Conversion

In real estate law, conversion refers to the legal transformation of a rental apartment building into condominium ownership under the Condominium Act (WEG)-that is, the division of a building that was previously rented as a single unit into individual condominium units that can be sold separately. Conversion is a key instrument of housing privatization and affects owners (potential for appreciation), existing tenants (rights of protection and preemption), and the housing market as a whole.

Legal Process of Conversion

The conversion process begins with the notarized declaration of division pursuant to § 8 WEG, through which the building is divided into areas of individual ownership and common ownership. This requires a division plan (floor plans of all units) and a certificate of separation issued by the building authority. In Nuremberg, the certificate of separation is issued by the City Planning Office. After notarization and entry in the land register, independent condominiums are created. In areas with a tight housing market (environmental protection statutes), the conversion in Bavaria additionally requires official approval.

The declaration of division simultaneously governs the community rules of the resulting WEG-that is, rights of use, cost sharing, and administrative rules. These documents form the basis for all future decisions of the homeowners’ association and should be carefully drafted. An experienced notary and expert guidance from a real estate professional are essential during the conversion, as flawed declarations of division can lead to additional costs and legal disputes down the line.

Tenant Protection During Conversion: Right of First Refusal and Protection Against Termination

Existing tenants enjoy special legal protection during the conversion: According to Section 577 of the German Civil Code (BGB), tenants of an apartment have a right of first refusal if their apartment is to be sold to a third party for the first time after the conversion. In addition, Section 577a of the German Civil Code (BGB) establishes a waiting period for terminations for personal use: For at least three years (extendable to up to ten years in Bavaria by statutory order), the new owner may not terminate the lease for personal use. These protective provisions are of vital importance to tenants-and a key evaluation criterion for investors when purchasing converted units.

Furthermore, Section 564b of the German Civil Code (BGB) generally protects tenants from ordinary termination upon a change of ownership, provided there are no special grounds for termination. For landlords, this means that existing tenancies generally continue unchanged after conversion, and the new owner assumes the existing lease agreement. Anyone purchasing converted apartments with existing tenants should carefully analyze the remaining lease term, the rent amount, and how it compares to the local market rent.

Conversion as an Investment Strategy

For owners of multi-family buildings, conversion can be very attractive financially: The total proceeds from the individual sale of the condominiums often significantly exceed the value of the building as a rental property (the so-called “privatization premium”). Key factors here are location, standard of amenities, tenancy agreements, and the demand for condominiums in the area.

Marketing converted units requires a differentiated strategy: Vacant apartments can be sold immediately to owner-occupiers or investors; rented units appeal primarily to investors seeking long-term wealth accumulation. In terms of price, privately financed, modernized units in prime Nuremberg locations often fetch 20-35% more than their calculated share of the total building value. We analyze for owners in Nuremberg and the metropolitan region whether and when a conversion makes economic sense and what approval requirements apply.

Practical Tip for Owners in Nuremberg and Franconia

In Nuremberg and several surrounding municipalities, neighborhood preservation ordinances (preservation statutes) are in effect, which require approval for the conversion of rental units into condominiums. This particularly affects parts of Südstadt, Gostenhof, St. Johannis, and the Old Town. Before you purchase or convert a rental building, we recommend checking the exact status of the building with the city planning office.

Our experience shows: A professionally guided conversion with a well-thought-out declaration of division, a clear marketing strategy, and transparent communication with tenants achieves significantly better results than a spontaneous sale without preparation. We guide you through the entire conversion process-from the feasibility analysis through the notary to the marketing of individual units-and are familiar with the legal nuances of the Nuremberg market from years of practical experience.

Frequently Asked Questions

Do tenants have a right of first refusal during conversion?

Yes. According to Section 577 of the German Civil Code (BGB), the tenant is entitled to a right of first refusal if the apartment is to be sold to a third party for the first time following the conversion. The right of first refusal must be exercised as soon as the landlord informs the tenant of the concluded purchase agreement with a third party-the tenant then enters into the agreement under the same terms. The right of first refusal does not apply if the apartment is transferred to family members or members of the household.

Can the new owner terminate the lease after purchasing a converted apartment?

Not immediately. The waiting period under Section 577a of the German Civil Code (BGB) is at least three years from the date of sale in Bavaria. If the apartment is located in an area with high housing demand (Rent Control Ordinance), the period may be extended to up to ten years. Termination for personal use and termination for economic exploitation are prohibited during the waiting period.

What are the legal and administrative costs of a conversion?

The notary fees for the declaration of division are based on the building’s value (GNotKG). Additional costs include the certificate of separation (building authority), land registry entry, and, if necessary, an expert for the division plan. For a building with ten residential units valued at €2 million, total costs of €15,000-€30,000 are realistic. In areas requiring approval, application fees and longer processing times apply.

How long does a conversion take?

From the time the notary is commissioned until all individual apartments are entered in the land registry, it usually takes three to six months-depending on processing times at the city planning office (certificate of separation), the land registry office, and, if applicable, the permitting authority. In Nuremberg, we recommend allowing for a time buffer of at least four to five months.

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