Enacted Legislation in 2025: Strengthened safeguards for independent construction professionals
In 2025, significant changes are coming to the German construction law, particularly affecting private homeowners. The focus is on altering home ownership structures, especially with regards to leasehold and commonhold reforms.
Starting from 2025, the sale of new flats will be banned using the traditional leasehold structure. Instead, new flats must be sold under a commonhold model, which implies shared ownership and management of residential buildings, rather than control by a single freeholder. This change aims to facilitate conversions from existing leasehold arrangements to commonhold, transferring control from freeholders to a shared ownership model among residents, sharing responsibility for building maintenance and management.
These reforms are expected to fundamentally alter the residential real estate landscape, impacting private homeowners by changing ownership rights, management responsibilities, and potentially the legal complexity and costs related to residential property ownership.
In addition to these changes, the new construction law offers several benefits to private homeowners. As of January 1, 2018, a new construction law, known as the consumer construction contract, is included in the German Civil Code. This law aims to protect private homeowners who are having their single-family home built by a general contractor or prefabricated house provider.
Under this new law, homeowners have better protection with the new payment regulations. The construction company must complete the work to the homeowner's satisfaction before receiving the final payment. The law also requires construction companies to agree on a binding completion date, ensuring that the project stays on schedule.
Moreover, the new construction law provides a cancellation right for consumer building contracts, which can be exercised within 14 days without reasons or fees. This gives homeowners peace of mind, knowing they can back out of the contract if they change their minds.
The law also mandates a complete and informative construction description in text form before signing the consumer construction contract. This detailed description must include at least the description of the building or renovation, type and scope of services offered, building data, construction description, and description of all essential trades. The construction description must also include information on interior design, building services with specific quality features, and detailed information on installed sanitary objects, fittings, electrical installations, and information technology, as well as outdoor facilities.
The new construction law also limits the amount of permitted installments to 90% of the agreed total remuneration, protecting homeowners from unexpected costs. In case of ambiguities in the construction description, these will be at the expense of the construction company in the future.
It is important to note that the new construction law does not apply to smaller renovations or additions, such as a garage or conservatory. It also does not apply to contracts concluded with a property developer or contracts awarded by the homeowner to subcontractors independently.
In summary, the most significant legal change for private homeowners under new German construction law is the shift from leasehold to commonhold ownership for flats, affecting ownership and management structures of residential buildings. The new law also offers several benefits to homeowners, including better protection during the construction process, a cancellation right, and a detailed construction description before signing the contract.
The experts predict that the shift from leasehold to commonhold ownership for flats, a significant change coming in 2025, will have a considerable impact on the finance and investing landscape of the real-estate business, particularly for private homeowners. Under the new construction law, which took effect starting from January 1, 2018, various benefits have been introduced to protect private homeowners, such as the new payment regulations, binding completion dates, a cancellation right, and a detailed construction description, all aimed at mitigating the legal complexity and costs related to residential property ownership.
