Do mandatory pre-emption rights apply to the sale of real estate assets in this country?
Municipalities may have mandatory pre-emption rights under the federal building code, the nature conservation law, the historic preservation laws or other laws of individual states. Where this is the case, the municipality is entitled to replace the buyer in the purchase agreement, subject to the same purchase price. The municipality must be informed when a purchase agreement is concluded. While such pre-emption rights arise frequently, in practice they are exercised only on rare occasions. In its decision of 9 November 2021, the Federal Administrative Court (Bundesverwaltungsgericht) also declared the practice of pre-emption rights of the Land of Berlin in social conservation areas to be unlawful. According to this, the far-reaching exercise of pre-emptive rights by municipalities in milieu protection areas with reference to mere (alleged) intentions of the purchasers is inadmissible. Tenants of residential real estate also have a mandatory pre-emption right in the event of a sale of condominium ownership, if their lease contract was already in existence when the condominium ownership was established.
The Building Land Mobilization Act (Baulandmobilisierungsgesetz) came into effect on 23 June 2021. The Act has amended Sec. 28 of the Federal Building Code; notably, the time frame in which the municipalities can exercise their pre-emption rights has been extended to three months (Sec. 28 (2) sentence 1 of the Federal Building Code).
Furthermore, the Building Land Mobilization Act has introduced Sec. 250 of the Federal Building Code, under which the conversion of leased premises into owner-occupied dwellings (home ownership),and consequently the sale of a flat to a third party, in a building with more than five flats in tense residential housing markets according to a statutory ordinance is subject to the approval of the local municipality. The aim of this legislation is the creation of residential accommodation. The statutory ordinance will be passed by the federal states (Länder) and will be valid until 31 December 2025. The federal states are authorized to deviate from the requirement of five flats and can include in the scope of their respective statutory ordinances buildings, which have between three and fifteen flats (Sec. 250 (1) sentence 6 of the Building Land Mobilization Act).
