2019-09-25 | Sanierungsgebiet: How owners pay the price for having property in a Berlin Redevelopment Area
Sanierungsgebiet: how owners pay the price for having property in a Berlin Redevelopment Area. Rather than creating incentives for investment in run-down areas, local authorities actually look to claim back the benefit that redevelopment may bring through enhanced property values.
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Sanierungsgebiet: How owners pay the price for having property in a Berlin Redevelopment Area
In many countries, national and local governments go out of their way to attract investment into run-down areas of their country or region. In the Italian province of Molise for instance, people moving into this under-populated area are → being offered 700,00 euro a month for three years to go there. Others, such as Sambuca, made headlines recently by offering abandoned properties for the → symbolic price of 1 euro.
In Berlin – and other German cities with designated → Sanierungsgebiet (Redevelopment) Areas, it is different. Rather than creating incentives for investment in these areas or supporting those who have taken the risk of buying property there, the local authorities actually look to claim back the benefit that redevelopment may bring through enhanced property values.
What makes a Redevelopment area?
Currently in Berlin there are → ten designated redevelopment areas scattered across the city, from → Wilhelmstadt in the west to → Marzahner Promenade in the east. According to the Berlin Senates own website, these areas have been identified because they have “…neglected parks and squares as well as roads, pedestrian and cycle paths in poor condition. The buildings and social facilities are partly run down, the business structure is getting worse and some shops are empty.”
All these are typical markers of what in the UK are also referred to as “Regeneration Areas”. Sadly, where such regeneration actually works, some commentators and sections of the → public complain the area has been “Gentrified”, which has now become a negative term instead of recognising that the physical environment and condition of the area has actually improved and is attracting new people and businesses.
Owning a property in a Redevelopment Area
For property owners, the real issues resulting from being in a Sanierungsgebiet area come up when you are looking to sell. The local authority has the right to claim the difference between what a property is valued at now and would have been valued at without the redevelopment works taking place. This, of course, is a matter of judgement and other factors such as improvements made by the owner to their property also has to be taken into account.
We recently had a case of a small investor selling a single apartment located within the → Turmstrasse redevelopment area in Moabit. The seller had accepted and offer from a buyer wanting to purchase the apartment for their own use. The sale was stopped by the local authority, which claimed that the price was too high and that a proportion of the sale price should be paid to them to reflect the added value of the redevelopment works.
We then had to help organise legal advice and independent valuation that showed that the price was actually similar to other properties being sold outside of the redevelopment area and the rapid price rise was due to the high demand and shortage of supply of vacant apartments in the city. Although delayed, the sale was then able to be completed.
Selling your property in a Redevelopment Area
So if you own a property in a redevelopment area and are thinking of selling, what should you do?
If the redevelopment work has not been completed, you may be able to agree an advance “balancing payment” to the local authority – such as the → city of Leipzig offered for owners in its 15 designated areas, offering a 20% discount for early payment. If the scheme has been completed, then you need to get professional advice and → valuations so that you can work out if a “balancing payment” will be required and ideally agree this with the local authority as soon as you have an agreed offer for the property. As a buyer, you need to ensure that any liability resulting from the property being located in a redevelopment area has been settled before you complete your purchase.
Contact us now for independent advice
Black Label Properties are able to help you negotiate your way through these issues and recommend sources of → independent advice you may need. With 30 years experience in the property market in this complex and ever-changing city, our → international team can help with all aspects of buying or selling property here. If you want to ask us any question you may have, please → get in touch now.