News on German and Italian real estate law: buying, selling, gifting, land transfer tax

LOCAL INDEX FOR DETERMINING THE RENT IN GERMANY

House for rent in Germany, with payment according to

In Germany, the objective rental value of a property is generally determined on the basis of the so-called rent index. If this cannot be used or is not available, the correct value can be determined by means of a well-founded and sworn expert opinion, information from a rental database or simply on the basis of the rents of at least 3 comparable apartments. In principle, each method is equivalent. 


The BFH has therefore clarified that the determination of the local market rent on the basis of the rent index serves precisely to obtain an objective assessment of value. The rental index is one of the sources of information that enable a simple and quick determination of the local market rent on the basis of a wide range.


Source: Federal Fiscal Court (BFH), judgment of February 22, 2021.

TERMINATION OF A RENTAL AGREEMENT WITHOUT NOTICE DUE TO DEFECTS

bucket over a piece of paper on which the lease termination is written

Either party may terminate the lease without notice for good cause. If the good cause consists of a breach of an obligation under the rental agreement, the termination shall only be permissible after the expiry of a reasonable period of time set for the rectification of the situation or after an unsuccessful warning. This does not apply if the setting of a deadline or warning does not clearly ensure the result. However, a warning cannot be dispensed with on the grounds of probable futility if the landlord has always endeavoured to remedy recurring defects.

LAND AND BUILDING PRICE SPLIT

Real estate purchase contract with land in Germany Calculation of acquisition taxes, splitting building and Land

In practice, it is often necessary to divide the total purchase price of a developed real estate into the building, which is subject to wear and tear, and the land, which is not subject to wear and tear, in order to determine the basis for calculating the depreciation of the real estate. According to the decisions of the Supreme Court, the total purchase price of a developed real estate should be divided between the land on the one hand and the building on the other according to the ratio of the market values or partial values.


The supreme tax authorities of the Federal Republic of Germany and the Federal States of the Federal Republic of Germany provide a working aid that enables the user to perform a purchase price allocation according to a standardized procedure and to check the plausibility of an existing purchase price allocation. In addition, instructions are provided for calculating the purchase price allocation of a property.


The Excel file can be downloaded from the homepage of the Federal Ministry of Finance: https://www.bundesfinanzministerium.de

FORBIDDEN TO VISIT THE NEIGHBOR'S PROPERTY?

Bricks resting on land for a house under construction violating German law by covering neighbor's view

The Higher Administrative Court of North Rhine-Westphalia (OVG) dealt with a case in which an apartment building with three residential units was to be built on a plot of land. The neighbor saw this as a violation of his legitimate interests, as the building would create a view of his property that would violate his privacy.


The court stated that the owner or user of a property cannot demand that his property be removed from the view of third parties. If every builder were required to ensure that the openings, balconies, and outdoor seating areas of the proposed building did not provide views of surrounding developed properties that would destroy the neighbor's "retreat," this would make building much more difficult, if not impossible, in many cases.

TEMPORARY RENTAL OF YOUR OWN HOME IS ALLOWED

Interior of a temporary rented apartment in Germany

The owner of a two-bedroom apartment in Munich worked as a hostess. Since she traveled a lot for work, she used Airbnb to rent out her apartment temporarily while she was away. After receiving an anonymous complaint, the city council launched an investigation into the misuse of living space and demanded that she immediately stop hosting strangers.


The judges of the Bavarian Administrative Court concluded that there was no illegal use in this case and that the private interests worthy of protection outweighed the interest in maintaining the residential use. A public interest in the preservation of living space could not be assumed from the outset if the living space in question was used by the owner as a home outside periods of absence and was therefore used, even if only temporarily, as a "home for everyday life".


In such cases, the purpose of the prohibition of change of use is not violated because there is no permanent conversion of owner-occupied or rented living space into commercial living space for rental to third parties.

THE "BERLIN RENT CAP" IS INCOMPATIBLE WITH THE CONSTITUTION

Justice goddess holding the scales to decide whether it's costitutional in Germany to cap rents

In its decision of March 25, 2021, the Federal Constitutional Court declared the Act on the Limitation of Rents in the Housing Sector in Berlin (MietenWoG Bln) to be incompatible with the Basic Law and thus null and void.


The regulation of rents for freely paid apartments that can be offered on the free housing market (freely available apartments) falls under the concurrent legislative competence. However, according to the ruling, the states may only legislate until the federal government has finally exercised its legislative power. Now that the federal legislator has finally regulated the MietWoG, there is no longer any room for the legislative competence of the federal states. Since the MietWoG Bln essentially also regulates the rent level for freely usable residential property, it is invalid in its entirety according to the decision of the BVerfG.


The "Berlin rent cap" consists of three main provisions:


- A cap, which prohibits exceeding the actually agreed rent until 18.6.2019 (cut-off date);


- a cap on subletting, which allows surcharges for quality of construction and furnishings, as well as for modernization; and


- a general prohibition of excessive rents.


The provisions of the MietWoG Bln do not apply to new buildings completed after January 1, 2024.

INSURANCE COVER FOR WATER LEAKS FROM THE SEWAGE SYSTEM

Gavel of a judge in Germany ruling on homeowners insurance coverage

Drainage pipes outside a building that only collect and drain rainwater and seepage water are not used for water supply. Therefore, water that escapes from such a drainage system contrary to its intended purpose does not constitute water damage to the water pipes for the purposes of residential buildings insurance. Rather, their structural purpose is solely to drain the soil, i.e., to collect and drain leaf and rainwater.

MODERNIZATION AND RENT INCREASE

Mano che appoggia mattoni uno sopra l'altro, di una casa in Germania in cui l'affitto costa di piu' dopo che la hanno rinnovata

In 2021, the German court of cassation has decided that a landlord can demand a rent increase for the period from December 2019 in accordance with the regulations applicable until the end of 2018 due to the modernization measures announced in December 2018 for his large residential complex. A close temporal connection between the modernization announcement and the planned start of the work is not required.


In the case decided, the landlord had announced modernization measures to the tenants at the end of December 2018, which were to be carried out in the period from December 2019 to June 2023 (installation of thermal insulation, replacement of windows, installation of roller shutters, etc.). One tenant considered the announcement to be invalid due to the lack of a close temporal connection with the implementation of the planned measures, meaning that the rent increase after completion of the modernization measures would only be possible under the law applicable from 1 January 2019 and not before under the old law.


The scenario of the proceedings is the change in the legal regulations on rent increases after modernization. While the legal regulation in force until 31.12.2018 allowed an annual rent increase of 11% of the costs incurred for the modernization, the new law only allows a maximum rent increase of 8% and also provides for a cap.

"FICTITIOUS" COSTS FOR THE RECTIFICATION OF DEFECTS AFTER PURCHASE

Judge's gavel over bills of money paid as compensation for home damage

The judges of the German Federal Court of Justice (BGH) decided in their decision of March 12, 2021 that a claim for damages under a purchase contract due to defects in the purchased object can still be calculated on the basis of the expected but not yet incurred ("fictitious") costs of remedying the defect.


In the small claims procedure, the buyer can claim either compensation for the diminution in value caused by the defect or compensation for the costs allegedly necessary to remedy the defect, regardless of whether the defect is actually remedied.

TERMINATION OF TENANCY IN THE EVENT OF DEMOLITION WITHOUT RESTORATION

Bulldozer knocking down building whose lease in Germany was terminated

According to the German Civil Code (BGB), a landlord has a legitimate interest in terminating a lease if, among other things, the landlord is prevented from making reasonable economic use of the property by the continuation of the lease and suffers a substantial disadvantage as a result. However, the Federal Court of Justice (BGH) has clarified that the demolition of a building without replacement does not constitute an economic disadvantage worthy of protection.

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