Local Tax Act (KAG)

The Local Tax Act (KAG) is the state law that authorizes municipalities and counties to levy fees, charges, and taxes on property owners and residents to finance public facilities. In Bavaria, the corresponding law is called the Municipal Tax Act (KAG Bavaria). It forms the legal basis for development contributions, road construction contributions, sewage fees, water fees, and other charges that represent relevant cost items for property owners.

Major Types of Levies Under the KAG

Development Contributions: Owners of building lots bear the costs of initial development (roads, sewer lines, lighting) on a pro-rata basis according to the lot area. The legal basis in Bavaria is the BayKAG in conjunction with the BauGB. Road Improvement Contributions (Road Improvement Contribution Bylaws): In Bavaria, recurring road improvement contributions (so-called resident contributions for the improvement of existing roads) were abolished in 2021. This was a significant benefit for Bavarian property owners. Fees for Water and Sewage: Municipalities levy usage fees for water supply and sewage disposal based on the KAG, following the equivalence principle (the fee corresponds to the cost). Contributions for Connection to Public Utilities: Anyone connecting their property to the sewer system or water supply network for the first time pays a one-time connection fee.

In addition to these traditional types of charges, the KAG also provides for cost-recovery contributions for nature conservation compensation measures: If a construction project causes impacts on nature and the landscape, the municipality may pass on the costs of compensation measures to the responsible parties through contributions. These costs are becoming increasingly relevant for larger new construction projects in the Nuremberg area.

Implications for Property Buyers and Owners

When purchasing a plot of land or a property, it is important to check whether there are any outstanding development fees or connection fees-these are transferred to the new owner and can amount to several thousand euros. While notaries do point out known public encumbrances, it is advisable to actively inquire with the municipality or check the register of building encumbrances. Even for properties without current infrastructure, future fees may apply if the municipality plans to expand roads or sewer lines.

Particular caution is advised for properties in newly designated development areas: here, the infrastructure costs are often not yet finally settled; the infrastructure assessment notice may arrive years after the purchase. Buyers should specify in the purchase agreement who is liable for development fees that become due after the transfer of ownership but are levied for development measures carried out prior to the transfer.

KAG and Development Costs for New Construction Projects

Anyone building a new home or purchasing an undeveloped property must factor in development costs. In Bavaria, the municipality’s share of development costs is capped at 10%; the owner’s share amounts to 90% of the eligible costs, distributed according to land area and building density. The contributions are set by official notice and must be paid within a specified period. Failure to pay risks foreclosure on the property.

When evaluating a property, buyers should factor in the expected development costs as a deduction from the purchase price or as an additional budget item. A developed property is always worth more than an undeveloped one; therefore, development costs directly impact the market value.

Practical Tip for Property Owners in Nuremberg and Franconia

In Nuremberg and the Franconia metropolitan region, buyers of land and older buildings in new development areas or in areas with ongoing development projects should inquire with the relevant city planning office or municipal administration to determine whether any development fees are still outstanding or will be levied in the near future. The abolition of road construction fees in Bavaria in 2021 represents a significant financial advantage over property owners in other federal states. Anyone purchasing land in municipalities in the Nuremberg area (e.g., Wendelstein, Schwaig, Röthenbach) should request and review the relevant fee regulations from the municipal office. At my-home.de, as part of our real estate brokerage services, we always clarify whether any municipal contribution liabilities still exist for a property being purchased.

Frequently Asked Questions

Are outstanding development contributions transferred to the buyer when purchasing real estate?

Yes. Public encumbrances-including development contributions, connection fees, and other municipal charges-are property-specific and are transferred to the new owner upon the change of ownership. While the notary will inquire about known public encumbrances, it is advisable to make an independent inquiry with the municipality before the purchase.

Have road construction contributions really been abolished in Bavaria?

Yes. Effective January 1, 2021, Bavaria became the first state to completely abolish recurring road construction fees. Existing notices issued before this date remain valid. Since 2021, Bavarian property owners no longer pay resident fees for the renovation of existing roads-an advantage over many other states.

How high can development fees be in Nuremberg?

The amount depends on the lot size, the permitted use (number of full stories, floor area ratio), and the actual development costs. For a standard-sized property (600-800 m²) in a new development area, development fees in Bavaria can range from €8,000 to €25,000. The city planning office or municipal administration can provide detailed information.

Can I appeal a development fee notice?

Yes. Development notices are administrative acts and can be challenged by filing an appeal within one month. Common errors include incorrectly calculated plot areas, inaccurate building dimensions, or an excessive cost allocation. A lawyer specializing in public construction and tax law can assess the likelihood of success for an appeal.

Can development fees be negotiated when purchasing a property?

Development fees are administrative acts that the property owner is legally obligated to pay-they are generally non-negotiable. What can be negotiated, however, is the question of who, in the relationship between buyer and seller, is responsible for outstanding or foreseeable development costs. The purchase agreement can stipulate that the seller is liable for all development contributions arising from measures taken before the transfer of ownership, even if the official notice is received only after the purchase. This provision is particularly important for properties in newly designated development areas, where the final settlement often occurs years after development is complete. Buyers should actively request this clause in the purchase agreement.

Municipal Fees and Their Impact on Property Value

Municipal fees influence the total investment costs of a property and thus its market value. A plot of land on which development contributions of 20,000 euros are still outstanding is, in effect, worth 20,000 euros less than a developed plot of the same location and size. When appraising real estate, these encumbrances must be taken into account as value-reducing factors. In Nuremberg and the surrounding municipalities, we always recommend, as part of our appraisals, obtaining written confirmation from the city planning office or the municipal administration regarding the status of the development contributions and deducting this amount when determining the purchase price. This ensures that the purchase price reflects the actual encumbrance on the property.

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