which may derive from such
changes. The landlord cannot exempt
himself - at least not by standard-form contract -
from liability, should the premises prove unsuitable for the
use agreed upon in the lease agreement.
Î
operational costs
•
According to German lease law, the rent is a gross rent if not
otherwise agreed in the contract, i.e. the rent is deemed to
include all operational costs.
•
However, the landlord can transfer such operational costs to
the tenant if this is specified in the lease agreement in detail.
Operational costs can be transferred to the tenant in the
way that the tenant is obliged to conclude the corresponding
contracts directly with the suppliers. Alternatively the parties
might agree that the landlord concludes the contract with the
respective suppliers and allocates the operational costs to the
tenant. In this case the specified operational costs that shall
be borne by the tenant have to be listed explicitly in the lease
agreement. Alternatively a reference to the German Regula-
tion on Operating Costs
(Betriebskostenverordnung or BetrKV)
may be included into the contract.
•
The costs for heating and consumption of warm water can
be partly transferred to the tenants according to the German
Regulation on Heating Costs
(Heizkostenverordnung)
.
Î
Repairs
•
According to German statutory law, the landlord is obliged to
bear all expenses incurred by keeping the lease object in good
condition. These include the costs for repairs, maintenance
workand replacements. However, the parties may deviate
from statutory law in certain situations. Thus, in commercial
lease agreements it is usually agreed upon that the landlord
is responsible for structural repairs whereas the tenant is res-
ponsible for repairs within the lease object. For common areas
used by several tenants (e.g. entrance hall, staircase, etc.), costs
for maintenance, repairs and renewals allocated to the tenants
must be limited (e.g. not more than 10 % of the annual net
rent).
TaX
Î
Real Estate Transfer Tax (RETT)
•
In Germany the disposal of a real estate asset is subject to Real
Estate Transfer Tax («RETT») which is levied by the competent
tax authority. The level of taxation was stable all over Germany
at 3.5% from 1997 to 2006. Since 2006 - except for the federal
states of Bavaria and Saxony - most of the federal states have
raised the level of taxation which is now either at 4.5%, 5.0%,
5.5%, 6 % (Berlin) or even 6.5% (Schleswig-Holstein). The tax
base for asset deals is the purchase price plus other obliga-
tions to be fulfilled by the buyer.
•
A share deal may also be subject to RETT in the event that (i)
either at least 95% of the shareholdings in the property hol-
ding company are acquired by the same buyer or (ii) the total
shareholding in the property holding company is trans-ferred
within the transaction. Taking these principles into account, a
transaction maybe structured in a way to avoid RETT being
triggered.
Investor Guide to Europe 2014
| 37
Î
value added Tax
(vaT)
•
The sale of a real estate asset by way of
an asset deal is not subject to VAT in the event
of a transfer of a business as a going concern under
German VAT law.
•
In the event that the asset deal is not considered as a business
going concern but as a delivery of a real estate asset the tran-
saction is subject to VAT but tax exempt. In this event the seller
might opt for the transaction not to be VAT exempt provided
that the object of the transaction is a real estate property with
VAT-able leases. The seller could then collect input VAT. In this
case the reverse charge mechanism is applicable. The appli-
cable VAT rate is currently 19%.
•
In the event of a share deal the structure needs to be analysed
in order to find out whether it is at all subject to German VAT,
whether it is tax exempt and whether it can be treated as a
non-VAT-able transfer of a business as a going concern.
