THE MYGERMANPROPERTY.EU BUYING PROPERTY IN GERMANY GUIDE- PART I

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Hello and welcome to our guide.
 mygermanproperty.eu has been working professionally in the German real estate market for just over 10 years, is a limited company registered in the UK, and is owned and run by Arthur, a British Ex pat who has seen his fair share of crooks try and make a quick euro from unsuspecting customers!
 
We have decided to write a 10 part guide to the most important things to look out for when considering investing in Germany, to help you avoid being disappointed with your investment.. 

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THINGS TO LOOK OUT FOR PART I: The Erschließungsbeitrag (Contribution tax)

We all love to see clean, well maintained pavements, streets and common areas where we live, right? But who pays for it? In the UK it comes from crippling council taxes and rates. Luckily, in Germany, rates and taxes are very, very low. But the facilities are as good, and sometimes better, than the UK. So how do they do it?
 
 Well, enter the Erschließungsbeitrag. What is it? Well, According to § § 127 of the German Building Code, The local municipality CHARGES YOU for the upgrades, either by proximity to the upgrade, or according to ‘expected use’. They usually come in small dribs and drabs here and there, 120 euros for upgrade to that streetlight in your street that failed; 30 euros for the overhaul of the kids playground.
 
A sensible solution- you pay what you use, which is a nice way of keeping the taxes low. And what is the occasional bill for a few hundred euros every few years, compared to what can be several thousand pounds of council taxes and rates every year, in the dreaded UK ‘tax bands’ system.
 
To most people the Erschließungsbeitrag principle is a little slice of heaven. However, as with any idea invested by any government in the world- it comes at a cost.
 
So you just found that inexpensive little project property come up on ebay. Before you even consider purchasing the property, every seasoned investor in the market knows  you MUST find out what condition is the road running past your new home? What about the main road into the town, is their a major gas line or sewer due to be installed running past the house? Does the seller seem especially interested to sell you the property at a bargain price?
 
Because this is when Erschließungsbeitrag comes to bite HARD. If your main road is going through a complete overhaul, and it passes by your door, you will be charged for every metre of road frontage it passes, split with your opposing neighbour (if you have one, if not, bad luck!) pretty much in full for its construction. Just read Article 131 of the BauGB (German building code) if you don’t believe it.
 

Going to look nice when it's finished, but not a good omen for your tax bill.
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That can mean, and this is not an exaggeration, THOUSANDS of Euros, to be paid, in cash, 30 days after demand. So you better check the road condition- if on your visit there are a plie of diggers, a bunch of blue suited workers with a  glint in their eye measuring that potholed excuse for a road which passes your door on your visit, you might want to turn tail and run before it becomes your problem.
 
However, just because you see the property and the roads seem fine, without a digger in sight, does not mean you are off the hook. HOW fine exactly are the roads? Is that a nice new park in the town?
 
Now you are asking has the seller paid their Erschließungsbeitrag? Because if they have not, it CAN pass to the new owner without them even knowing it, years after the building work started. The contribution tax is only due on the ‘etzten Gehwegplatte’ or ‘Last slab’. So the road could apparently be complete for years, at least the part running past your house- but not officially signed off, or just being finished a few miles up the road. Of course, sadly, many sellers know this fee is coming, and they ditch their property like a sack of potatoes to the next unsuspecting chump up the line, cheap. Then, usually a foreign investor picks it up thinking ‘wow this is cheap’ and they eventually hear rumours/find out about the dreaded Erschließungsbeitrag before they too take their place in the Erschließungsbeitrag ‘musical chairs’ game until it lands on the unsuspecting new buyer.
 
Of course, once the demand for Erschließungsbeitrag is issued you CAN NOT SELL THE PROPERTY without paying the tax. When you sell, it is taken automatically.
 
HOW TO AVIOD GETTING STUNG?
 
You are set on the property- the road seems fine, you have decided to buy. The first thing you MUST do is insist that the Notar who is dealing with your case do a search for any possible Erschließungsbeitrag due on the property in the area. They have access to systems which can, and will, disclose any planned or current contributions due on the property. It is your LEGAL right to this information before you purchase.
 
Tell your seller this. If they insist on deposits/contracts etc before they will give you this information, WALK AWAY. You are inheriting someone elses problem.
 
Mygermanpropery.eu ALWAYS checks the Erschließungsbeitrag situation of a property before offering it for sale. Why? Arthur learned the hard way with his first purchase in Germany- a cheap, good condition factory building, he sourced for a client who needed a warehouse for shipping goods from Poland to the UK. He was certainly surprised when he found out that 4 streetlights, 150m of road frontage (including pavement) and a sewer drain were all his responsibility- at almost 18,000 euros. Luckily for us the client really wanted the building and location and decided it was worth the extra money- but a learning experience it certainly was.
 
We hope this article has been useful to you, and if you have any questions about purchasing property in Germany feel free to contact the MYGERMANPROPERTY team
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