GERMANY Law and Practice Contributed by: Wolfram H. Krüger, Barbara Rybka, Markus Wollenhaupt and Alexander Zitzl, Linklaters
1. General 1.1 Main Sources of Law The main source of real estate law is the Civil Code ( Bürgerliches Gesetzbuch ). Of further relevance are: • the Land Registration Act ( Grundbuchord - nung ); • the General Terms and Conditions for Build - ing Contracts (VOB/B); • the Mandatory Fee Structure Regulation for Architects and Engineers (HOAI); • the Federal Building Code ( Baugesetzbuch ); • the Federal Land Use Ordinance ( Baunut- zungsverordnung ); • the 16 states’ individual building regulations ( Landesbauordnungen ); • the Notarisation Act ( Beurkundungsgesetz ); • the Heritable Building Right Act ( Erbbaure - chtsgesetz ); and • the Condominium Act ( Wohnungseigen - tumsgesetz ). 1.2 Main Market Trends and Deals In 2024, the willingness to purchase property remained subdued. The price spiral, rooted in the low-interest rates of previous years, has left many potential buyers unable to afford property. The economic crisis and the sharp prior increase in interest rates have increased foreclosure rates, with significantly more apartments, houses, and plots of land auctioned compared to 2023. How - ever, 2024 saw a slight decline in interest rates and a slowdown in inflation compared to 2023. Inflation in the eurozone is expected to stabilise during 2025 at the European Central Bank’s tar - get level of 2%. Nonetheless, high government debt and sluggish economic growth are likely to continue. This trend is leading to decreased demand for office, retail, and logistics spaces,
which could exacerbate competition for tenants with strong credit ratings. The residential real estate segment remains the most vital asset class in the German invest - ment market, with demand particularly high in metropolitan regions. Significant transactions were missing in 2024 and the year was primarily characterised by numerous small transactions. Noteworthy transactions in 2024 nevertheless included the sale of the Upper West office build - ing in Berlin and the acquisition of approximately 6,900 apartments from a ZBI sub-portfolio by asset manager ZAR Real Estate. Blockchain in real estate transactions and the tokenisation of real estate assets have yet to gain broad acceptance, although artificial intel - ligence is becoming increasingly important in accounting, property management, valuation, due diligence, and ESG monitoring. Looking ahead, investors are likely to focus on sectors where demand is rising, such as residential properties, data centres, micro-living, and stu - dent housing. There is also notable demand for spaces offering sustainable inflation protection, achievable through manage-to-core or manage- to-green strategies. Between 2024 and 2027, real estate loans in Germany totalling approximately EUR228 billion have required/will require refinancing. A capital shortfall of around EUR77 billion is anticipated, due to high loan-to-value ratios and low inter - est coverage ratios impeding the refinancing process. The residential and office segments are particularly affected, with EUR36 billion and EUR35 billion respectively in required refinanc - ing. An uptick in restructuring cases is expected in both office and retail properties as demand declines.
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