De facto ban on condominium conversions

With the adoption of the Building Land Mobilisation Act into law, Germany’s 16 federal states can now introduce further measures to restrict the conversion of rental apartments into condominiums in tight housing markets. In particular, the subdivision of houses with more than five residential units will now be subject to a municipal approval. In practice, this requirement for municipal approval is tantamount to a ban on condominium conversions, as there are very few, and very narrow, exceptions. These include, for example, a requirement to approve conversions if two-thirds of a building’s tenants want to buy their apartment. In reality, this will very rarely be the case. Experts predict that the tightening will further reduce the supply of apartments on the real estate market over the next few years and that, as a result, prices for new apartments and apartments that have already been approved for conversion will continue to rise.