Selling a Freehold Flat: What Really Matters When Selling an Apartment

What is different when selling a flat compared with selling a house

Anyone selling a detached house usually sells the plot and the building as a whole. With a freehold flat, matters are more layered: you sell your Sondereigentum (individual ownership) of the flat, combined with a Miteigentumsanteil am gemeinschaftlichen Eigentum (co-ownership share in the common property). This is governed by the German Condominium Act (Wohnungseigentumsgesetz, WEG) in Section 1.

You should be able to tell three terms apart with confidence, because they also play an important role for buyers:

• Sondereigentum (individual ownership): the rooms of your flat over which you alone have control, that is, for example, the internal walls, floor coverings and the interior fit-out.
• Gemeinschaftseigentum (common property): everything that belongs to all owners jointly, for example the roof, façade, stairwell, load-bearing walls as well as, frequently, the windows and external doors (Section 5 WEG).
• Sondernutzungsrecht (exclusive right of use): not ownership, but the sole right to use a part of the common property, for example a section of the garden or an outdoor parking space.

For the sale this means: the buyer is interested not only in your flat, but also in the condition of the entire building and in the question of how well the community is organised and financed. This is why the WEG documents are central when selling a flat, whereas they usually play no part at all when selling a house.

The WEG documents: the heart of selling a freehold flat

A well-prepared sale stands or falls on having the right documents. Complete and meaningful WEG documents create trust, make financing easier for the buyer and spare you awkward queries at the notary's office. You should put together these documents:

• Teilungserklärung (declaration of division) with the Gemeinschaftsordnung (community rules): it is the basis of freehold flat ownership (Sections 3 and 8 WEG) and shows what exactly belongs to your flat and which rules apply within the community.
• Aufteilungsplan (partition plan): the plans approved by the building authority, with the numbering of the units. They allow you to check whether the actual division matches the legal one.
• Minutes of the owners' meetings: the last three years are customary. They show which measures have been resolved or are pending and whether the community functions well.
• Beschlusssammlung (collection of resolutions): the managing agent keeps it pursuant to Section 24 WEG. It provides the complete overview of all valid resolutions, not only those of the most recent meeting.
• Wirtschaftsplan (budget) and annual statements (Hausgeld statements): they set out the running costs and the Hausgeld, the monthly service charge (Section 28 WEG). From the most recent statements the buyer can see how the costs have developed.
• Status of the Instandhaltungsrücklage (maintenance reserve): since the 2020 reform the law refers to the Erhaltungsrücklage (preservation reserve). Its level shows whether the community is equipped for major repairs.

In addition there are documents needed for any property sale, such as the current extract from the land register (Grundbuch) and the energy performance certificate (Energieausweis). For a let flat, the tenancy agreement and the operating-costs statement (Betriebskostenabrechnung) also belong here. This collection seems extensive, but it is well manageable if you tackle it early. We are happy to support you in compiling the documents completely.

Hausgeld, Wohngeld and the preservation reserve: decisive for the buyer's purchase

One point that is particularly often underestimated when selling a flat is the Hausgeld (the monthly service charge, often also called Wohngeld). These are the monthly advance payments that each owner makes to the community in order to cover the costs of the common property: heating, water, refuse, building insurance, cleaning of the building, the managing agent's remuneration and the contribution to the reserve fund.

For buyers, the level of the Hausgeld is an important signal. A conspicuously low Hausgeld can point to underfunding, which is later followed by increases or special levies (Sonderumlagen). A very high Hausgeld, by contrast, raises the ongoing burden and, in the case of a capital investment, reduces the yield. Important to know: not all items of the Hausgeld can be passed on to the tenant in the case of letting. The administration costs and the contribution to the reserve fund are borne by the owner himself.

Closely linked to this is the Erhaltungsrücklage (preservation reserve). It is the WEG's joint savings account for major measures such as the roof, façade or heating. A well-filled reserve combined with a well-maintained building has a sale-promoting effect, because it reduces the risk of sudden special levies. A low reserve combined with visible refurbishment needs, on the other hand, is a clear point for negotiation. The reserve, incidentally, belongs to the community, not to you personally, and on sale it is not paid out separately but factored into the purchase price.

Managing agent's consent, rights of pre-emption and the WEG after the 2020 reform

Since 1 December 2020 the reformed German Condominium Act has applied, implemented by the Condominium Modernisation Act (Wohnungseigentumsmodernisierungsgesetz, WEMoG). For sellers, two questions above all are important.

First, the managing agent's consent: previously Section 12 WEG provided for a restriction on disposal, under which a sale could require the consent of the managing agent or the community. This provision was repealed with the reform. There is no longer a statutory requirement of consent today. However, such a clause may still be agreed in the Teilungserklärung or Gemeinschaftsordnung (declaration of division or community rules). If it is set out there, the sale requires the managing agent's consent, which in practice is usually a formality. Whether such a restriction applies to your flat follows from the declaration of division and from the land register.

Second, the topic of the right of pre-emption (Vorkaufsrecht): there is no statutory right of pre-emption of the owners' association or of the other owners when selling a flat. A right of pre-emption can only be agreed by contract and entered in the land register. A special case is the tenant's right of pre-emption under Section 577 BGB (German Civil Code), which we explain in the next section. A look at Section II of the land register provides clarity here. This check is usually carried out by the accompanying estate agent in collaboration with the notary.

Selling a let freehold flat: what you should bear in mind

Many freehold flats are let, and the sale of a let flat follows its own rules. The most important principle is: sale does not break a tenancy (Kauf bricht nicht Miete, Section 566 BGB). The buyer steps into the existing tenancy agreement; the tenancy continues unchanged with him. A let flat therefore often achieves a different, frequently lower price than a vacant one, because the buyer cannot move in himself straight away.

Three tenancy-law protection rules are particularly relevant when a former rented flat is converted into freehold ownership and then sold:

• Tenant's right of pre-emption (Section 577 BGB): if the converted flat is sold to a third party for the first time, the tenant may step into the purchase contract on the same terms.
• Notice-period block (Kündigungssperrfrist, Section 577a BGB): after a conversion, the acquirer cannot immediately give the tenant notice on the grounds of personal use (Eigenbedarf). The blocking period is in principle three years and may be extended to up to ten years by state regulation in areas with a strained housing market. In parts of North Rhine-Westphalia (Nordrhein-Westfalen, NRW) such an extended period applies.
• Personal use (Eigenbedarf): a notice on the grounds of personal use by the buyer is only possible under the general requirements of tenancy law and is subject to the periods mentioned.

Whether it is better for you to sell let or vacant depends on your situation and on demand. Both routes have their advantages, and we are happy to assess them together with you.

The sales process step by step

An orderly process takes much of the pressure out of a sale. In practice, the sale of a freehold flat is structured into these steps:

1. Valuation: determine the realistic market value. For flats intended for owner-occupation, the comparative-value method (Vergleichswertverfahren) usually serves as the benchmark; for let flats, the capitalised-earnings value (Ertragswert) plays a greater role. Relevant to the price are location, floor and lift, the condition of the individual and common property, as well as the Hausgeld, the reserve fund and any backlog of refurbishment to the building.
2. Compile the documents: above all the WEG documents, the land register extract and the energy performance certificate.
3. Prepare the brochure (Exposé): meaningful photographs, a floor plan and all the key data, including the Hausgeld and the energy figures.
4. Marketing and viewings: approach suitable prospective buyers and prepare appointments carefully.
5. Vet the buyer: check the seriousness and financing, for example by means of a financing confirmation.
6. Notarial purchase contract: the purchase of a property must be notarially recorded (Section 311b BGB). The notary drafts the contract and records it.
7. Land register completion: priority notice of conveyance (Auflassungsvormerkung), payment of the purchase price once due, and finally the transfer of title in the land register.
8. Handover: with a record, meter readings and handover of the keys.

A brief note on tax: whether tax is payable on a sale gain depends above all on the ten-year speculation period (Spekulationsfrist) and on possible owner-occupation. This is a separate topic that you should clarify bindingly with your tax adviser.

Sell with experience at your side

Selling a freehold flat demands care: with the WEG documents, with the assessment of the Hausgeld and the reserve fund, and with the question of for whom your flat is the right purchase. It is precisely here that experience and reliable market access are worth a great deal.

As the arm of Wolfgang Richter GmbH, we have been accompanying owners in the Düsseldorf and North Rhine-Westphalian (Nordrhein-Westfalen) market for over six decades. Over the years a grown network with more than 20,000 contacts has emerged, which helps us to bring owners and suitable buyers together discreetly. On request, we initially approach your sale discreetly and away from the large portals, that is, off-market, and where necessary we also work together with other estate agents if that brings your flat the right buyer.

We determine the value of your flat with our own valuation system, which draws on official data and professional market data. The valuation of your freehold flat is free of charge for you. From the first assessment through the preparation of the documents to the handover, we accompany you personally and unhurriedly.