June 29, 2023, 3:24 am | Read time: 4 minutes
Many would be delighted to receive a gifted property. But newly minted owners must deal with many issues to ensure the joy lasts.
Receiving a property as a gift is a more affordable way to become an owner compared to buying or building new. And then what? Move in, sell, rent, renovate? All of these are possible: Recipients have the same rights and obligations as their predecessors.
Gifted Property–Now What?
In principle, the new owners can do whatever they want with the property transferred to them. The only limits are laws and possible agreements in the gift contract. In this notarized document, former owners typically reserve lifelong living rights or usufruct, allowing them to stay in their home even if they no longer own it.
Clauses like these restrict the new owners’ actions because they are binding and often combined with a right of reclaim by the givers. If the recipient does not adhere to an agreement, the givers can reverse the gift.
Gift Tax Must Be Paid
Then there are the finances: In many cases, the tax office will demand gift tax from recipients. The amount depends on both the property’s value and the applicable personal exemption.
This, like inheritance tax, depends on the degree of kinship. According to the Federal Chamber of Tax Advisors (BStBK), spouses benefit from a 500,000 euro exemption and children (400,000 euros per parent) fare better than grandchildren (200,000 euros), distant relatives, and friends. The tax is levied on the difference between the respective exemption and the property’s market value.
More on this: Gifting Property–What You Absolutely Need to Consider
Recipients Assume All Obligations
Another financial aspect: For properties with outstanding loans, recipients must repay the debt. “Recipients generally enter into the contracts of the former owners,” says Jan Bittler from the German Association for Inheritance Law and Asset Succession (DVEV). The same applies to insurance contracts related to the property, such as homeowners insurance or specific liability insurance for house and landowners.
For rental agreements, the rule is central. Because anyone who receives a rented property automatically enters into the rental agreement, according to Bittler. “Selling, inheriting, gifting does not break the lease,” is how lawyers describe this principle. Newly minted owners thus slip into the role of landlord.
With the contract, they not only take over the tenants but also the right to collect rent from them every month. They also have the option to move into the transferred but rented property themselves. This usually requires a notice of termination for personal use. Selling with or without tenants is also possible–as long as the gift contract does not prohibit it.
Gifting Property to Children and Saving on Taxes
Why Energy-Efficient Renovations Can Be Complicated in a Homeowners Association
In a Homeowners Association, Freedom Is Restricted
Anyone who owns one or more units in a homeowners association (WEG) through transfer automatically becomes a member and is bound by its rules. These are generally derived from the Condominium Act. Specific details about the rights and duties of owners are then found in the declaration of division and the community rules of the respective WEG.
Most often, this means that condominium owners–unlike homeowners–cannot act as freely within their four walls as they might wish. Even seemingly simple things like installing sun protection on balconies and terraces or placing flower boxes can require the homeowners association’s approval. Similar restrictions may apply to a planned sale of the property.
WEG members are obligated to pay association fees. The monthly payments finance the community’s ongoing expenses and save for potential repairs. Among the rights of owners is the ability to set the amount of the association fee. This is decided by the owners’ meeting. Every owner has the right to participate in the annual event. Gifted owners should promptly contact the property management to obtain all relevant information.
Thermal Protection, Traffic Safety, Renovation
New homeowners, in contrast, do not need anyone’s approval to install an awning. However, they also have obligations that individual condominium owners need not worry about because the WEG handles them.
One such obligation is traffic safety. The property must not pose a danger to others, reminds Stiftung Warentest, citing examples like snow removal, adequate lighting, and secure roof tiles. Homeowners can delegate these tasks to service providers, but they are not released from their own liability.
New owners should check whether their house is subject to mandatory energy renovation and how extensive it will be. This depends particularly on the condition and features of the property.
Additionally, both houses and WEGs often have a backlog of renovations that will eventually need to be addressed, potentially making the gifted property not as affordable as it initially seemed.
with material from dpa