When does the guaranteed rental income begin?
It starts from the very first month after paying the purchase price. This is also when the first rent payment is transferred to the investor.
How long does the guaranteed rental income period last?
The minimum term is four years. It is automatically extended by a further year at a time unless the contract is terminated in writing with a six-month notice period. The subject matter of the contract remains unaffected by the extension.
Can the guaranteed rental income also be terminated by the management company?
Theoretically, yes, but only once the minimum contract term has expired. In practical terms, the profitability for the management company lies in the long-term nature of the arrangement.
Who is the owner of the apartment(s)?
The investor is the owner and entered in the land register. The management contract, including the guaranteed rental income and all associated services, are notarised with the sale contract. It is therefore possible to bring enforcement proceedings against the management company (rent guarantor). The apartments qualify for tax relief. Interest on any finance is tax-deductible.
At what point can the apartment be sold again?
Anytime, even within the four-year minimum term. Just like any property sale, the new owner is bound by the terms of the management contract. Capital gains derived from a rise in the value of the property are liable to tax if it is sold within the first ten years. They are tax-free after ten years.
Is it possible to serve notice on the property, if the owner wishes to use it themselves, for example?
Only after four years and in compliance with the notice period. The notice period is six months from the time the minimum term expires. Arrangements are then made directly between the owner and the tenant.
Who is the tenant?
The occupant of the apartment. The management company finds the tenant and is the rent guarantor.
Who takes care of reletting?
The management company searches for and verifies (by means of SCHUFA/Creditreform) the tenants. The rent is transferred to the owner, regardless of whether the property is actually occupied.
What is included in the maintenance work?
The apartments are renovated and modernised in line with current standards. The tenants are obliged to return the apartments in the same condition as when they moved in. This also means that the tenant is responsible for keeping movables (such as the kitchen) in good condition, which is monitored and demanded by the management company. The rented property is maintained by the management company in a suitable condition for use as set out in the contract, pursuant to Section 535(1)(2) German Civil Code (Bürgerliches Gesetzbuch or BGB). Furthermore, all maintenance work that maintains the substance or value of the property will be carried out.
Who carries out the renovation and maintenance work?
Our own professionals carry out the work in order to ensure high standards and maintain price stability. The benefits of pooling purchasing and organisation arrangements can thus be passed on.
What happens if the apartment cannot be renovated prior to the acquisition?
If the renovation work cannot be carried out prior to the start of the contract, it will be carried out contractually during the next tenant changeover. The guaranteed rental income ensures that there is no loss of rent despite the apartment possibly being unoccupied.
What is the procedure if the apartment cannot be renovated within the contractual period?
Upon acquisition of the apartment, the buyer receives a statement of work with a breakdown of the renovation costs. This amount will be credited to the owner if they sell on the apartment during the contractual period. If the owner terminates the management contract before it has been possible to renovate the apartment, the renovation costs detailed in the statement of work will also be credited.
What is the procedure for maintaining the common parts?
When purchasing real estate projects, plot/building sections such as the roof, heating system, staircase, lift, etc. are professionally inspected. All maintenance work that may be necessary within the next five years will be carried out prior to the sale. The responsibility for all maintenance work that is necessary after this period of time will be transferred to all of the owners.
What happens if the apartment is neglected by the tenant?
This is insured by Provinzial with up to €15,000 cover.
How long does the cover last for loss of rent due to neglect?
Up to six months. Furthermore, the contractual guaranteed rental income continues to apply.
Who attends the property owners’ meeting?
The management company is authorised to represent the owners. The property owners’ meetings are held in line with the legal provisions of the German Residential Property Act (Wohnungseigentumsgesetz or WEG). The management company will assume all landlord obligations.
To what extent are rent increases passed on to the owners?
Rent increases are not passed on. The guaranteed rental income ensures that the owner always receives the contractually agreed rent during the contractual period, irrespective of whether the apartment is actually occupied. If the owner wishes to set the rent themselves, the contract may be terminated at the end of the minimum term, subject to the notice period being observed. Costs for brokers, an unoccupied apartment, loss of rent, service charge billing and maintenance work must then be covered by the owner.
What would happen if the management company went bankrupt?
The rent and service charges would then be paid by the tenant directly to the owner. An administrator would be appointed by the relevant district court to take care of the administrative duties.