DSC Legal moves into new offices in the BEHREN PALAIS
Our law firm has moved into new business premises (a few metres away from its previous location) and has been welcoming its clients and business partners to the
BEHREN PALAIS
Behrenstraße 36 in 10117 Berlin
(adjacent to the Rocco Forte Hotel de Rome)
With the move to the listed building complex, which Dresdner Bank had built at the end of the 19th century in the style of the Roman High Renaissance as its business headquarters and in which the Hamburg private bank M.M.Warburg & CO now operates a branch, our clients and business partners now have modern meeting rooms with a view of Bebelplatz. Notarisations and meetings can take place here in a quiet atmosphere, without any disturbing background noise from outside.
Our new offices are easily accessible by public transport (the underground stations "Unter den Linden", "Museumsinsel" and "Hausvogteiplatz" as well as the bus stops "Staatsoper", "Französische Straße" and "Werderscher Markt" are in the immediate vicinity).
If you are travelling by car, parking spaces are available in the public underground car park directly on Bebelplatz (Q-Park Unter den Linden / Staatsoper). A taxi rank is located directly in front of the building.
We look forward to welcoming you personally to our new office!
Smart and to the point.
DSC Legal specialises in legal advice and notarial support for M&A and real estate transactions, construction and architectural law, banking and financing law, law relating to start-ups and venture capital as well as IP / IT law.
Advising on issues relating to property law is one of the core areas of our legal and notarial practice.
The information in this newsletter cannot and should not replace in-depth legal advice based on a comprehensive examination of each individual case. Our experts will be happy to advise you on your legal options and represent you with outstanding expertise and extensive experience in the extrajudicial and judicial enforcement of your claims.
Changes to the law governing civil law partnerships (BGB-Gesellschaft) from January 1, 2024, due to the German Partnership Law Modernization Act (MoPeG)
On January 1, 2024, the German Partnership Law Modernization Act (Personengesellschaftsrechtsmodernisierungsgesetz - MoPeG) will largely come into force. The new legal regulations not only affect the formation of new civil law partnerships (Gesellschaften bürgerlichen Rechts - GbR), but may also trigger a need for action for partners in existing partnerships, especially those with real estate.
The main new statutory regulations are summarised below and their effects, particularly on civil law partnerships with real estate, are outlined. Finally, possible alternatives to the civil law partnership will be presented.
- Company register for civil law partnerships / de facto registration requirement
From January 1, 2024, a new register for German civil law partnerships will be created, which will be kept by the local courts, which are also responsible for the commercial registers, etc. Upon entry in the company register, the civil law partnerships is obliged to use the terms "eingetragene Gesellschaft bürgerlichen Rechts" (registered civil law partnership) or "eGbR" as a suffix to its name. The registration has the effect that the protection of good faith under Sec. 15 of the German Commercial Code (Handelsgesetzbuch – HGB) applies accordingly to the registered civil law partnership, in particular with regard to the information to be entered on the partnership, the partners and their power of representation. This makes it easier for the registered civil law partnership to participate in business transactions.
In principle, the entry of existing or new civil law partnership in the company register is voluntary. However, according to the new version of Sec. 47 para. 2 German Land Register Ordinance (Grundbuchordnung – GBO), a right shall only be entered in the land register for a civil law partnership if the partnership is entered in the company register. Changes in the land register - whether changes in the partner structure or in the right recorded in the land register - also require the prior entry of the civil law partnership in the company register and the pre-entry of the registered civil law partnership in the land register. This will result in a de facto registration requirement for civil law partnerships with real estate in the future. The same applies to civil law partnerships that are or are to be registered as shareholders in the commercial or company register, in the shareholder list of a limited liability company (GmbH) or in the stock register.
In order to be entered in the company register, an application signed by all partners in publicly certified form must be submitted to the registration court in whose district the partnership has its registered office. Civil law partnerships entered in the company register can choose their contractual domicile differently from the actual administrative domicile, which gives them greater local freedom of movement than non-registered companies. The registration must contain the necessary information about the partnership (name, registered office, address) and about each partner (name, date of birth and place of residence or business name, legal form, registered office and, if applicable, register and registration number), about the partners’ power of representation and the assurance that the partnership is not already registered in the commercial or partnership register. Changes must be recorded in the register.
As a public register, the company register can be inspected by anyone free of charge. Publicity in the register creates transparency regarding the existence and identity of a civil law partnership and its partners.
- Expanded opportunity for the registered civil law partnership to participate in conversions according to the German Conversion Act
Until now, a civil law partnership could only participate in conversions as the target legal entity of a change of legal form within the meaning of the German Conversion Act (Umwandlungsgesetz). In contrast, registered civil law partnership will in the future have the opportunity to be the permissible source and target legal entity for mergers, divisions and changes of legal form within the meaning of the German Conversion Act.
- Check the need for adjustments to existing partnership agreements!
When the German Partnership Law Modernization Act (MoPeG) comes into force on January 1, 2024, some regulations of the German Civil Code (BGB) will also change, which may require selective adjustments to existing partnership agreements:
For example, according to the previous legal regulations, the partners are entitled to voting power, share of the result and liquidation proceeds on a per capita basis, i.e. in equal shares, unless otherwise agreed in the partnership agreement. In the future, the legal rule will be that these partners’ rights are primarily based on the agreed shareholdings (Sec. 709 para. 3 sent. 1 German Civil Code future version).
Furthermore, until now death, termination and insolvency of a partner lead to the dissolution of the partnership by law. If the partners did not want the partnership to be dissolved, but rather to continue the partnership with the remaining partners, an express provision in the partnership agreement was necessary. According to Sec. 723 para. 1 German Civil Code future version, from January 1, 2024, the legal rule is that the partner in question shall leave the partnership and therefore the partnership continues to exist with the remaining partners.
If an adjustment to the partnership agreement is necessary as a result of the legal changes, the partners would have to take action accordingly. Partners who do not want the new regulations to apply to their partnership agreement can request the application of the previous rules in writing from the partnership by December 31, 2024, before a reason leading to the dissolution of the partnership or the departure of a partner arises within this period (Art. 229, Sec. 61 German Introductory Act to the Civil Code - EGBGB). The request can be rejected by a partners’ resolution.
- Entry in the company register leads to an obligation to report to the transparency register
According to Sec. 20 para. 1 sent. 1 of the German Money Laundering Act (Geldwäschegesetz - GwG), the registration of a civil law partnership in the company register leads to the obligation of the partnership to obtain, store and keep up to date information on the beneficial owners and to immediately submit the information to the registering authority to enter them in the transparency register. According to Sec. 20 para. 1 sent. 2 of the German Money Laundering Act, this obligation should also apply if the registered civil law partnership has its administrative seat abroad, i.e. in particular if it holds ownership of a property located in Germany or undertakes to acquire such property, etc.
A real estate civil law partnership operated for the purpose of acquiring and renting out residential or commercial space can initially avoid this obligation of transparency and thus keep its circle of partners confidential by not exercising the registration option of Sec. 707 para. 1 German Civil Code future version. However, due to the de facto registration requirement described above in the event of impending changes in the number of partners or in the partnership’s rights recorded in the land register, transparency is ultimately ensured about the respective beneficial owners in the transparency register.
- Will the leasing of real estate only be possible in the future through a registered civil law partnership?
As in the past, a civil law partnership as such can only conclude contracts, including rental agreements for property, if it can acquire rights and enter into liabilities itself. This is the case with the civil law partnership with legal capacity within the meaning of Sec. 705 para. 2 var. 1 German Civil Code new version, whereas the internal partnership (Innengesellschaft) without legal capacity cannot be a party to a rental agreement.
If a partnership with legal capacity is newly founded for the purpose of acquiring, holding and leasing real estate after January 1, 2024, it must first be entered in the company register in accordance with the de facto registration requirement described above due to the new regulation in Sec. 47 para. 2 German Land Register Ordinance (GBO), before it can then acquire ownership of a property in the land register (and then rent it out).
In the case of existing civil law partnerships with real estate, regardless of whether it was already rented out before January 1, 2024 or is only to be rented out afterwards, there is no obligation to enter it in the company register simply because of the (intended) rental. From Sec. 12 para. 2 no. 1 German Money Laundering Act new version, a de facto registration requirement is occasionally justified with the argument that in order to collect the rent it is essential for the partnership to open a current account with a credit institution, but that a credit institution must first collect and check the legally required information about the civil law partnership with legal capacity on the basis of an extract from the company register. However, the existing civil law partnership may already have a corresponding account, so further verification is not readily necessary. Furthermore, the verification of the relevant information is also permitted in accordance with Sec. 12 para. 2 no. 2 German Money Laundering Act on the basis of founding documents or equivalent evidentiary documents. However, if changes in the number of partners occur after January 1, 2024 or if changes affect the rights of the civil law partnership in the land register, the pre-entry requirement in the company register as described above remains.
It is therefore advisable to register a civil law partnership with real estate in the company register in order to keep the company capable of acting.
- Risks when renting out living space, if the possibility of claiming personal use is to be preserved, and in the case of temporary rental contracts for living space
Sec. 573 para. 1 sent. 1 German Civil Code limits the landlord's right to properly terminate a residential tenancy to the existence of a legitimate interest. A legitimate interest exists in particular if the landlord requires the rooms as accommodation for himself, his family members or members of his household (so-called personal use).
Until now, the highest court ruling (BGHZ 213, 136) have recognised the right of partners in a civil law partnership to claim personal use, even though a partnership by its nature cannot "live" itself and also has no "family or household members". However, some in the literature on tenancy law doubt that the previous case law on termination for personal use can be upheld once the German Partnership Law Modernization Act (MoPeG) comes into force since the legal capacity of the civil law partnership and the independence of the partnership's assets vis-à-vis the partners are now legally established and thus the basis for the corresponding application of Sec. 573 para. 1 sent. 1 German Civil Code to the partnership with legal capacity no longer applies in the future. This means that there is a risk that, from January 1, 2024, a termination for personal use of a partner of a civil law partnership could be ruled out by a court on these grounds.
The reasons for the previous authorisation of a termination for personal use by the partners of a civil law partnership apply accordingly to the conclusion of temporary rental agreements within the meaning of Sec. 575 para. 1 sent. 1 no. 1 German Civil Code. Should it therefore be established by a court in future, in line with the above-mentioned opinion, that a termination for personal use by partners of a civil law partnership with legal capacity is excluded under the new law, the conclusion of a temporary rental agreement within the meaning of Sec. 575 para. 1 sent. 1 no. 1 German Civil Code by a civil law partnership should also be ruled out. It remains to be seen whether even existing temporary rental agreements could then be "overturned" with the result that they are deemed to have been concluded for an indefinite period in accordance with Sec. 575 para. 1 sent. 2 German Civil Code.
- Possible alternatives to the registered civil law partnership for partnerships with real estate
As pleasing as the legal certainty in legal transactions with civil law partnerships that the German Partnership Law Modernization Act (MoPeG) aims to achieve is, there may well be cases in which the parties involved shy away from the bureaucratic effort associated with the de facto registration obligation and the disclosure of their personal data in a company register that can be inspected by anyone, which may lead to conclusions about this existing real estate assets. This applies in particular to married couples or non-married partners who have acquired real estate in the form of a civil law partnership.
For these persons, a change to a fractional ownership (Bruchteilsgemeinschaft) may be an alternative to the registered civil law partnership (eGbR). This would require the existing civil law partnership to be dissolved. This can be done, for example, by a resolution of all partners to dissolve the partnership. The partnership’s assets would then have to be divided among the partners. The existing real estate can be transferred to the partners in proportion to their economic interest in fractional shares in the course of the division of assets, with the result that they would be entered in the land register as co-owners. Compared to the civil law partnership, co-ownership has the potential disadvantage that each co-owner can freely dispose of their co-ownership share at any time. However, the co-owners can enter into legally binding agreements on the management and use of the co-ownership or also exclude the right to demand the cancellation of the community for good or for a limited period of time. Such a co-ownership agreement also applies to the special successor of a co-owner if it is entered in the land register in accordance with Sec. 1010 German Civil Code.
Particularly in the case of partnerships with only two partners, such as spouses' civil law partnerships, it is also possible to transfer the property to one of the two partners by one partner leaving the partnership. As part of a withdrawal agreement, for example, the partners can stipulate that the partnership will cease to exist without liquidation and that the share of assets of the departing partner will accrue to the other partner. The latter would have to be entered in the land register as the sole owner by way of a land register correction.
There are no reporting obligations to the company or transparency register for co-owners or sole owners of real estate. Similarly, renting out property by co-owners or sole owners is of course possible without further ado. There can then also be no doubt about the basic authorisation to assert personal use as a landlord or to conclude fixed-term rental agreements if the other legal requirements are met. Whether the one-off higher notary and land registry costs resulting from the change to fractional ownership or sole ownership are justified is something the parties involved must decide for themselves. In any case, the parties involved are advised to seek prior tax advice on the consequences of the change to fractional or sole ownership.
Smart and to the point.
DSC Legal specializes in legal advice and notarial support for M&A and real estate transactions, construction and architectural law, banking and financing law, the law relating to startups and venture capital as well as IP / IT law.
Advice on issues in the area of real estate law is one of the core areas of our legal and notarial practice.
The information in this newsletter cannot and should not replace in-depth legal advice with a comprehensive examination of the respective individual case. Our experts will be happy to advise you on your legal options and represent you with outstanding professional expertise and extensive experience in enforcing your claims out of court and in court.
Double award for Dr Peter Diedrich - Cross of Merit of the Federal Republic of Germany with Ribbon and Bene Merito Medal of the Republic of Poland on 25 October 2023
We are very pleased to announce that the Managing Partner of DSC Legal, attorney at law and notary Dr Peter Diedrich, was awarded the Cross of Merit of the Federal Republic of Germany by Federal President Frank-Walter Steinmeier on 28 June 2023 for his outstanding personal commitment to the common good of our country. This Order of Merit was presented to him on 25 October 2023 by the Senator for Justice and Consumer Protection of the State of Berlin, Dr Felor Badenberg, in a festive ceremony attended by H.E. the Ambassador of the Republic of Poland, Mr Dariusz Pawłoś, in addition to 25 invited guests.
In a subsequent ceremony on the same day, H.E. the Ambassador of the Republic of Poland, Mr Dariusz Pawłoś, presented Dr Diedrich with the highest Polish award, the Bene Merito Medal, for his extraordinary efforts to promote German-Polish international understanding and, in recognition of the presentation of these two high awards to Dr Diedrich, held a ceremony at the Polish Embassy, which was attended by around 60 invited guests, including Senator Dr Badenberg.
Some photos of the ceremonies in the Nordsternsaal of the Berlin Senate Department for Justice and in the Polish Embassy on 25 October 2023:
DSC Legal again advises the Czech EPH Group on the acquisition of a German railway undertaking and rolling stock
The EPH Group of Czech entrepreneur Daniel Kretinsky has acquired all shares in SGL - Schienen Güter Logistik GmbH (SGL) from Knape Gruppe Holding GmbH (KGH) via its subsidiary EP Logistics International a.s.
As part of a related asset deal, another company from the EPH Group acquired all assets of KGH’s rail vehicle leasing sub-business (locomotives, traction units, railway wagons, etc.).
SGL is a licensed rail transport company based in Dachau with around 100 employees.
EPH was advised by DSC Legal throughout the entire transaction.
Smart and to the point.
DSC Legal is a notary's office and law firm at Brandenburg Gate in Berlin.
One of our core competencies is the legal advice and support of German and foreign clients in the acquisition and sale of companies. We regularly advise on domestic and cross-border acquisitions of companies in all economic sectors under German law.
Excellent buying opportunities ahead for equity strong investors on the German residential real estate market
Dr. Peter Diedrich/ Dr. Istvan Szabados
DSC Legal Rechtsanwaltsgesellschaft mbH, Berlin
26 October 2022
Developers and real estate investors had to deal with substantial supply chain problems in the aftermath of the global pandemic that not only delayed the realisation of residential building projects but also led to massively increased costs. The war in the Ukraine and particularly its huge impact on energy prices in Germany have made matters worse. Unsurprisingly, the number of newly constructed buildings as well as the number of building permits have noticeably dropped in recent months.
On the other hand, the financial leeway for potential homeowners is narrowing due to the extraordinarily high inflation: The German consumer price index has reached a level of 10% in October 2022 - a figure unseen in the past 70 years. In addition, the European Central Bank‘s attempt to fight inflation resulted in a steep mortgage rate hike that has made financing substantially more expensive. While a mortgage loan with a fixed interest rate for 10 years cost less than 1% per annum a year ago, the interest rate has now risen above 4% p.a. As residential real estate has become much less affordable in the past months, asking prices are currently stagnating and, in some areas, for the first time for 13 years even slightly declining. Potential buyers seem to turn to the rental market instead.
Unlike in many other countries, the residential rental market in Germany is, compared to the owner occupier market, very sizeable. In general, more than half of the German households are renters, and in Berlin, as one of the top seven German metropolitan areas, even more than 80%. Demand for housing in metropolitan areas continues to exceed the number of available homes by far. Given the increasing backlog of homes to be built and the additional pressure on the German rental market caused by refugees from Ukraine and other countries, a strong rise in the apartment rents can currently be observed. In Berlin, for example, the rents for newly built apartments have increased by approx. 10% within the last year. Due to exorbitant energy costs, the operating costs for less energy efficient buildings have recently, however, risen to new heights, so that landlords of older buildings may not be able to increase the net cold rent similarly. It can be assumed that, under the current market conditions, the quality of the asset (in terms of location, building standard, energy efficiency and maintenance level) will play an increasingly important role for its valuation and the price that sellers can achieve in case of an exit.
Even though many investors who financed their property in Germany with bank loans agreed in the past years on fixed interest periods of 10 to 20 years (or even longer), those who require a re-financing in the next couple of months and years will have to pay much higher interest rates. Particularly in cases where the purchase was highly leveraged and only little repayments were made, (re-)financing could become stressful. Taking into account the increased operating and maintenance costs, particularly for older, unrefurbished buildings, and the darkened exit prospects due to the higher financing costs, it may well be that purchasing opportunities will emerge on the market that have not been available for a long time in recent years.
Equity strong investors - particularly with a value add strategy such as energy efficient refurbishments - should therefore await buying opportunites on the German residential real estate market. That is especially true for US. dollar-based investors who can currently benefit from their historically strong currency: To the same extent the euro has depreciated against the US. dollar, German real properties have become cheeper on a US. dollar basis. The current strength of the US. dollar therefore presents an excellent window of opportunity for investments in German real estate.
Smart and to the point.
DSC Legal is a notary and law firm located at Pariser Platz in Berlin and a Gold Member of IR Global, Germany, Real Estate (www.dsc-legal.c0m).
Our experienced notaries and lawyers specialise in providing comprehensive legal advice and support to domestic and foreign clients and principals in connection with real estate transactions, project developments, the creation of residential property as well as the establishment, acquisition or sale and operation of companies. Advising on issues relating to real estate law and landlord and tenant law is one of the core areas of our legal practice.
The information in this article cannot and is not intended to replace in-depth legal advice under comprehensive examination of the respective individual case. Our experts will be happy to advise you on your legal options and represent you with outstanding professional competence and extensive experience in enforcing your claims in and out of court.
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