Editorial update: · Richter Immobilien-Transaktionen
An inherited house can provide rental income, but that income comes with decisions, obligations and costs. This guide helps you establish who may act, whether the building is ready and how much money the letting could actually leave available. It concerns property in Germany, particularly North Rhine-Westphalia, under German law.
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Establish what you have inherited before advertising
Keeping a family house and using the rent to cover its costs can be an appealing plan. The first task, however, is to understand the asset and the obligations attached to it. A vacant house with sound services and adequate cash reserves presents a different decision from a property with an outstanding loan, another person’s right of occupation or substantial defects. An estimated market value does not tell you whether the next repair invoice can be paid.
Under section 1922 of the German Civil Code, the estate generally passes to the heirs when the deceased dies. Correcting the Grundbuch, Germany’s land register, records the position rather than creating the inheritance. Collect the will or inheritance agreement, the court’s opening documents and any existing evidence of succession. Under section 35 GBO, suitable public testamentary documents and the opening record can, in the circumstances specified there, replace a certificate of inheritance for land-register purposes.
Build a separate list of liabilities. Include property loans, outstanding invoices, insurance commitments and known claims arising from compulsory shares or legacies. German inheritance liability extends beyond the building itself. If you have not resolved whether to accept the inheritance, obtain inheritance-law advice before entering binding letting commitments. Renunciation normally has a six-week deadline, with a different starting point from a simple automatic count from the death; specified situations involving another country carry six months. Acceptance can also remove the option to renounce.
Your first useful result is therefore a short factual file: identified heirs, evidence still needed, existing rights and payments falling due. Once those are clear, the letting decision can rest on the actual estate rather than assumptions about ownership.
Give co-heirs a workable decision-making arrangement
Where several people inherit, the house forms part of the jointly held estate. A quarter share does not automatically give its holder a particular floor or bedroom to rent independently. Section 2038 BGB places estate administration with the heirs jointly. Its reference to section 745 allows majority decisions for proper administration in the relevant circumstances. That majority is based on shares, rather than a headcount, and does not legitimise every possible letting arrangement.
Consider three heirs: Anna has one half, while Ben and Cem have one quarter each. Ben and Cem together do not hold a majority of the shares; neither does Anna alone. Anna and Ben together hold three quarters. This arithmetic does not, by itself, establish that a proposed agreement constitutes proper administration or that one person can sign for everyone. A disputed decision, unusually long commitment or substantial conversion warrants advice from a lawyer experienced in German inheritance law.
Separate the internal decision from external representation. Permission to obtain quotations or arrange viewings is not automatically permission to bind all the heirs to a tenancy. Record the intended letting, expenditure ceiling, parties involved and necessary powers of attorney. If a Testamentsvollstrecker, a German executor, has been appointed, establish the scope of that appointment and their powers before treating the heirs as the sole decision-makers.
Agree practical responsibilities as well: receiving invoices, authorising repairs and keeping the others informed. Urgent measures needed to preserve the property have their own legal treatment; they are not a general permission to create a new tenancy. Our guide to jointly inherited property covers the wider ownership decision. For the letting itself, aim for a documented arrangement that can function after the first tenant moves in.
Take over the whole existing tenancy, including its records
If the house is already let, the landlord’s death does not generally start a fresh tenancy. Through succession, the heirs take over the landlord’s contractual position. They cannot require a replacement agreement or reset the rent to a current asking price simply because they inherited. Give tenants reliable information about the authorised contact and an evidenced payment arrangement. Several relatives issuing different bank instructions creates avoidable uncertainty for everyone.
Read the complete tenancy file. You need amendments, handover records, garden and garage arrangements, previous service-charge accounts, deposit records and recent correspondence. Compare the rent due with actual receipts. A lower payment may reflect an agreed variation, a reported defect and claimed reduction, or arrears. Those explanations lead to different actions and should not be grouped together as one unexplained gap in income.
Check unfinished service-charge accounting immediately. Inheritance does not restart the relevant deadlines. Where advances are agreed, section 556 BGB generally requires annual accounting, communicated by the end of the twelfth month following the accounting period. Identify outstanding years and request missing invoices from the previous administrator. A healthy current rent stream does not remove the need to complete earlier accounts properly.
Locate any cash deposit and confirm how it is held. It is not an estate reserve available for redecorating. If a family member occupies the house, establish the legal basis before describing it as vacant or available: a tenancy, registered right of residence, usufruct or another arrangement can produce different outcomes. Having the keys does not establish unrestricted possession. Clarifying occupation early also prevents photographs, viewings or access being arranged on an incorrect assumption about who controls the home.
Inspect the building against what you will promise tenants
A house can have served its former owner adequately for decades while needing work before it is offered to another household. Under section 535 BGB, the landlord must provide and maintain a condition suitable for the agreed use. Start with the practical question: what accommodation and equipment can you reliably hand over? A neat exterior does not establish the condition of the wiring, the cause of damp or the reliability of the heating.
Walk through every room and classify findings into work needed before occupation, foreseeable maintenance and optional improvements. Record observations with dates. Ask appropriate tradespeople or a building expert to investigate technical uncertainty. Painting over a damp patch is not an investigation of its cause. For substantial work, obtain quotations that describe the scope, dependencies and a credible completion date, rather than relying on one informal total.
Compare actual use with plans, floor areas and building approvals. A converted basement hobby room is not automatically an authorised bedroom. Missing paperwork does not by itself prove unlawful building work, but it should lead to a focused enquiry. Clarify access, storage, garden boundaries, equipment included in the letting and how consumption will be measured. These details affect both the offer and the subsequent administration.
Arrange the energy performance certificate in good time. The applicable certificate presentation rules generally require presentation no later than the viewing and delivery after the agreement is concluded, subject to the relevant statutory exceptions. The certificate is not a building survey. Also tell the building insurer about the intended use and clarify any requirements during vacancy. Whether a particular risk is insured depends on the actual policy, so a general expectation of cover is not a substitute for checking it.
Derive a supportable rent and check its legal ceiling
The amount the heirs would like to receive each month does not determine an achievable rent. Assess the house itself: location, authorised living area, age, equipment, energy characteristics and garden. Compare genuinely similar properties and distinguish asking rents from rents actually agreed. If you use a local Mietspiegel, a German rent reference table, check whether its scope covers this kind and size of house. Not every table supplies a directly applicable figure for a detached property.
Then establish the legal limit. In designated areas, section 556d BGB generally limits initial residential rent to ten per cent above the local comparable rent. For a property in North Rhine-Westphalia, check the address against the current state rent-protection regulation and its annexes. Rules concerning previous rent or modernisation and statutory exceptions require their own evidence. Being inherited or being a single-family house does not, in itself, create an exemption.
Keep Nettokaltmiete, the basic rent excluding operating costs, separate from service-charge advances. Costs can only be passed on within the legally permitted and effectively agreed framework. Under the German operating-cost rules, administration and work to remedy deterioration or defects are not operating costs recoverable through that route. Eligible routine servicing, such as specified regular heating-system checks, must be distinguished from repairs. Part of the monthly transfer will therefore be needed for bills and subsequent accounting, rather than belonging to the heirs as profit.
Our guide to calculating rental prices helps organise the comparison. Use an evidenced rent assumption in your financial plan and label remaining uncertainties. If the proposal works only at an untested premium, reconsider the costs and alternatives before advertising. A high asking figure does not solve an underlying shortage of funds.
Test cash availability through an ordinary and a difficult year
Start with a deliberately hypothetical example, rather than a claim about local market rents. Basic rent of €1,500 a month would produce €18,000 annually. Deduct €1,500 for one assumed month without rent, €1,800 of owner costs that cannot be passed on, €2,400 allocated to a repair reserve and €6,000 in loan payments including principal repayments. The remaining planned cash is €6,300 before personal taxes and additional one-off expenditure. This is neither a property valuation nor a return promise.
The repair reserve is a planning assumption, not a statutory standard amount. If the inspection has already identified major work, budget its actual expected cost separately. One further month without rent reduces the example’s remainder to €4,800. Testing that variation reveals whether a seemingly attractive annual rent leaves enough room for an ordinary setback. Use the property’s evidence to choose assumptions rather than copying the example amounts into your own budget.
Prepare a separate start-up calculation. If essential work before occupation costs €20,000 and €35,000 is available for it, €15,000 remains initially. That figure excludes continuing bills before the tenancy starts, inheritance tax and any payments due to other parties. Future rent cannot settle an invoice that falls due before the first tenant pays. The tenant’s deposit must not be used to bridge that gap either.
Co-heirs should not automatically divide the projected surplus by their shares. Estate debts, agreed reserves and the applicable income-distribution rules come first. Agree who can contribute additional money if the forecast proves too optimistic. If one heir cannot or will not do so, resolve that issue before committing to the tenancy, while there is still room to choose a different course.
Keep inheritance tax, rental tax and depreciation distinct
Inheritance tax concerns the acquisition of the estate; income tax concerns, among other things, later rental income. They are separate calculations. Paying little or no inheritance tax does not establish how much of the rent will remain after income tax. Have the position assessed using the estate documents and the heirs’ individual circumstances, rather than treating a general tax allowance as a complete answer.
A former family home requires an early question: has someone claimed, or planned around, an exemption based on their own occupation? The family-home exemptions in section 13(1), numbers 4b and 4c ErbStG depend on specified beneficiaries and personal residential use. Letting the property does not constitute that personal use. Ceasing qualifying occupation within ten years can remove the exemption retrospectively, while statutory exceptions for compelling circumstances require individual assessment. Check this before letting, rather than after the intended tax benefit has been built into the budget.
Depreciation does not automatically restart at the house’s market value on the date of death. For private assets acquired without payment, section 11d EStDV generally refers back to the predecessor’s relevant tax basis and circumstances. Obtain old purchase documents, construction costs and depreciation records. Buying out another heir can introduce an additional transaction needing separate treatment.
Finally, distinguish the tax calculation from cash flow. Loan principal reduces the bank balance but is not treated like deductible interest expense. Money merely set aside for repairs is not an already incurred repair payment. Ask a German tax adviser to classify expenditure and depreciation properly. The resulting taxable income and the money available for distribution can be substantially different figures.
Choose a letting plan you can sustain
A sound decision combines four results: established authority, an understood building condition, a legally supportable rent and sufficient available money. If one defined repair quotation is missing, preparation can continue towards resolving it. If the heirs disagree fundamentally or essential work is unfunded, avoid promising a binding move-in date. A sale or another agreed use may deserve consideration alongside letting. The useful question is which option the owners can actually carry through.
A trial letting does not automatically provide an easy exit. For an ordinary residential tenancy, section 575 BGB requires a statutory reason for a fixed term and written notification of that reason when the agreement is made. A possible later sale is not, by itself, such a reason. Nor does inheritance allow unrestricted termination of an open-ended tenancy. Match the contract to the family’s real plans and obtain legal advice where those plans depend on future possession.
Prepare accurate advertising, organised viewings and a proportionate selection process. Our guide to finding suitable tenants covers the next stage. At handover, record condition, readings, keys and included items. Under section 551 BGB, an agreed residential cash deposit is generally limited to three months’ basic rent, payable in three monthly instalments and held separately from the landlord’s assets.
To discuss the letting with RICHTER Immobilien-Transaktionen, use the landlord enquiry form and describe the location, approximate size, current occupation and intended timetable. Mention co-heirs and known work so that the property discussion starts with the relevant facts. Inheritance disputes belong with a qualified lawyer, tax consequences with a tax adviser and technical uncertainties with the appropriate building professionals.
