Condominium ownership

Partial ownership refers to the separate ownership of spaces within a building that are not used for residential purposes, combined with a share in the common property. It arises through division in accordance with the Condominium Act (WEG) and typically includes offices, retail spaces, medical offices, storage rooms, parking spaces, or garages. Partial ownership is subject to the same legal regulations as condominium ownership but has its own specific characteristics regarding use and valuation.

Partial Ownership vs. Condominium Ownership: The Key Differences

The central difference lies in the intended use: condominium ownership is intended for residential purposes, while partial ownership is intended for commercial or other non-residential uses. This classification is specified in the declaration of division and can only be changed by amending the declaration of division (with the consent of all owners).

Practical consideration: Anyone wishing to use a unit designated as fractional ownership for residential purposes on a permanent basis generally requires approval from the community and, if necessary, the building authority. Conversely, the same applies to the commercial use of condominium ownership. Unauthorized changes in use may result in warnings from the community and, in the worst case, injunctive relief. The question of permissible use should therefore be carefully examined before any purchase of partial ownership.

Typical Forms of Partial Ownership

In practice, partial ownership takes the following forms: commercial units (retail stores on the ground floor of a residential building), offices and practice spaces (especially in mixed-use urban neighborhoods), parking spaces and garages (often as separate co-ownership units in the underground garage), as well as basement rooms or storage rooms, if they are registered as separate units in the land registry. Each of these forms has its own land registry entry and a co-ownership share in the common property.

Important: The co-ownership share generally determines voting power at the condominium association meeting and the distribution of common expenses. Partial owners are full members of the association and contribute accordingly to maintenance reserves and building fees.

Partial Ownership as an Investment: Opportunities and Risks

Partial ownership in the form of commercial units or parking spaces can yield attractive returns. Commercial spaces in locations near Nuremberg’s city center are in demand due to stable demand from service providers, doctors, and retailers. Risks: Vacancies due to economic shifts (e.g., declining demand for retail space), higher tenant turnover costs, and the fact that the interests of residential and fractional owners do not always align in WEG decisions-such as those regarding facade design or operating hours.

A careful review of the community rules and existing lease agreements is essential before purchasing. In particular, check whether the community rules contain usage restrictions for the fractional ownership that could limit your planned operations.

Financing and Valuation of Partial Ownership

Financing partial ownership is more complex than financing a traditional home purchase. Many banks will only finance commercial units with a higher equity stake (30-40%) and require a detailed usage plan. The loan-to-value ratio is determined based on a capitalized income approach-the key factor is the sustainable market rent, not the current lease agreement. If a lease is about to expire or the unit is vacant, the bank will set the loan-to-value ratio conservatively.

Parking spaces as fractional ownership, on the other hand, are significantly easier to finance: They are considered a standard product; prices in Nuremberg’s underground garages range between 15,000 and 45,000 euros depending on the location. Net returns of 3-5% are realistic if the parking spaces are located in an area with limited parking availability-such as the Old Town, St. Johannis, or parts of the Südstadt. Management is minimal, and rental defaults are rare.

When determining the market value of commercial co-ownership units, we recommend a professional appraisal based on the income approach. Particularly for medical offices or offices with unique layouts, vacancy risk discounts and suitability for alternative uses can significantly influence the value. We support you through the appraisal, purchase, and marketing processes with reliable market data from the Nuremberg Appraisal Committee.

Practical Tip for Owners in Nuremberg and Franconia

In Nuremberg’s vibrant neighborhoods-such as the Südstadt, Gostenhof, or the Old Town-well-designed ground-floor commercial units are in high demand. We often see that co-ownership units are underestimated during purchase and valuation: A careful analysis of lease agreements, condominium association resolutions, and structural usability is crucial. Pay attention to the remaining terms of existing leases, special provisions in the condominium bylaws (e.g., noise protection, operating hours), and the structural condition of the unit.

We would be happy to handle the valuation and marketing of your co-ownership unit-with in-depth market knowledge of the entire Nuremberg metropolitan region.

Frequently Asked Questions

Can co-owned property be used for residential purposes?

Generally no-the type of use specified in the declaration of division is binding. However, permanent residential use may be approved if the community consents and building code requirements (e.g., living space quality, minimum ceiling height, natural ventilation, safety standards) are met. In Nuremberg, this usually also requires a building permit for the change of use from the Building Authority.

How is co-ownership registered in the land registry?

Partial ownership is entered on a separate land register page, similar to condominium ownership. It includes the co-ownership share and a description of the unit. The declaration of division is filed as a notarized document with the land registry office and can be viewed there. When purchasing, you should always request and review the current declaration of division.

Do partial owners have voting rights in the condominium owners’ association meeting?

Yes. Partial owners are full members of the condominium owners’ association with all rights and obligations. Voting weight is determined by the formula specified in the association bylaws (usually co-ownership shares or the per-member principle). Partial owners can attend meetings, challenge resolutions, and submit motions-just like condominium owners.

Tax Treatment of Partial Ownership

The tax treatment of partial ownership depends on the type of use. If partial ownership is rented out (e.g., commercial unit, office, warehouse), the owner generates income from renting and leasing (Section 21 of the German Income Tax Act). The associated income-related expenses-interest, administrative costs, depreciation, maintenance-are tax-deductible. In the case of parking spaces held as fractional ownership that are used by the owner, no taxable income is generated, nor are there any income-related expense deductions.

The depreciation (AfA) on the building is calculated for co-ownership, just as for condominium ownership, based on the building portion of the purchase price (excluding land value). For commercial fractional ownership, a depreciation rate of 3% applies instead of 2% for residential buildings if the building was completed after December 31, 2022, or if it is a commercial building. We recommend that owners of co-ownership properties in Nuremberg consult with a tax advisor regarding tax optimization-especially for mixed-use properties where residential and co-ownership interests are combined within a single owners’ association and where cost allocation must be carefully documented.

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