GERMANY Law and Practice Contributed by: Wolfram H. Krüger, Barbara Rybka, Markus Wollenhaupt and Alexander Zitzl, Linklaters
In addition to the Commercial Code ( Handelsgesetz- buch ) and the Stock Exchange Act ( Aktiengesetz ), the REIT Act ( REIT-Gesetz ) applies to them. In addition to being listed at the stock exchange, REITs must fulfill certain other criteria, such as a minimum distribu - tion of 90% of annual profit, focus on real property investment (at least 75%), minimum diversification (no shareholder must maintain more than 10%, minimum free flotation of 15%), exclusion of real property trade The minimum share capital for a GmbH is EUR25,000. Capital contribution in kind is possible but is subject to further restrictions. No minimum capital requirements apply for a KG. 5.5 Applicable Governance Requirements No specific governance requirements apply to real estate investments as such. However, regulatory requirements apply if the investment vehicle qualifies as an investment fund under the German Investment Code (KAGB) – ie, any collective investment under - taking that raises capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors, and that is not an operative business outside the financial sector. The German Federal Financial Super - visory Authority ( Bundesanstalt für Finanzdienstleis - tungsaufsicht ) supervises German fund managers and investment funds offered by such companies under the provisions of the KAGB. 5.6 Annual Entity Maintenance and Accounting Compliance The annual entity maintenance and accounting com - pliance costs depend on the individual circumstances of the entity and the property itself. and a minimum equity ratio of 45%. 5.4 Minimum Capital Requirement 6. Commercial Leases 6.1 Types of Arrangements Allowing the Use of Real Estate for a Limited Period of Time German law differentiates between Pacht , entitling the tenant to use the property and benefit from it, and Miete , which only entitles the tenant to use the prop -
erty. For example, the leasing of a hotel, including all fixtures and equipment, and the right to operate the
hotel is regarded as a Pacht contract. 6.2 Types of Commercial Leases
There are no different types of commercial leases, apart from the general differentiation previously explained. 6.3 Regulation of Rents or Lease Terms Leases are subject to the Civil Code, which regulates basic contractual matters. Within that scope, con - tracting parties may freely negotiate the contractual provisions, as long as they do not violate any manda - tory law, eg, regulations on the maximum rent payable and its increase for residential leases. 6.4 Typical Terms of a Lease Fixed leases typically run for a period of between five and ten years, and extension options are often agreed. It is possible to negotiate terms of up to 30 years. The landlord is obliged to maintain the premises in the agreed condition – therefore, the landlord must bear all costs for repairs and decoration. It is mar - ket standard for maintenance and repair work to be undertaken by the tenant at its own cost. In most cases, the landlord remains responsible for structural and major repairs, and the tenant carries out internal repairs and maintenance as well as repairs solely for interior decoration. Case law regards clauses that oblige the tenant to repair the roof and structure of the leased premises, to decorate at fixed intervals, to comply with unlimited renovation obligations at the end of the term, or to pay for renovation irrespective of the premises’ actual state at the end of term, to be unfair and invalid. Triple net leases (in which the tenant agrees to pay all real estate taxes, building insurance and maintenance) are generally not permitted unless individually agreed; eg, in sale-and-leaseback transactions. Rent is mainly paid on a monthly basis. In rare cases quarterly, six-monthly or yearly rents are agreed.
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