Development fee

Development Contribution - A development contribution is a public-law levy through which municipalities pass on the costs of initially constructing infrastructure (roads, paths, squares, sewer lines, street lighting) to the adjacent property owners. The legal basis is provided by Sections 127-135 of the German Building Code (BauGB). Development contributions are generally a one-time fee incurred when a property is developed for the first time-for example, in new development areas or during the subsequent development of existing land.

Legal Basis and Calculation Method

The collection of development contributions is regulated at the federal level by the BauGB, with the details specified in municipal statutes:

What constitutes development subject to contributions?

• Roadways and sidewalks (including street lighting)
• Drainage systems (sewers, unless billed via fees)
• Green spaces as part of the development infrastructure
• Collector roads and cul-de-sacs

What is not subject to contributions:

• Internal development of private properties (e.g., utility connections, private access roads)
• Renewal or improvement of existing infrastructure (road improvement contributions may be levied for this purpose-Bavaria abolished these in 2018)

Calculation of the contribution:

• The municipality bears at least 10% of the development costs itself (Section 129 of the German Building Code (BauGB))
• The remaining 90% is distributed among the adjacent properties
• Distribution formula: often based on lot area (simple scale) or on lot area multiplied by the permitted number of stories (floor area ratio relevant for the contribution)

Amount and Special Features

The development contribution can be substantial depending on the location and scope of development:

• For a standard residential street with a sidewalk, street lighting, and sewer: typically 20-60 euros per square meter of property area (varying significantly depending on the municipality and construction costs)
• For a property with an area of 600 m²: potential total cost of 12,000-36,000 euros
• Development contributions must be assessed by the municipality and may be contested
• Statute of limitations for assessment: 4 years after the factual obligation to pay arises (at the earliest upon receipt of the municipality’s final invoice)

Tax Treatment:

• For privately used real estate: not deductible
• For rented properties: to be capitalized as construction costs and claimed through depreciation

Comparison of Development Fees - Bavaria (as of 2024)

Type of Fee	Legal Basis	Occasion	Who Pays	Typical Amount
Development contribution	Sections 127-135 of the German Building Code (BauGB)	Initial construction of roads/paths/sewers	Adjacent properties (90%; 10% municipality)	€20-60/m² of land area
Sewer connection fee	KAG Bavaria	Initial connection to the sewer system	Owner of the connected property	€2,000-8,000 flat rate (per municipality)
Road improvement fee	Abolished in Bavaria since 2018	Renovation of existing roads	No longer applicable in Bavaria	-
Water connection fee	KAG Bavaria	Initial connection to the drinking water network	Owner of the connected property	€1,500-5,000 flat rate
Sewer construction fee	Municipal bylaws	Operation and maintenance of the sewer network	All connected properties	Per m² of land or building

Distinction from sewer connection fee and road construction fee

The development fee under the German Building Code (BauGB) applies exclusively to the initial construction of a development facility. This is to be distinguished from:

Sewer connection fee: A separate levy under municipal tax law for the initial connection to the public sewer system. In many Bavarian municipalities, this is levied in addition to the development fee.

Road improvement fee (formerly): For the renewal and expansion of existing roads. Bavaria abolished the collection of road improvement fees in 2018-so property owners in Bavaria are no longer required to pay for the renewal of existing roads. This does not apply in other federal states.

These distinctions are important when purchasing property: A seller offering a “serviced” lot should specify exactly which fees have already been paid and which are still outstanding.

Practical Tip for Property Owners in Nuremberg and Franconia

In Nuremberg itself, development fees for existing properties are rare due to the largely completed urban development. In the surrounding municipalities of the metropolitan region-such as in new development areas in Schwaig, Feucht, Wendelstein, or Röthenbach-development fees are regularly incurred. We recommend that buyers of building land explicitly ask the municipality before purchasing about any outstanding or as-yet-undetermined development fees-these can significantly increase the purchase price.

A property listing that does not specify development costs should be treated with caution. We help our clients fully understand the total costs of a property purchase and factor them into their financing plans-because development contributions, just like the purchase price, must be financed from equity.

Frequently Asked Questions

When does the obligation to pay a development contribution arise?

The obligation to pay arises upon the final completion of the development infrastructure and the municipality’s notification of the final invoice. It does not arise with the building permit or when moving into the house. It is therefore possible that a development contribution may not be assessed until years after moving in.

Can I appeal a development contribution notice?

Yes. An appeal against the notice can be filed within one month (with the municipal administration). As a second step, a lawsuit may be filed with the administrative court. Valid grounds for objection include: incorrect calculation, statute of limitations, missing infrastructure, or incorrect allocation formula.

Are development fees taken into account when selling a house?

Yes. Outstanding or impending development fees reduce the value of a property and should be factored into the purchase price. We recommend that buyers include a clause in the purchase agreement specifying who is responsible for any development fees incurred prior to the effective date.

How does Bavaria differ from other federal states regarding development contributions?

In Bavaria, the road improvement contribution was abolished in 2018-meaning owners are no longer required to pay for the renovation of existing roads. However, the development contribution under the German Building Code (BauGB) for initial development still applies. In other federal states (e.g., Baden-Württemberg, Bavaria prior to 2018), additional road construction contributions exist, which can represent a significant financial burden for owners of properties on existing roads.

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