Obligation to dismantle

Obligation to remove structures refers to the contractual or statutory obligation of a property owner or user to remove a structure at their own expense upon the expiration of the term of use, upon termination of the agreement, or in the event of failure to meet certain conditions, and to restore the property to its agreed-upon original condition. It primarily applies to temporary permits, leasehold agreements, hereditary building rights, and commercial real estate leases, and protects the owner or the municipality from permanent structural alterations made by the user.

Obligation to Restore in Lease and Tenancy Law

In commercial leases, the tenant often bears a contractual obligation to restore the property to its original condition with respect to fixtures and alterations they have made. Tenants of retail space in Nuremberg who have installed special fixtures (ventilation systems, specific flooring, partition walls) must remove them upon moving out and restore the property to its original condition, unless the landlord expressly waives the right to restoration.

In residential tenancy law, the situation is more nuanced: Tenants may generally remove fixtures that the landlord has not approved, but are only obligated to do so if contractually agreed upon or if the original condition is impaired without removal. For example, if tenants have installed a built-in kitchen, they may take it with them when they move out-an obligation to do so exists only if the landlord expressly demands removal and this is provided for in the contract.

For landlords, we recommend including a list of permitted fixtures and those subject to removal in the commercial lease agreement and approving the tenant’s renovation projects in writing in advance-with a clear stipulation of whether and to what extent removal is required upon moving out. This provision avoids disputes at the end of the tenancy and protects the landlord from unreasonable costs.

Public-law removal obligations

Under building law, there are public-law obligations to remove structures for facilities that are only approved for a limited period-such as temporary construction site facilities, wind turbines with a limited operational lifespan, or special structures in rural areas. Section 35 of the German Building Code (BauGB) permits privileged projects in rural areas under certain conditions, subject to the requirement that the building be removed after the end of its use.

This obligation is secured by a building encumbrance in the register of building encumbrances or by security deposits (guarantees, reserves) to ensure that the public sector is not left to bear the costs. In practice, we see such obligations primarily in the case of ground-mounted photovoltaic systems, mobile office containers on commercial properties, and sales pavilions in rural areas. When purchasing such properties, the extract from the encumbrance register should be reviewed for existing demolition obligations.

Financial Security for the Demolition Obligation

Securing the demolition obligation is important for owners and creditors: If the obligated party becomes insolvent or resells the property, it must be ensured that the demolition still takes place. In leasehold agreements, a guarantee or a security interest in the form of a land charge is often agreed upon.

In commercial lease law, landlords recommend a security deposit that also covers demolition costs, or separate demolition reserves. As a rule of thumb, for extensive tenant improvements, the security deposit should cover at least the expected demolition costs-three months’ rent is often insufficient in such cases. For public projects, a building obligation is the standard instrument-it also binds the property’s legal successors.

Costs and Tax Treatment of Demolition Measures

Demolition costs that a landlord must bear (because the tenant fails to fulfill their obligation) may be deducted as business expenses from rental income, provided the measure serves to restore the property to a rentable condition. In contrast, demolition reserves set aside in advance cannot be claimed immediately as business expenses-the deduction is made only in the year of the actual expenditure.

For tenants, the costs of contractually required demolition are generally not tax-deductible, as this is a private obligation. For commercial tenants, demolition costs may be treated as business expenses provided the demolition is necessary for operational reasons.

Practical Tip for Property Owners in Nuremberg and Franconia

When leasing commercial real estate in the Nuremberg metropolitan region, we recommend explicitly and thoroughly addressing the demolition obligation in the lease agreement: What fixtures may the tenant install? Which must they remove upon moving out? Which may they leave behind (and receive compensation for, if applicable)?

When purchasing a commercial or mixed-use building, we recommend reviewing the list of encumbrances to identify public-law demolition obligations that are transferred to the property. Public-law encumbrances are not recorded in the land register but in the municipality’s encumbrance registry and must be obtained separately. We are happy to advise you on contract drafting and due diligence-please contact us.

Frequently Asked Questions

As a tenant of an apartment, do I really have to remove my own fixtures?

For residential lease agreements, the following applies: Fixtures installed without the landlord’s permission must generally be removed upon moving out if the landlord requests it. If the landlord has given written consent and waived the requirement for removal, this obligation does not apply. Cosmetic repairs (painting, wallpapering) are not considered removal measures and are regulated separately under tenancy law. In case of doubt, written permission with removal provisions should be obtained before making any installations.

Who bears the costs of restoration?

The costs of restoration are borne by the party obligated to do so-typically the tenant or occupant. If restoration is contractually agreed upon, the landlord has no claim to reimbursement. If the tenant refuses, the landlord may have the restoration carried out at the tenant’s expense and recover the costs from the security deposit or through legal action. In the public sector, the property owner or the party responsible bears the demolition costs; in the event of insolvency, costs may be transferred to the public sector.

Does the demolition obligation expire upon a change of ownership?

A contractually agreed demolition obligation is generally personal and does not automatically expire upon a transfer of ownership. However, security interests in rem (building encumbrance, land charge) may also bind the legal successor. The purchase agreement must therefore clarify whether and how existing restoration obligations are transferred to the buyer or must be discharged by the seller. Building encumbrances under public law always bind the respective property owner, regardless of a change in ownership.

How can the demolition obligation be secured in the land register?

Under private law, a demolition obligation can be secured in the land register by a land charge or a real encumbrance-this security then also applies to legal successors. Under public law, the instrument is the building encumbrance, which is entered in the municipal building encumbrance register. Building encumbrances are not visible in the land register, but only in the separate building encumbrance register-which is why this extract should always be requested when purchasing a property. The combination of contractual provisions and security in rem offers the most reliable protection.

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