Milieu protection in Berlin 2019: Conservation statute, conversion ban and pre-emption rights

Many property owners are caught off guard by milieu protection. What the Berlin Senate and boroughs see as a shield against speculation with residential space creates considerable problems for owners of apartment buildings in the affected areas. Knowledge of the details is often superficial among owners, buyers, and tenants alike.

What the conservation statute covers

The legal basis is Section 172 of the German Building Code (BauGB). It gives the boroughs three instruments:

• Permit requirement for construction: Major renovations, floor plan changes, or adding balconies must be approved by the borough. Measures deemed luxury renovation that could lead to steep rent increases are generally prohibited.
• Conversion regulation: Converting rental apartments into condominiums requires a permit. Permits are granted only under strict conditions.
• Pre-emption right: When an apartment building is sold, the borough can step into the purchase contract or exercise its pre-emption right in favor of third parties, such as state-owned housing companies.

The conversion regulation

Since March 2015, the conversion regulation severely restricts splitting apartment buildings into condominiums in milieu protection areas. Approval is often granted only when the owner commits to selling the apartments exclusively to existing tenants for seven years. Initially limited until March 2020, this rule significantly constrains owners' exit strategies.

Pre-emption rights in practice

The pre-emption right is arguably the boroughs' sharpest tool. Especially in Friedrichshain-Kreuzberg, Pankow, and Neukoelln, it is actively used to block sales of apartment buildings to private investors. After a purchase contract is signed, the borough has two months to review. It often tries to push the price down via an appraisal or to get the buyer to sign a waiver agreement with far-reaching obligations, such as forgoing renovations. This affects market trends in the affected neighborhoods and creates uncertainty for both buyers and sellers.

Growing number of designated areas

The number of milieu protection areas in Berlin keeps growing. Nearly all boroughs are conducting preliminary screenings to identify further candidates. Even before a formal designation, from the moment the borough passes a resolution to investigate, it can freeze certain projects for up to 12 months. For property owners that means: check early whether your property falls within a conservation area, an investigation area, or an area with a pending designation resolution.