Subdividing an apartment building & selling apartments individually – Selling an apartment building is a complex undertaking that requires good preparation and execution. Since the residential building consists of several tenants, the question often arises: Sell the entire apartment building or individual apartments? Find out here under which circumstances a division is worthwhile and what you have to consider regarding protection against termination, right of first refusal & Co.
Sell apartment house: complete or each apartment separately?
When it comes to selling an apartment building, there are several ways to do it. One possibility is to sell the entire building as a unit. Another option is to divide the building into individual apartments and then sell them separately. Both options have advantages and disadvantages that must be considered when making a decision.
You have these two options:
Sell entire property
Sell individual apartments
In most cases, owners decide to sell the entire property.
Advantages & disadvantages of a complete sale of the property
If you decide to sell the entire apartment building, the sales process is much less complicated for a complete sale. After all, it is easier to find a buyer for a complete building than for several separate apartments. At the same time, complete apartment buildings are less in demand than individual apartments or single-family homes, since apartment buildings are usually only of interest to capital investors and investors.
However, selling the entire building can also fetch a lower price because the buyer bears the risk of taking on potential vacancies and rental problems.
Here are the pros and cons:
Advantages: Easy & fast sale
Disadvantages: Low retail price
Therefore it is worth dividing the apartment house
In comparison, dividing the building into individual apartments can increase the selling price. Since each apartment can now be sold separately, it may also be easier to find a buyer for it.
However, the disadvantage of this is that the division of the building into separate apartments may involve additional costs, such as the construction of partition walls and the installation of separate utilities. In addition, you should allow enough time in advance, as a division of the apartment building must be carefully prepared and processed.
Advantages: Increased purchase price & many interested parties
Disadvantages: Cost and time intensive
Even if a division into several apartments requires a lot of resources, it can be worthwhile to divide the house into several ownership shares. To ensure that this works smoothly, you have a few things to consider.
Divide apartment building into individual apartments
In order to divide the apartment building into individual apartments and sell them separately, you need to take certain steps. We will now take a closer look at how this works.
Certificate of Completeness by Building Inspectorate
If an apartment building is divided into several condominiums, a condominium owners’ association (WEG for short) is created. An important prerequisite for this is the existence of a certificate of self-containedness in accordance with the German Condominium Act (Wohnungseigentumsgesetz). This certificate is issued by the responsible building supervisory authority and confirms that the individual apartments are self-contained. This means that they have a separate, lockable entrance, their own ceilings and walls, and their own WC.
These conditions must be met for an apartment to be considered locked:
Separate, lockable access
Own ceilings & walls
Own WC
Partition plan via architect or engineer
In addition to the certificate of separateness, you also need a partition plan of the entire building. This plan is an important part of the declaration of partition and shows how the building will be divided.
The most important information about the distribution plan at a glance:
Is additionally required
Shows division of the building
Includes location & size
Creation by architect or engineer
It must be prepared by a competent architect or engineer and indicate the exact size and location of each dwelling.
Notarization of the declaration of division
Once you have received the certificate of seclusion and the partition plan, you can prepare the declaration of division. This states that each owner will convert his or her property into co-ownership shares corresponding to the share in the entire residential complex. The declaration of division must be notarized to be legally effective.
Land register entry of the co-ownership shares
Finally, you must make the entry in the land register to secure the co-ownership shares. This is usually carried out by a notary, who draws up the title transfer deeds and applies for the entry at the relevant land registry office.
Once this step is complete, you can sell the apartment in question. But what happens to the tenants after the sale?
This is what needs to be considered: Right of first refusal for tenants
If you convert an apartment building into individual condominiums and sell them, you must bear in mind that the current tenants have a right of first refusal. This means that the tenants have the opportunity to purchase their current apartment on the same terms as agreed in the purchase contract between you and another buyer. The right of first refusal serves to provide the tenants with a certain degree of security and to ensure that they cannot be kicked out of their apartment without further ado.
However, it is possible that the tenant will not exercise his right of first refusal. In this case, you can sell the apartment to another buyer who is willing to fulfill the conditions of the purchase agreement.
Protection against dismissal when selling a house
In addition, according to the German Civil Code (BGB), the buyer is bound by the existing leases. This means that tenants retain their leases even after the house is sold and do not have to fear that they will be terminated.
So if you intend to sell the individual apartments in the apartment building, you must observe a notice lock-up period of at least three years. During this time, the new buyers cannot simply terminate the rental agreements.
Tip: To avoid potential conflicts between buyers and tenants when selling a house, you should include binding regulations in the purchase agreement. These regulations should refer to outstanding rent claims, operating cost payments and deposit repayments.
In summary:
Buyer is bound by existing leases
Termination of tenants after sale not possible
Termination lock period of 3 years
Tip: Record all formalities in the purchase contract
Conclusion: multi-family house apartments for sale individually
The decision whether to sell the apartment building as a whole or divided into individual apartments depends on various factors, such as the condition of the building, the location and the demand for housing in the area. If you decide to divide the apartment building into individual apartments and sell them, you can look forward to high sales prices. At the same time, it is important to consider both the tenants’ right of first refusal and the protection against dismissal.
