German Condominium Act
According to the German Civil Code the ownership of a piece of land comprises also the ownership of buildings erected on that land. Therefore it is only possible to acquire ownership of an individual apartment in a house under the provisions of the German Condominium Act, the so called Wohnungseigentumsgesetz. The Law provides individual ownership of a certain apartment and partial ownership of all commonly used parts. The Condominium Act provides for a whole range of provisions to organize the relations between the several apartment owners.
The apartment ownership is established by certifying the so called separation deed (Teilungserklärung) by the Construction Authorities and its subsequent registration in the Land Register. The partition plan assigns numbers to the apartments, the basement rooms, garages, parking spots, etc. These numbers are used to identify the different apartments in the actual separation deed of which the partition plan is an integral part. The partition plan usually determines the general function of the apartment house which may be only a residence house or also serve as commercial building, the management of the property and contains basic rules for the distribution of costs for running expenses and repairs.
Common Property vs. Special Property
A crucial point of the German Condominium Act is the separation of common property (Gemeinschaftseigentum) on one hand and special property (Sondereigentum) of residential commercial and other spaces (e.g. garages) on the other. The common property comprises of the land and certain parts of the building that do not form part of the special property directly linked to a condominium. This includes the courtyard and staircase, jointly used basement rooms, etc. as well as the major constructive parts of the building (load carrying walls, roof, main pipes and lines, boiler of the central heating system etc.). The costs incurred for maintaining/refurbishing the common property are shared between the condominium owners in respect to the size of their apartments.
The owner of a special property may use this property at his discretion, i.e. the owner is free to sell, give away for free, bequeath, rent, or encumber the special property. The special property is recorded on a separate folio (page) in the land register. On the other hand, all repairs and maintenance inside of the apartment have to be covered by the individual owner.
Administration and the Condominium Association
From the common ownership flow certain duties that may put limits to the use of the property. The coowners are also free to set up resolutions governing their relations. Only a few provisions in the Condominium Act are mandatory.
Each condominium owner is a member of the relevant condominium owners' association that jointly manages the real estate. The governing body of the association is the owner's assembly that meets at least once a year. The assembly is convened by the administrator who must send invitations to all condominium owners. Each owner has a vote according to the size of his apartment(s) in this assembly. Most resolutions are made by the simple majority of votes. The resolutions adopted by the assembly are binding for all owners and enforceable by the German district courts (even if the owner does not live in Germany).
The administrator (Verwalter) is also elected by the condominium association. He is responsible for implementing the resolutions and for managing the common property, providing the care, upkeep, and physical maintenance of the common elements. He is responsible for procuring adequate insurance coverage and to handle the day-to-day administration of the house.
The administrator must prepare a budget for the following fiscal year that includes all expected revenue and expenses. The revenue comprises of the contributions made by the condominium owners and of interests, the expenses include administration costs, insurance costs, and the administrator's fee. The expected expenses determine the monthly amount (housing money, house contribution) that each condominium owner needs to pay. The budget has to be approved by way of a resolution adopted by the condominium owners' assembly.
Furthermore the administrator has the legal obligation to install an apropriate maintenance reserve (sinking fund) to cover unexpected repairs. The contribution to this reserve is a previously defined annual amount that condominium owners pay in addition to their housing money; it is concluded by way of a resolution adopted by the annual condominium owners' assembly.
Managing an Apartment
By law the responsibility of the condominium adminstrator ends at the doorstep of the apartment. Therefore an investor needs somebody to look after his property especially to close lease agreements, collect the rent and to pay the house contribution. The owner can appoint somebody, but also the condominium adminstrator might take over the duties of an apartment manager, but this will be an extra contract causing an aditional fee.