More and more tenanted apartments in Berlin are sold directly to their tenants. Why this route is gaining importance is explained in our insight on tenant purchases in Berlin.
To turn the room for negotiation into a fair deal, both sides should clarify a few points in advance. The following checklists help.
Checklist for owners: selling to your tenant
Clarify the starting position
☐ Is the apartment already registered as a condominium in the land register, and is there a declaration of division (Teilungserklärung)?
☐ Is this the first sale after the conversion? If so, the tenant usually has a statutory right of first refusal.
☐ Was the apartment converted in a social preservation area? If so, a seven-year restriction may apply under which it may only be sold to the tenant. When does it expire?
Know the value
☐ Determine the value of the apartment in tenanted condition, i.e. the price an investor would pay
☐ Determine the value in vacant condition
☐ Define the negotiating range between the two values
Assess the tenant
☐ How long has the tenant lived in the apartment, and what is the current rent?
☐ Is there a general interest in ownership?
☐ Does financing appear realistic?
Prepare the conversation
☐ At what stage of the seven-year period are you?
☐ How, and by whom, will the tenant be approached?
☐ Define the offer price
☐ Allow enough time for financing, more than the two months provided for by the right of first refusal
☐ Provide documents: declaration of division, minutes of the owners' meetings for the last three years, budget plan and service charge statement, energy performance certificate, floor plan
Make a comparison
☐ Calculate a sale to an investor for comparison, so that both options rest on a solid basis
Checklist for tenants: buying your own apartment
Can my apartment be bought?
☐ Check whether the apartment is already registered as a condominium in the land register
☐ Know and contact the owner or the property management
Know my rights
☐ Does a restriction apply to my apartment under which it may initially only be sold to me?
☐ Do I have a right of first refusal? Important: it only applies once a purchase contract with a third party exists, the deadline is two months, and I take over that contract's terms, possibly including a broker clause.
Does the purchase pay off?
☐ Determine the monthly cost as an owner: loan instalment, non-recoverable service charges, maintenance
☐ Compare this cost with today's and future rent
☐ Compare the purchase price with the value of a comparable vacant apartment. The difference is my value reserve.
☐ Budget for acquisition costs: in Berlin, 6 percent real estate transfer tax plus notary and land register fees
Clarify financing
☐ Check equity: at least the acquisition costs, ideally also part of the purchase price
☐ Obtain a financing confirmation from the bank early on
☐ Choose a fixed interest period that fits your life plans
Inspect the property
☐ Read the minutes of the owners' meetings: which measures have been decided or are planned?
☐ Check the level of the maintenance reserve and possible special levies
☐ Look at the condition of the building and the common property, such as the roof, façade, pipes and heating
Frequently asked questions
As a tenant, do I have to buy if the apartment is offered to me?
No. The tenancy continues even if the apartment is sold to a third party. In Berlin, an extended lock-up period for owner-occupation terminations applies to converted apartments.
Why should I negotiate now instead of waiting for the right of first refusal?
Anyone who buys via the right of first refusal enters into someone else's contract and takes over its price and terms, possibly including a broker's commission. In a direct conversation, price and timing are negotiable.
What does the owner gain from selling to the tenant?
Usually a higher price than when selling to an investor, a faster process without broad marketing, and a buyer who already knows the apartment.
This guide does not replace legal advice. Whether a restriction, a right of first refusal or a notice lock-up period applies in an individual case depends on the specific conversion. For owners considering a sale to their tenant, we offer a valuation of the apartment in tenanted and vacant condition. You can find more about the sales process under Sell Apartment.
Disclaimer
This article is for general information only and does not constitute tax or legal advice. The content does not replace individual consultation with a tax advisor or attorney. No liability is assumed for accuracy or completeness.
