In a ruling on Tuesday (BVerwG, ruling of 09.11.2021 – 4 C 1.20), the Federal Administrative Court denied the exercise of the pre-emptive right by the State of Berlin for a property located within a “social preservation statute” (Soziale Erhaltungssatzung), also known as the milieu protection ordinance (“Millieuschutzsatzung”). The court justified its decision by stating that the property was used in accordance with the objectives of the preservation statute and that the building did not show any defects or deficiencies. The mere danger of a future intention of the buyer to use the property contrary to the specifications of the preservation statute was not sufficient to trigger the pre-emption right. The assumption that the buyer could possibly force the tenants out of the area in the future is therefore not a reason that justifies the exercise of the pre-emption right.
While the lower courts also took into account an expected future use of a purchaser, the BVerwG rejects this. The wording of Clause 26 No. 4 BauGB (Baugesetzbuch –Building Code) clearly refers to the actual circumstances at the time of the last decision of the authorities on the pre-emption right and does not cover future developments, so the BVerwG.
Consequence for property acquisition:
The Federal Administrative Court has rejected the previously common practice of pre-emption rights in Berlin. This strengthens the rights of investors. Nevertheless, in an asset deal the waiver of the pre-emption right should be a prerequisite for maturity, as it cannot be ruled out that a municipality will nevertheless exercise its pre-emption right. In that case, it would have to be clarified in court – possibly in a lengthy legal dispute – whether the exercise of the pre-emption right was lawful or not.
It remains to be seen whether there will be a new legal regulation of the pre-emption right for cases in which displacement of the residential population is threatened.
Social preservation statutes intend to prevent the displacement of the ancestral residential population by modernisation measures, refurbishments, changes in the structure of a dwelling, thereby increasing rents to an extent that the tenants living there cannot bear or by way of conversion of dwellings to commercial use or of rented flats to condominium.
The State of Berlin has often exercised its pre-emption right in favour of its state-owned housing association to counter this danger. This was also the case in the case ruled by the BVerwG.
A real estate company had brought an action against this; the subject of the dispute was a plot of land in Berlin Friedrichshain-Kreuzberg, which is built up with an apartment building from 188 with 20 rented flats and two commercial units.