Buying an apartment building or a portfolio of apartments: document due diligence, step by step

Why the paperwork decides the deal

When you buy an apartment building or a package of condominium units in Germany, you are not just buying bricks. You take over a running system of tenancies, resolutions, contracts and obligations — largely in whatever state the seller leaves it. The notary appointment seals that state. Whatever has not been checked by then rarely improves afterwards.

Professional buyers therefore work through the documents in a fixed order: first the legal foundations of the property, then the contractual relationships, then the numbers, and finally the building itself. The logic is simple — potential deal-breakers surface first, before money is spent on surveys, financing commitments and advisers.

One note before we start: this article is general information, not legal or tax advice. For an actual transaction, you will want the notary, usually a lawyer specialising in German tenancy and condominium law, and a tax adviser at the table.

Step 1: the land register — reading sections II and III

Start with a current excerpt from the land register (Grundbuch), ideally no more than a few weeks old. Section I shows whether the seller is actually the registered owner. Section II is where it gets interesting: it lists encumbrances and restrictions such as rights of way, utility easements, rights of residence, usufructs and pre-emption rights. A registered lifelong right of residence, for example, can make a unit unlettable for years — and reduces its value accordingly. Foreclosure or insolvency notices also appear in section II; treat them as a clear warning sign.

Section III lists the land charges and mortgages. Important to know: the registered amount says nothing about the actual remaining debt — a land charge stays on the register in full even after the loan has long been repaid. What matters is that the purchase agreement provides for the release of these charges: the notary will usually structure completion so that you acquire the property free of the seller’s land charges — check that the draft contract expressly provides for their release.

One thing the land register does not show in most German federal states: public building obligations (Baulasten), such as commitments regarding setback areas or parking spaces, which are kept in a separate register at the building authority. If you are buying with development potential in mind, always request that register as well.

Step 2: declaration of division, community rules and the resolution record

If the property has been divided under the German Condominium Act (WEG) — which is almost always the case when you buy a portfolio of apartments — a second layer applies. The declaration of division with its partition plan defines what is individually owned and what is common property; the community rules govern cost allocation, voting rights and exclusive-use rights. Where the cost allocation deviates from the statutory standard, the yield of individual units can shift noticeably — clauses like these are easy to miss.

Also check the declaration of division for a restriction on sale: under Section 12(1) WEG, it may be agreed that selling a unit requires the consent of other unit owners or of a third party — in practice usually the managing agent. Under Section 12(2) WEG, that consent may generally only be refused for good cause — in practice it is above all a timing factor to plan for in the transaction. It concerns you twice: at acquisition, and again years later when you sell.

The underrated source is the resolution record (Beschluss-Sammlung): under Section 24(7) of the German Condominium Act (WEG), every owners’ association must keep a running record containing the wording of the resolutions announced at owners’ meetings and of all written resolutions, as well as the operative parts of court decisions in condominium disputes. While meeting minutes only cover individual years, the resolution record shows the association’s entire decision history. Request both — the minutes of the last three to five owners’ meetings and the complete resolution record — and read them with these questions in mind:

• Which measures have been resolved but not yet carried out? Depending on when payment falls due, their cost may already land on the buyer.
• Have special assessments been resolved — and have they been called in and paid?
• Are there current or past court proceedings, such as challenges to resolutions? A series of challenges points to a divided association.
• Do the same topics come up year after year — damp in the basement, trouble with the heating? Recurring items are usually unsolved problems.
• How large is the maintenance reserve, and is it growing? Building up an adequate reserve is part of proper administration under Section 19(2) no. 4 WEG — a strikingly low reserve in an older building is a warning sign.
• How often has the managing agent changed? Frequent changes in quick succession rarely have good reasons.

Step 3: leases and deposits — what transfers to you automatically

For the tenancies, one principle governs everything: a sale does not break a lease. Under Section 566(1) of the German Civil Code (BGB), the buyer of let residential property steps into the seller’s rights and obligations under the existing tenancy agreements. You take the leases exactly as they are — including below-market rents, old stepped-rent clauses and verbal side agreements you may never have heard of.

The most underrated point: the deposits. Under Section 566a BGB, the buyer also steps into the rights and obligations arising from tenant security deposits. Under German case law, the buyer must generally repay a deposit at the end of the tenancy even if the seller never handed it over. So insist on documentary proof of every deposit account and have the transfer expressly addressed in the purchase agreement.

For long-term leases — above all commercial units on the ground floor — check the form requirement: since 1 January 2025, text form suffices for commercial leases. Under Section 578(1) sentence 2 and Section 578(2) sentence 1 BGB, a commercial lease concluded for longer than one year that does not satisfy text form is deemed concluded for an indefinite period, which makes it terminable with statutory notice; since 1 January 2026 this also applies to legacy leases. The old ‘written-form trap’ has thus been defused, but purely verbal amendments or side agreements remain risky — so still review every amendment for form defects. For residential leases running for more than one year, by contrast, the written-form requirement of Section 550 BGB continues to apply. As a minimum, request the following for each unit:

• The complete lease with every amendment and annex — not just the first page showing the rent.
• A current rent roll with net rent, advance payments, start of tenancy and any stepped or indexed rent clauses per unit.
• Proof of every deposit: amount, form of investment, account statements.
• An overview of rent arrears, ongoing rent reductions and terminated tenancies.
• Correspondence on disputes, rent increases and terminations from recent years.
• Move-in/move-out handover reports, where available.

Step 4: statements, budgets and the energy performance certificate

The service-charge statements of the last three years are the most honest documents in the data room. They show which costs actually arise, which of them can be passed on to tenants — and that the cost of vacancy stays with the owner. For context: under Section 556(3) BGB, advance payments for operating costs must be reconciled annually, and the statement must reach the tenant no later than twelve months after the end of the accounting period; after that deadline, additional claims by the landlord are generally barred. If statements for past years are missing, the purchase agreement should say clearly who will still prepare them — otherwise you may be left holding claims that can no longer be enforced.

For divided properties, add the association’s budgets and annual accounts. Compare the current monthly charge with the actual costs: an underbudgeted plan flatters the yield on paper — the gap catches up with you later as a top-up payment or special assessment.

You do not have to ask for the energy performance certificate as a favour: under Section 80 of the Buildings Energy Act (GEG), the seller must present it to the prospective buyer no later than at the viewing and hand it over after the contract is signed. Its figures belong in your calculation — they influence financing terms and show where energy-related investment is foreseeable. And finally, the building itself: a walk-through with a professional — roof, facade, heating system including its year of installation, risers, electrics, basement — reveals the maintenance backlog that no statement will show. The older the heating and the longer the list of postponed works, the larger the investment you should price into your offer.

Red flags: findings that deserve a second look

None of these findings has to kill the deal — but every one of them demands an explanation before you sign, and every one is an argument in the price negotiation:

• A foreclosure or insolvency notice in section II of the land register.
• Resolved works or special assessments without secured financing — costs the buyer may bear, depending on when they fall due.
• A strikingly low maintenance reserve in a visibly ageing building.
• Deposits for which the seller cannot produce account statements.
• A rent roll that does not match the leases — such as asking rents quoted in the sales brochure that no lease supports.
• New lettings concluded shortly before the sale at conspicuously high rents — they can make the income look better than it is.
• Gaps in the file: a seller who cannot locate minutes, statements or the resolution record rarely has a mere filing problem.

How a good property manager supports the review

Document due diligence is legwork — but above all it is a matter of experience. Someone who reads budgets, statements and meeting minutes every week spots implausible line items, hidden conflicts and dressed-up figures far faster than someone who does it twice a year. There is a strong case for involving your future property manager in the acquisition review — not only after the keys change hands.

KF Properties regularly supports investors during acquisitions: the management team reviews the figures and the resolution history, while the in-house caretaking and refurbishment teams walk the property and put realistic prices on any maintenance backlog — numbers instead of gut feeling. After takeover, everything runs through one place: a dedicated contact person, a 24/7 emergency service and an online portal in which all property documents are cleanly filed from day one.

That pays off twice: at acquisition, because every documented red flag is a price argument — and years later at exit, because a fully documented property makes the next buyer’s due diligence considerably easier.