Repair

Repair refers to all measures taken to restore a property to its original, contractually agreed, or structurally sound condition. It involves the repair of damage, defects, and wear and tear, but goes beyond mere upkeep (maintenance). In rental and home ownership law, the distinction from modernization is significant from both a legal and tax perspective.

Repair vs. Maintenance vs. Modernization

These three terms are often confused in everyday language, but they have different legal and tax implications:

• Maintenance involves preventive measures to avoid damage (e.g., regular roof inspections, heating system maintenance). It takes place before damage occurs.
• Repair addresses damage that has already occurred and restores the property to its intended condition (e.g., repairing a leaky water pipe, replacing a defective roof). It responds to existing defects.
• Modernization improves the condition of a property beyond the original standard (e.g., installation of a new, more efficient heating system; thermal insulation of the facade).

For landlords, the classification is crucial: repair costs are deductible as business expenses in the year they are incurred, while modernization costs may need to be spread over several years. Under tenancy law as well: repairs are the landlord’s obligation without cost allocation; modernization costs, on the other hand, can be partially passed on to the tenant.

Obligations and Cost Allocation in the Tenancy Agreement

In a tenancy agreement, the landlord generally bears the obligation to repair the rented property. The landlord is obligated to maintain the apartment in a condition suitable for contractual use throughout the entire lease term (Section 535 of the German Civil Code (BGB)). Exceptions apply if the tenant caused the damage themselves or if the damage falls within an area of responsibility contractually assigned to the tenant.

Through so-called minor repair clauses in the lease agreement, a portion of the costs for minor damage to items subject to frequent use can be transferred to the tenant. These clauses are only valid if they are limited in amount (maximum of approximately 100-150 euros per individual repair) and the tenant’s annual burden is capped (max. 6-8% of the total annual net rent). The Federal Court of Justice (BGH) has declared clauses without these limitations to be invalid.

Repairs in Condominium Associations (WEG)

For condominiums, the German Condominium Act (WEG) distinguishes between individual ownership and common property. The condominium association (WEG) is responsible for the common property (e.g., roof, facade, stairwell, load-bearing walls), and the costs are allocated to all owners via the annual statement of accounts based on their co-ownership shares. Since the 2020 WEG reform, repair measures for common property can be decided by a simple majority-which significantly simplifies decision-making in large WEGs.

In contrast, each owner is personally responsible for the individually owned property (the actual apartment, including non-load-bearing interior walls, floor coverings, and interior doors). In the event of flooding originating from the common property (e.g., defective pipes in the masonry), the HOA’s obligation to repair also applies to damage to the individually owned property, provided the cause lies within the common property.

Tax Aspects of Repairs

For rented properties, repair costs are generally immediately deductible as income-related expenses in the year of payment-which represents a significant tax advantage over construction costs that must be capitalized. However, the three-year period following acquisition must be observed: If repair measures are incurred in the first three years after acquisition and their total costs exceed 15% of the building’s purchase price, these are treated for tax purposes as acquisition-related construction costs (Section 6(1)(1a) of the German Income Tax Act (EStG)). In this case, they must be capitalized and depreciated over the useful life-a risk often overlooked by buyers of properties in need of renovation.

We recommend always consulting with a tax advisor regarding major repair work after purchase to ensure optimal tax treatment and avoid surprises on your tax return.

Practical Tip for Property Owners in Nuremberg and Franconia

In the Nuremberg metropolitan region, a significant portion of the real estate stock dates from the 1950s to the 1970s. Particularly in neighborhoods such as Gostenhof, Langwasser, or in the surrounding Franconian area, many buildings require repairs to roofs, plumbing, and facades. We recommend always obtaining a technical appraisal before a purchase and reviewing the homeowners’ association’s maintenance reserve fund.

As a seller, known defects should be documented and-where possible-repaired before marketing the property, as this typically increases the achievable price and minimizes liability risks. Minor repairs (dripping faucets, broken roller shutters, damaged tiles) cost little and leave a much better impression on the buyer. We are happy to help you realistically assess the renovation needs during a viewing and decide which measures make sense before marketing the property.

Frequently Asked Questions

Who pays for repairs-the tenant or the landlord?

In general, the landlord is responsible for repairing the rental property. Exceptions apply in cases of damage caused by the tenant themselves, as well as in cases of validly agreed minor repair clauses for minor damage up to approximately 100-150 euros per individual case.

Can I deduct repair costs from my taxes?

Yes. Repair costs for rented properties are generally immediately deductible as income-related expenses in the year of payment. Note: If major repair work is required within the first three years after acquisition, these costs may be classified as acquisition-related production costs (Section 6(1)(1a) of the German Income Tax Act (EStG)) and must then be depreciated over the useful life of the property.

What constitutes repair, and what constitutes modernization?

Repair restores the property to its original condition (repair, replacement of equivalent components). Modernization permanently improves this condition. A practical example: Replacing a defective single-pane window with an equivalent single-pane window is repair; installing triple-pane thermal insulation glazing, on the other hand, is modernization.

How long can I wait as a tenant before having repairs done?

As a tenant, you should report defects to the landlord immediately-preferably in writing. If you do not report damage immediately and it worsens as a result, you may be held liable for the additional damage incurred. The obligation to report defects promptly stems from the general duty to mitigate damage.

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