Are you facing the decision to sell your rented property? Many owners fear a decrease in value of up to 30% and legal hurdles. Learn here how to make the sales process legally secure and minimize financial disadvantages.
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The topic briefly and concisely
The principle 'purchase does not break rent' (§ 566 BGB) is the central legal framework; the buyer takes over the tenancy agreement.
A rental can reduce the selling price by up to 30%, as the target audience is primarily restricted to investors.
The capital gains tax on the profit from the sale is waived if the property has been held for more than 10 years or has been used for personal purposes for at least three years.
Selling a rented house is more complex than selling a vacant property. The principle of “purchase does not break rent” protects the tenant, which limits the potential buyers and often drives down the price. But does this rule out a profitable sale? Not at all. With precise, data-driven valuation and a clear sales strategy, you can set the course for a successful conclusion. This article shows you how to navigate the legal framework, realistically assess your property's value, and target the right audience.
The Foundation: The principle 'purchase does not break rental'
The German legislature provides comprehensive protection for tenants. The decisive principle when selling a rented house is anchored in § 566 BGB: “A purchase does not break a lease”. This means the new owner fully enters the existing rental contract and assumes all rights and responsibilities. Termination solely because of the sale is legally excluded. For you as the seller, this means you are effectively “selling the tenancy” along with the property. This legal security for the tenant forms the starting point for all further strategic considerations. Transparent communication about this situation is essential for a smooth private property sale. Understanding this legal situation is the first step to managing the process professionally.
Value Analysis: How the Tenancy Affects the Sale Price
An existing rental agreement almost always leads to a price reduction. Experts estimate this depreciation to be up to 30 percent compared to a vacant property. The reason lies in the limited target group of buyers. Most interested parties are looking for a house for self-use and thus drop out. Remaining are investors seeking immediate returns through rental income. If the current rent is below market level, it reduces the investor's return expectations and further lowers the potential purchase price. A professional property value assessment for house sales is therefore crucial. It must realistically represent not only the intrinsic value but also the income value based on the rental contract. Only in this way can you find a market-appropriate price.
Two primary sales strategies for rented properties
Basically, you have two realistic options if you want to sell your rented house. Each targets a different buyer group and requires an adapted approach. The right choice depends on your situation and the condition of the property.
Here are the two main paths:
Sell to the current tenant: This is often the quickest and most straightforward way. The tenant already knows the property, and you save yourself a laborious marketing process. Even though there is usually no legal right of first refusal for a single-family house, a fair offer to the tenant is a worthwhile option to consider.
Sell to an investor: This target group specifically looks for investment properties. For them, having an existing, reliable tenant is an advantage, as it guarantees immediate income. Here, the sale price is primarily determined by the achievable return. Comprehensive documentation of rental income and expenses is essential for this buyer group.
The decision for a strategy influences the entire marketing and the required sales documents.
The Royal Path? The Lease Cancellation Agreement as an Alternative
An unoccupied property can achieve up to a 30% higher sale price. Therefore, it might be economically sensible to seek an agreement with the tenant. A rental termination agreement is a voluntary arrangement that ends the tenancy at a specified time. In return for moving out, compensation, also known as a move-out bonus, is often paid. The amount of this bonus is a matter of negotiation and can be based, for example, on moving costs and the higher deposit for a new apartment. This approach can avoid conflicts and significantly accelerate the sales process. It creates clear conditions and opens the door to the significantly larger group of owner-occupier buyers. Before taking this step, you should carefully weigh the potential costs and benefits. A neutral assessment by Auctoa can help you make this decision based on data.
The last option: Termination due to own use
Terminating a tenancy due to personal use is an option for the buyer to end the rental agreement, but it is subject to strict regulations. The new owner can only terminate if they or close family members can prove they intend to move into the property themselves. Additionally, legal embargo periods of three or more years often apply after the purchase before such a termination can even be issued. The notice periods themselves depend on the duration of the tenancy:
Up to 5 years tenancy: 3 months notice period
5 to 8 years tenancy: 6 months notice period
More than 8 years tenancy: 9 months notice period
A hardship case like the tenant's advanced age or illness can render the termination invalid. This option involves significant uncertainties and should be realistically assessed when minimising risks during the sales process.
Tax Considerations: Keep the Speculation Period in Mind
When selling a property, a significant tax burden can arise. The decisive factor is the so-called speculation period. If you sell your rented house within ten years of purchase, you must tax the profit made at your personal income tax rate. The period begins on the date of the notarisation of the purchase contract. After the ten-year period has elapsed, the sales profit is completely tax-free. There is an exception to this rule: If you have used the property exclusively for residential purposes both in the year of sale and in the two preceding years, the tax is also waived. A thorough examination of the deadlines is essential to avoid an unexpected tax repayment of several thousand euros.
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Selling a rented house is not a standard business but a strategic task. Legal tenant protection and the price-dampening effect of the tenancy require a well-thought-out approach. Without the right strategy, a price reduction of up to 30% is likely. The key to success lies in an objective, data-driven assessment that considers both the asset value and the income situation. Whether you sell to the tenant, an investor, or seek a contract termination – every decision should be based on solid data. Use tools like the Auctoa ImmoGPT to evaluate your options and develop an informed strategy for your sale. Good preparation is the best way to secure maximum proceeds.
Additional useful links
Gesetze im Internet provides access to § 535 of the German Civil Code (BGB), which describes the essential contents and main obligations of a rental agreement in detail.
Federal Statistical Office (Destatis) offers comprehensive statistics and data on housing in Germany on its website.
Deutsche Bundesbank presents its indicator system for the residential property market, delivering key figures on market development.
Deutsche Bundesbank provides an article that analyses the significant decline in residential property prices and increased pressure on rents in 2023.
Federal Court of Justice provides a PDF document with a Federal Court of Justice (BGH) judgement that illuminates relevant legal aspects.
DIW Berlin offers a weekly report that includes an analysis of the real estate market in crisis mode, focusing on falling purchase prices and rising rents.
Gesetze im Internet leads to the Real Estate Valuation Ordinance (ImmoWertV 2022), which regulates the principles for determining the value of properties.
FAQ
Which documents are particularly important for selling a rented house?
In addition to the usual documents like the land register excerpt and energy certificate, the current rental agreement, an overview of the rents paid over the last three years, as well as the most recent service charge statement, are crucial. These documents are essential for investors to calculate returns.
How do I arrange viewings without disturbing the tenant?
Arrange appointments early and group potential buyers to keep the strain low. Viewings typically take place on weekdays between 10 am and 1 pm and 4 pm and 6 pm. Announcing them at least 24-48 hours in advance is mandatory. Transparency and cooperation are key here.
What is a relocation allowance and how much should it be?
The lease termination fee is a freely negotiable compensation that you pay to the tenant for agreeing to a termination of lease agreement. Its amount is not legally regulated and is often based on the costs incurred by the tenant due to moving (e.g., agency fees, moving expenses, higher rent).
Can the new owner raise the rent immediately?
No, the new owner is bound by the existing lease. They can only increase the rent within the legal framework, for example, up to the local comparative rent while observing the cap or after a renovation. An immediate, arbitrary increase is not possible.
What happens to the deposit paid by the tenant?
The deposit, along with all rights and obligations, is transferred to the buyer. As the seller, you must pass the deposit on to the buyer. Upon the tenant's departure, the buyer is then responsible for the correct settlement and repayment.
Is it worth selling to the tenant?
Yes, this can be very advantageous. You save costs and the effort involved in marketing, viewings, and potential legal disputes. Often, a quick and straightforward sale at a fair price is the best solution for both parties.
