  • The calculation of local comparative rent is difficult if there is no qualified rent index, as in Berlin. You will still have to use this when inspecting a property, because obtaining expert opinions on all apartments on the amount of the local comparative rent when renting is out of the question for reasons of cost and time.
  • The permissible rent at the beginning of the respective contract is decisive, in the case of staggered steps also when entering the respective season. In a portfolio of 200 units, therefore, each individual lease must be examined to determine when it began and then the local comparable rent for that unit at that point in time must be calculated. The evaluation must be repeated for subsequent seasons. If the rent in question is based on a previous rent, this must also be checked.

From a notarial point of view is relevantwhether the seller assures or even guarantees a certain level of earnings for the property, or whether he only makes a statement about the current amount of rent payments, without being responsible for their resilience. It should be clarified with each other how bindingly the parties to the purchase contract want to handle this.