“Quasi-division ban”: how the permit requirement affects property subdivisions

Permit requirement

For the subdivision of a plot of land with an existing residential building into individual apartments or partial ownership units, notarized certification of a partition declaration (Teilungserklärung) is required. Under the Federal Building Code (Baugesetzbuch), state governments are authorized to designate areas with tight housing markets as such by ordinance. If the property to be subdivided is located in an area where the state legislature has exercised this authority and simultaneously established a permit requirement for subdivisions, the partition declaration can only be recorded in the land register (creation of separate land register sheets for each apartment or partial ownership unit) upon submission of the official permit, unless an exemption from the permit requirement applies (see below).

Entitlement to permit issuance

The last-minute amendments to § 250 BauGB allow very few circumstances under which the subdividing owner has a legal claim to permit approval. In practice, these conditions are rarely met, effectively creating a statutory quasi-division ban. Examining the five circumstances in detail makes it clear that for most intended subdivisions, the requirements are either not met or cannot practically be proven.

Sale to family members of the owner for their own use

A relevant sale (sale or gift) to family members is seldom intended, as close relatives must use the unit themselves. According to prevailing opinion, only one apartment per owner and one apartment per self-using relative is approved.

Sale to at least two-thirds of tenants for their own use

Proving the “intended” sale to two-thirds of tenants is practically difficult. For example, should notarized purchase offers from at least two-thirds of tenants be submitted? Regardless of the potentially wasted costs for notarized offers, tenants are unlikely to provide such formal offers. Verbal or written declarations of intent are insufficient. Even if two-thirds of tenants could be mobilized to purchase, permit issuance will likely fail due to the almost impossible proof of purchase intent.

Registration of a priority notice in the land register

A permit must be granted if a priority notice securing the claim to a co-ownership share and ownership of a future apartment or partial ownership unit was registered in the land register before the respective state ordinance (Conversion Ordinance) came into force. This only applies to “old cases” relevant at the time the ordinance became effective.

Unreasonableness of refraining from subdivision

This circumstance is also rare. It requires weighing the purely economic interests of the subdividing owner against the public interest. Refraining from subdivision must constitute a financial hardship for the owner, measured against their individual capacity, that outweighs the public interest. An example is raising capital for maintenance of the property, which can only be realized through subdivision and subsequent sale of units.

Estate property

The property belongs to an estate, and apartment or partial ownership is to be created in favor of co-heirs or legacy beneficiaries. A permit claim exists only if a co-heir or legacy beneficiary, but not a third party (e.g., the spouse of an heir), is favored. Favoring does not require that the heir/beneficiary personally use the unit. Even after heirs agree on allocation of a unit during estate settlement, a permit must be granted.

It is discussed that instead of transferring an undivided property during the owner’s lifetime (e.g., for gift/inheritance tax reasons), the transfer to heirs through a testamentary disposition could achieve the subdivision. However, considerations include the ordinance’s validity period, tax advantages of lifetime transfers, and potential conflicts in inheritance settlements.

Permit issuance without meeting the statutory conditions

Under the law, a permit may also be granted without meeting any of the specific conditions, but only if the permit is not required to ensure adequate housing supply. Since the issuance of a Conversion Ordinance requires a tight housing market, a permit is only unnecessary in rare exceptional cases.

Exemption from permit requirement

If none of the statutory conditions are present, as is usually the case, subdivision of existing properties is generally not possible. No permit is required, however, for the subdivision of new buildings or existing properties with no more than five units (the number of units can be set differently by the ordinance issuer, between a minimum of three and a maximum of 15). Extensions such as adding floors or building an annex are also generally exempt from the permit requirement.

Outlook

Under the current law, all Conversion Ordinances—regardless of their effective date—expire on December 31, 2025. Discussions and efforts to amend the reformed § 250 BauGB again, thereby enabling the issuance of new Conversion Ordinances effective from January 1, 2026, are ongoing. Experiences with the “rental price brake” show that extensions are realistic.

Such extensions must comply with reasoning and publication obligations at both federal and state levels, which are not always fully observed. In such cases, gaps in timing may arise, during which it may be temporarily possible to subdivide without a permit. The decisive factor is the date the notarized partition declaration is submitted to the land registry.

The future development of the legal framework and potential extensions of Conversion Ordinances will be crucial for whether and how the market for subdividing existing properties becomes active again. Close monitoring of political discussions and legislative changes is therefore essential. Only in this way can owners and investors respond in a timely manner to new regulatory conditions.