Conversion (from rent to ownership)

Conversion (Rental to Ownership) - The conversion of rental apartments into condominiums refers to the legal process by which a multi-unit residential building is divided into individual condominium units through the creation of a declaration of division. Each unit receives its own land registry entry and can be sold separately. Conversion is an established investment model that allows individual owners to generate significant additional proceeds compared to a bulk sale - but has been subject to stricter legal restrictions since 2021 to protect existing tenants.

Conversion Process

The conversion of a multi-family building into condominiums takes place in several clearly defined steps:

1. Certificate of Separation: The competent building authority issues a certificate based on division plans (floor plans showing the residential units) confirming that each unit is structurally separate from the others-with its own entrance, kitchen, and bathroom. A prerequisite is that the building’s structural condition supports this separation; in older existing buildings, preparatory construction work is sometimes necessary.

2. Declaration of Division by a Notary: The notary prepares the declaration of division, which divides the building into individual units (separate residential units) and common property (stairwell, roof, facade, load-bearing walls, shared utilities). At the same time, the community rules (regulations for use and management) are established, and the co-ownership shares are determined.

3. Land Registry Entry: A separate land registry page is created for each residential unit. This entry serves as the formal basis for the individual sale of the apartments.

4. Marketing: After registration, the apartments can be sold individually-to investors, owner-occupiers, or even to existing tenants through their right of first refusal.

The total costs for the conversion amount to approximately 5,000-15,000 euros for a typical multi-family building with 6-10 units, depending on size, number of units, and the effort required for the partition plans.

Tenant Protection in the Event of Conversion: Sections 577 and 577a of the German Civil Code (BGB)

Existing tenants enjoy special legal protection in the event of a conversion, which must be taken into account during the planning process:

Right of First Refusal (§ 577 BGB): Upon the first sale of the apartment following the conversion, the tenant has a statutory right of first refusal. The landlord must present the tenant with the purchase agreement concluded with the third-party buyer in a notarized form. The tenant then has two months to exercise the right of first refusal-that is, to purchase the apartment under exactly the same terms. The right of first refusal does not apply to the conversion itself, but only to the subsequent sale. It cannot be excluded or restricted to the tenant’s disadvantage.

Notice moratorium (§ 577a BGB): Following the conversion and the initial sale of an apartment, a notice moratorium applies. During this period, the tenant may not be given notice for the landlord’s personal use or for economic exploitation. The statutory minimum period is 3 years-in areas with a tight housing market, federal states may extend this period to up to 10 years. In Nuremberg, a Bavarian state ordinance mandates a 10-year moratorium on termination following the initial sale.

Permit requirement under Section 250 of the German Building Code (BauGB): Since 2021, federal states have been able to make conversions subject to a permit in areas with a tight housing market. In Bavaria, the Conversion Prohibition Act is in effect as the Bavarian Conversion Ordinance (BayUmwV). In Nuremberg, official approval for conversion is generally required-exceptions apply, among other things, if owners convert a maximum of two apartments or if all tenants agree to the purchase of their apartment.

Economic Viability of Conversion

The economic appeal of conversion stems from the multiplier effect of individual sales: In Nuremberg, condominiums typically sell at prices per square meter that are 20-40% higher than the calculated share of rental living space in the total building value. Anyone who has purchased an apartment building with 8 units for a total of 1.2 million euros and sells the individual units after conversion for a total of 1.7 million euros achieves an additional profit of 500,000 euros-with conversion costs of approximately 10,000 euros.

However, the 10-year moratorium on termination must be taken into account in the calculation: Apartments with long-term tenants may have to be sold at existing rental rates (and thus at lower purchase prices for investors). Owner-occupiers who rely on a vacant apartment can only move in after the moratorium period has expired due to personal need.

Practical Tip for Owners in Nuremberg

We recommend the following approach to owners of multi-family homes in the Nuremberg metropolitan area who are planning a conversion:

• Preliminary legal review: Consult with a real estate attorney to determine whether your property falls under the Bavarian Conversion Ordinance and whether official approval is required.
• Tenant communication: Early, transparent communication with tenants builds trust and opens up the possibility of selling individual units directly to the tenants-often more straightforward and without the need to find a buyer.
• Pre-conversion appraisal: Have the building professionally appraised before conversion to determine realistic individual sale prices and proceed with conversion only if the additional proceeds justify the effort.
• Timing: In Nuremberg’s current market conditions (2025), condominiums in sought-after locations (Johannis, Maxfeld, Erlenstegen) sell well; in outlying areas and for units subject to rent control, finding a buyer may take longer.

Contact us-we support conversion projects from valuation through to individual sales and are familiar with the specific legal framework in Nuremberg.

Frequently Asked Questions

What does it cost to convert a multi-family building?

The costs consist of: Certificate of Separation (approx. 500-1,500 euros depending on the scope of the review), notary fees for the declaration of division (approx. 2,000-5,000 euros depending on the number and value of the units), land registry fees (approx. 1,000-3,000 euros), architect’s fees for division plans (approx. 1,000-3,000 euros) and, if applicable, costs for preparatory construction work. Total costs: approx. 5,000-15,000 euros for a typical multi-unit residential building with 6-10 units. The additional proceeds from individual sales usually more than offset these costs many times over.

Does the tenant have a right of first refusal?

Yes. According to Section 577 of the German Civil Code (BGB), the tenant has a statutory right of first refusal upon the initial sale following the conversion. The landlord must present the tenant with the complete purchase agreement with the third-party buyer; the tenant has two months to exercise the right of first refusal by means of a notarized declaration and to enter into the purchase agreement. The right of first refusal cannot be contractually excluded or limited in time. If the tenant does not exercise it or expressly waives it, it expires.

Is the conversion economically viable?

The conversion is worthwhile if the individual sales value of the apartments significantly exceeds the sum of the building’s value (as a whole) plus conversion costs. In Nuremberg, the price per square meter for condominiums is typically 20-40% above the calculated share of the total building value. The 10-year moratorium on termination must be taken into account in the calculation-occupied apartments typically fetch 15-25% lower prices on the market as investment properties than comparable vacant units. A realistic profitability calculation should account for both scenarios (occupied and vacant apartments).

Do I need official approval for the conversion in Nuremberg?

In Nuremberg, the Bavarian Conversion Ordinance (BayUmwV) generally requires approval from the competent authority (Building Control Office) for conversions in areas with a tight housing market. Exceptions apply, among other things, to owners with up to two apartments or if all tenants consent to the conversion and purchase their apartment. We strongly recommend clarifying the approval requirement on a case-by-case basis with the Nuremberg City Planning Office or a specialized attorney before initiating the process.

Back to the Real Estate Glossary.