The real estate year 2020

The new year brings several changes for property owners, tenants, and real estate agents. Buyers will see relief regarding real estate agent commissions, rent control will be further tightened, and a loophole in the property transfer tax will be closed.

Draft law on the "buyer pays" principle.

The Federal Council wants to establish binding and nationwide regulations for the distribution of real estate agent fees between buyers and sellers. Currently, there are significant regional differences, as the agent's commission for the sale of apartments or single-family homes is freely negotiable within the legal framework. For example, while the buyer in Berlin pays the maximum commission of 7.14 percent to the agent, the costs are typically split between the seller and buyer in Munich.

The planned amendment to the law aims to provide financial relief for buyers. Federal Justice Minister Katarina Barley (SPD) wants to ensure that buyers will no longer pay more commission than sellers, with a maximum of 50 percent. This also applies if the buyer has hired the real estate agent. If both the seller and buyer hire the agent, the agent must charge the same commission to both parties. The new law is expected to be passed in March 2020 and come into effect by autumn.

Stricter rent control

Rents in Germany are expected to continue rising in 2020, especially since demand still exceeds the supply of housing. To keep housing affordable in cities with tight housing markets (currently 336 municipalities), the rent control law was introduced in 2015, which was originally set to expire at the end of this year. However, the government now intends to extend it until 2025 and further tighten its provisions.

When a property is re-let, the rent may be increased by a maximum of ten percent over the next five years. The benchmark is the local comparative rent, which is further reduced by extending the observation period from four to six years. A new provision allows for the retroactive recovery of overpaid rent: If the landlord violates the rent control regulations, the tenant can reclaim the overpaid rent up to two and a half years after the lease agreement was signed – regardless of whether they previously raised an objection.

Furthermore, the law against usurious rents, which are 20 percent or more above the local comparative rent, is to be tightened. In cases of objectively limited housing supply, the burden of proof will no longer lie with the tenant. The reform will also increase the fine for landlords to up to €100,000.

A rent cap is planned for the federal capital Berlin, but the Constitutional Court must first decide whether this instrument is permissible.

Housing benefit increases

At the beginning of the year, the new housing benefit reform came into effect, primarily aimed at providing relief to pensioners and low-income families. For example, a two-person household now receives an average of €190 in housing benefit per month instead of €145 – an increase of about 30 percent. Around 660,000 households benefit from the 2020 housing benefit reform.

Child benefit for home construction is expiring

Families with children only have until the end of 2020 to apply for the government's child benefit for home construction. The subsidy amounts to €1,200 per child per year and can be paid over ten years. The federal government currently has no plans to extend the program.

No more share deals

Through the legal loophole of share deals, companies circumvent real estate transfer tax by acquiring not the property itself, but 94.9 percent of the shares in the company that owns the property. After a holding period of five years, the investor buys the remaining almost five percent of the company and thus the entire property – without paying real estate transfer tax. Federal Finance Minister Olaf Scholz (SPD) intends to close this loophole by summer

Reform of the Condominium Ownership Act

Federal Justice Minister Christine Lambrecht (SPD) intends to reform the Condominium Ownership Act (WEG), which regulates the rights and obligations of homeowners' associations. To ensure that homeownership remains attractive, renovations of condominium complexes should be made easier and faster. Lambrecht's priorities include promoting electromobility, specifically the installation of charging points for electric cars, and barrier-free living. The reform is to be completed by 2021 at the latest. It will also strengthen the powers of the property manager and their responsibility to the homeowners' association.

Sources: bundestag.de, zeit.de, capital.de, haufe.de, t-online.de, immobilienbesitzer-muenchen.de, kreditvergleich.net, homeday.de