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Trends and prospects
What are the current trends in and future prospects for the real estate market (both commercial and residential) in your jurisdiction?
Due to Germany’s stable economic outlook, the interest of domestic and international investors in German commercial real estate is unbridled. As the supply of properties for sale is constantly diminishing, a significant rise in value development is expected.
Regarding the residential real estate market, there is an ongoing trend towards a tenants’ market in which the demand for housing outstrips the supply. On the other hand, the housing shortage in metropolitan areas has been further aggravated as a result of urbanisation and the increased influx of refugees.
Rights and registration
What types of holding right over real estate are acknowledged by law in your jurisdiction?
German civil law distinguishes between sole ownership and co-ownership. A sole owner may – within the limits of the law – dispose of the property at its discretion, excluding others from exerting any influence. In the case of co-ownership, a distinction is made between co-ownership by fractional shares and a community of joint owners. Co-ownership by fractional shares means that a property is owned by several persons (a community of part owners) in terms of a certain share ratio (fraction). Each part owner may independently dispose of its own share of the common title. In contrast, in a community of joint owners, although the property is owned by several persons, no share ratio applies. In other words, a community of joint owners (eg, a community of heirs or a partnership under the Civil Code) may dispose of the common property only jointly.
Are rights to land and buildings on the land legally separable?
In principle, ownership of a plot and any buildings erected on it cannot be split. However, one peculiarity is a community of condominium owners, where the purchaser acquires ownership of one flat in a property and also joint ownership of a portion of the plot. Moreover, there is the possibility of creating a ‘heritable building right’ – that is, a right in rem entitling its holder to erect a building on a plot of land owned by a third party, and is typically created for 99 years. Above all, cities, municipalities and churches offer such plots for construction.
Which parties may hold and exercise rights over real estate? Are there restrictions on foreign ownership of property?
Both natural and legal persons may acquire plots of land in Germany, regardless of the person‘s origin or nationality. However, just as for a domestic purchaser, the formal prerequisites (eg, notarisation of the purchase contract) must be met. This applies to purchasers of all nationalities.
How are rights, encumbrances and other interests over real estate prioritised?
Real collaterals (eg, land charges) are created for a property. Such rights must be registered in the relevant Land Register and are effective against all parties. The rights and encumbrances in regard to a property derive from Sections 2 and 3 of the Land Register. The registered encumbrances, easements and liens on property are to be classified according to their order of precedence. The order of entries in a given section is decisive for their ranking. For entries in two different sections, the respective dates of entry in the Land Register are decisive for their ranking. Rights registered on the same day are of equal rank.
Must real estate rights, interests and transactions be registered in your jurisdiction? What are the legal effects of registration?
Any changes to the rights in a property must be registered in the Land Register. According to registry law, the local courts in their capacity as land registries are responsible for any property within their circuit. On the purchase of a property, ownership will not be transferred to the acquirer until the latter has been registered in the Land Register. The Land Register enjoys public faith. It is thus theoretically possible that ownership can be acquired from an unentitled person.
What are the procedural and documentary requirements for entry into the national real estate register(s)? Can registration be completed electronically?
Typical prerequisites for registration include:
- an application;
- an entry permit;
- the pre-registration of the person whose right is affected by the entry; and
- compliance with certain formal requirements.
Entries into the Land Register cannot be made electronically, but may be inspected electronically through a notary or the land registry.
What information is recorded in the national real estate register(s) and to what extent is such information publicly available?
The Land Register is a public register divided into three sections:
- Section 1 – ownership rights;
- Section 2 – encumbrances and easements on the property; and
- Section 3 – liens on property.
Inspection is granted only to persons with a legitimate interest therein. As well as the owner, a potential buyer may have a legitimate interest, which is strictly examined by the land registries. Therefore, an intention to buy must be substantiated by way of a letter of intent or an attestation by a real estate agent.
Is there a state guarantee of title?
There is no state guarantee of title, but the Land Register enjoys public faith in the correctness of its entries. Pursuant to Section 892 of the Civil Code, the acquirer of a property may rely on the fact that the seller is the actual owner of the property if the seller is registered as such in the Land Register. Thus, acquisition of property is possible even if the seller is not entitled to perform the transaction. The correctness and completeness of the Land Register are notionally construed in favour of the good-faith purchaser.
Sale and purchase
How are real estate brokers regulated in your jurisdiction (eg, through caps on commission or disclosure obligations)?
Real estate brokers are regulated by the Real Estate Agent and Commercial Construction Industry Ordinance and Sections 652-656 of the Civil Code, which deal with the design of brokerage contracts. The real estate agent may either provide mere evidence of opportunity or act as an intermediary. In the former case, the agent will merely pass the name of a possible contracting partner to the client, while in the latter case the agent will conduct negotiations between the parties. Another restriction exists in the form of the so-called ‘orderer’s principle’, according to which the person commissioning the agent must pay the agent’s fees. Previously, such costs typically had to be borne by the tenant, although the agent was commissioned by and acting on behalf of the landlord. Since the introduction of the orderer’s principle, such practice is no longer permissible.
What due diligence should be conducted before conclusion of a real estate sale contract?
Depending on each transaction, in general legal, tax, technical and financial due diligence should be conducted.
Are any preliminary agreements typically entered into before conclusion of a sale contract?
Usually the parties enter into a non-disclosure agreement and a letter of intent or head of terms before entering into a sale contract.
Must sale contracts be concluded in writing? If so, must they be notarised?
Contracts for the sale and purchase of property must be in writing and must be notarised. The failure to notarise may be resolved by subsequent entry of the change of title into the Land Register.
Can sale contracts be concluded electronically?
A sale contract cannot be concluded in purely electronic form. As a sale contract must be notarised, the parties or their representatives must make their statements before a notary in person and at the same time.
What provisions are usually included in a sale contract?
A sale contract usually contains provisions regarding:
- the parties;
- the purchase object;
- the purchase price;
- the closing mechanism;
- representations and warranties; and
- mac clauses.
Obligations and liabilities
What are the seller’s disclosure obligations and other liabilities, and what are the consequences of breach?
German civil law imposes no duties on the seller of a property beyond those incumbent on the seller in the context of a standard sale and purchase contract. The seller must inform the purchaser about the quality of the property. If the seller is aware of a defect and does not disclose it to the acquirer, the seller is subject to indemnification and the purchaser may subsequently rescind the contract. Moreover, the seller must inform the purchaser of any legal disputes, existing tenancy agreements or easements.
What contractual warranties are usually given by the seller?
The guarantees given by the seller vary from case to case. However, in the case of existing buildings, sellers will typically exclude any defect-related rights. An exception applies to any contents that cannot be verified by the acquirer (eg, payments of charges and taxes by the seller).
Are there any other obligations on the buyer, aside from paying the purchase price?
The buyer is subject to an obligation of both payment and acceptance. Moreover, the buyer is obliged to assume the following costs of the transaction:
- the notary’s fees (1.5 % to 2% of the purchase price);
- the costs of registration of land charges for financing purposes; and
- if the party commissioned the agent, the agent’s fees.
What taxes are payable on the sale and purchase of real estate? Are any exemptions available?
Real estate transfer tax
Asset deals are subject to real estate transfer tax (RETT), which is levied by the competent tax authority where the real estate is located. RETT varies between 3.5% and 6.5% depending on the respective federal state. The tax will generally be applied on the purchase price. Although the purchaser and the seller are both legally liable to pay RETT, in practice the purchaser bears the full cost of RETT.
RETT may also apply in a share deal if at least 95% of the shares in a real estate company or the interest in a real estate partnership are (legally or economically) transferred. In case of a share deal, the tax base for RETT is the value of the underlying real estate. By using certain acquisition structures (subject to careful tax planning), RETT may be mitigated in case of a share deal.
Capital gains taxation Tax on sale of German property by German or non-German individuals Capital gains from the sale of German real estate are subject to German income tax only if:
- the property qualifies as a business asset (eg, in the case of short-term trading); or
- the property was held for 10 years or less.
Where the capital gains are taxable, individuals are subject to a progressive income tax rate of up to 45% plus a solidarity surcharge, resulting in an aggregate maximum tax rate of 47.475%.
Further, capital gains from the disposal of real estate may be subject to German trade tax if such gains are attributable to a permanent establishment. However, individuals may make use of certain exemptions or tax reliefs resulting in an offset of trade tax, if any.
Tax on sale of German property by companies Profits resulting from a sale of German real estate by companies are subject to German corporate income tax at a rate of 15% plus a solidarity surcharge (ie, the aggregate tax burden is 15.825%).
In addition, German trade tax (from 14% to 17.5%, depending on the location of the real estate) may become due if the property qualifies as a business asset and is allocated to a German permanent establishment. Consequently, careful implementation of tax structuring is required in order to mitigate trade tax risks, such as using an inbound investment structure (a foreign property-owning company holding German real estate) in order to avoid a permanent establishment in Germany.
Value added tax The sale of real estate by way of an asset deal is either subject to value added tax (VAT) but tax exempt or exempt from VAT as a transfer of a business as a going concern. In the case of the former, the seller may opt to apply German VAT if the purchaser qualifies as an entrepreneur for VAT purposes. Entrepreneurs usually choose VAT if they have reclaimed input VAT regarding the real estate which would otherwise have to be refunded. In case of an option for VAT, the purchaser would be liable to pay VAT to German authorities on the purchase price and is entitled to deduct input VAT.
Transfer of title
When does title in the property transfer?
The transfer of title occurs on entry of the acquirer into the Land Register. However, transfer of possession occurs on payment of the purchase price.
What is the typical duration of a sale transaction?
A sale transaction typically has the following timeframe:
- six to eight weeks of due diligence (which often involves exclusivity);
- signing of the sale contract; and
- six to 10 weeks between signing and closure of the sale transaction, depending on conditions precedent and payment conditions.
Must a lease agreement be concluded in writing?
Lease agreements need not be concluded in writing. If a lease with a term of more than one year is not concluded in writing, it applies for an indefinite period of time. In this case, the lease may be terminated either for convenience or for an important cause.
Are there any regulations setting out mandatory or prohibited provisions in lease agreements?
Tenancy law is governed by Sections 535 to 580a of the Civil Code. Deviations from those provisions are permissible, but must usually be compatible with the regulations governing general terms and conditions of business (Sections 305ff of the Civil Code). If a contractual clause deviates from a statutory provision with the result that one of the parties is unreasonably disadvantaged, that contractual clause is invalid and must be replaced with the relevant statutory provision.
What provisions are typically included in lease agreements?
The provisions agreed by the parties vary from case to case. Mandatory provisions include the exact specification of the parties, the rental property, the rental price and the term of the tenancy.
What are the standard forms of lease agreement used in your jurisdiction?
Lease agreements are typically concluded in writing. This type of conclusion offers all parties a higher degree of security, as any disagreements or legal problems can be avoided by means of a professionally drafted contract text. When letting out or renting housing, private persons typically use standard-form contracts (eg, those provided by tenants’ associations).
Length of term
Are there any regulations on minimum and maximum terms of leases?
German civil law sets no minimum terms. However, Section 544 of the Civil Code deals with the maximum term of a tenancy. For example, a lease agreement concluded for more than 30 years may be terminated for cause by either party on expiry of the term. In other words, in such case the lease is not terminated automatically, but the parties are given the opportunity to rescind the contract.
Are long-term tenants accorded any special rights as to extension or renewal of leases?
No, the extension or renewal of rights must be agreed between the parties. There is no statutory extension or renewal
What regulations (if any) govern rent increases?
Rent review provisions are included in Section 557ff of the Civil Code. Permissible forms of rent increase include the agreement of a stepped or indexed rent or an increase up to the reference rent customary in the area. However, these provisions are mandatory only under residential tenancy law. Under commercial tenancy law, rent review is typically subject to contractual agreement and coupling to the Consumer Price Index, provided that the term of the lease is at least 10 years. Otherwise, a graduated rental agreement (providing for a stepped rent) must be concluded.
What regulations (if any) govern rent security deposits?
Under residential tenancy law, the security deposit must not exceed three times the monthly rent. Under commercial tenancy law, a similar security deposit of three times the monthly rent is normally provided in the form of a bank guarantee, but higher amounts are possible.
Can the tenant withhold rent payments on any legal grounds?
If a defect in the rental property occurs during the term of the lease, the tenant can reduce the rent or to withhold part of it. Under commercial tenancy law, such rights of the tenant are normally excluded; instead, the tenant must file a lawsuit in order to enforce such rights.
Under what circumstances is sub-letting typically allowed?
Without the landlord’s consent, the tenant cannot provide or sublet the rental property to third parties. Residential tenancy law deviates from this principle in certain respects: if only part of the rental space (eg, one room) is to be provided to a third party, the tenant may ask the landlord’s permission to do so, but the landlord need not grant such permission if specific reasons for refusal exist (see Section 553(1)(2) of the Civil Code).
Obligations and liabilities
What are the general obligations and liabilities of the landlord in respect of the property and what are the consequences of breach?
The landlord’s main duty is to provide the rental property to the tenant for use during the term of the lease. Moreover, the landlord must provide the rental property in a state suitable for use as stipulated in the lease agreement and shall maintain that state during the term of the lease. At least under commercial tenancy law, this maintenance obligation on the part of the landlord is often transferred to the tenant. In the case of a breach of the landlord’s duties, the tenant may reduce the rent, demand damages or terminate the lease for cause.
What are the general obligations and liabilities of the tenant in respect of the property and what are the consequences of breach?
The tenant is obliged to pay to the landlord the agreed rent and to treat the rental property with due care and consideration. Moreover, the tenant must return the rental property to the landlord on expiry of the lease. If the tenant fails to meet these obligations, the landlord may claim damages or terminate the lease for cause.
Are any taxes payable on rental income? If so, are any exemptions available?
German and non-German individuals are generally subject to German income tax in respect of their rental income. Further, rental income may be subject to German trade tax if it is attributable to a permanent establishment. However, individuals may enjoy certain exemptions or tax reliefs resulting in an offset of trade tax, if any.
Companies German and non-German companies will be subject to German corporate income tax on rental income generated from German real estate (at a rate of 15% plus the solidarity surcharge, resulting in an effective tax rate of 15.825%).
Income subject to German taxation is reduced by allowable deductions, including interest expenses in relation to financing. However, the German interest deduction barrier rules limit the deductibility of interest expense over interest income (net interest expense) to 30% of an entity’s earnings before interest, taxes, depreciations and amortisation. There is an annual threshold of net interest expense of up to €3 million; below this threshold, the interest deduction barrier rule does not apply.
In addition, German trade tax (from 14%-17.5% depending on the location of the real estate) may become due if the property qualifies as a business asset and is allocated to a German permanent establishment. Consequently, careful implementation of tax structuring is required in order to mitigate trade tax risks, such as using an inbound investment structure (a foreign property-owning company holding German real estate) in order to avoid a permanent establishment in Germany.
Value added tax Rental income is usually exempted from value added tax (VAT) but, where certain conditions are satisfied, an option to tax can be made in respect of commercial property.
Input VAT recovery (or a deduction against VAT payable to the German authorities) can be obtained. Input VAT includes VAT payable in respect of the purchase price of the property, as well as VAT on construction and other costs. However, input VAT recovery is only available to the extent that the German property is used to earn income which is not exempt from VAT (eg, rental income arising from property which has been opted to tax).
Are the landlord and tenant bound by any insurance requirements?
There is no compulsory insurance, but many lease agreements include provisions requiring building and public liability insurance to be taken out.
Termination and eviction
What rules and procedures govern termination of the lease by the landlord and the tenant’s eviction from the property?
Termination for convenience by the landlord is subject to Section 573ff of the Civil Code. As far as residential tenancy law is concerned, this requires a legitimate interest in such termination (eg, because of own needs) and observance of the notice period pursuant to Section 573c of the Civil Code. The tenant is also entitled to terminate the lease for convenience, observing the notice period set out in Section 573c. In the case of a commercial lease agreement for an indefinite term, the parties must merely observe the notice period set out in Section 580a(2) of the Civil Code if they wish to terminate for convenience. Either party can terminate for cause if continued performance of the contract appears unacceptable. However, this must be handled restrictively – not each and every disagreement constitutes a cause for termination.
What are the typical providers of real estate financing in your jurisdiction? Are there any restrictions on who may provide financing?
Typical finance providers are banks, financial institutions (eg, insurers) and funds (including pension funds). Certain regulations restrict the granting of commercial loans, such as the Banking Act for financial institutions or the Capital Investment Code for funds.
What are the most common structures used to secure real estate financing and how are these security interests perfected?
A typical security package for a real estate finance transaction would consist of:
- an immediately enforceable land charge, including an abstract acknowledgement of debt and an accompanying security purpose agreement;
- security assignment of receivables (rent, insurances, claims under existing and future sale agreements, claims under work contracts and claims resulting from shareholder loans);
- pledge over shares, accounts and hedging proceeds; and
- in, for example, the hotel sector, security transfer agreement in relation to fixtures and fittings.
For the purposes of perfection:
- the land charge must be notarised and recorded in the Land Register; and
- the pledges must be notified to the relevant parties.
If shares in a German limited liability company are pledged, the pledge agreement must be notarised as well. Otherwise, in most cases security assignments, security transfers and pledges can be made in writing.
What covenants are typically made in financing agreements?
This is highly transaction specific and depends on a variety of factors such as:
- the type of deal (eg, single property, multi property or development);
- the parties involved (eg, national or international);
- the syndication strategy (eg, national, continental European or international); and
- the investment risk profile.
Hence, documentation ranges from short-form in-house documents to variable data printing documentation and Loan Market Association-based documents.
Enforcement of security
How are security interests enforced in the event of default?
Specific rules apply to the enforcement of land charges. On insolvency, assets not belonging to the insolvent’s estate can be separated and recovered by their owners. The secured creditors (including pledgees and creditors secured by a transfer of title by way of security or assignments by way of security) have a right to preferential satisfaction out of the proceeds of the sale of the security granted. If the insolvency administrator enforces security on moveable assets (other than pledges) and distributes the proceeds to the creditor, it can deduct 4% of the proceeds for the ascertainment of the security and 5% of the proceeds for the enforcement procedure. If the actual costs deviate substantially, these rates would be adjusted.
What is the typical timeframe for the enforcement of security?
Enforcement proceedings in relation to a land charge typically take between six and nine months.
What is the general climate of real estate investment in your jurisdiction?
Real estate prices are expected to continue to rise in 2017 as well, although the price increases are likely to be smaller compared with previous years. The low interest rates and the Brexit decision will continue to affect German real estate positively.
In spite of the ongoing price developments and global political changes, the German real estate market is stable and thus remains attractive for investors.
Who are the most common investors in real estate?
Germany has retained its leading position for overseas investment, not just from Asia but also from many neighbouring European countries, including France and the United Kingdom. This trend is likely due to the geographical attractiveness of Germany’s location within Europe and the easy access to the rest of Europe and the world that this offers.
Are there any restrictions on foreign investment in real estate?
As a leading global economy, Germany provides safe and transparent market conditions. The German government welcomes overseas investors and the legal system is reliable.
What structures are typically used to invest in real estate and what are the advantages and disadvantages of each (including tax implications)?
Investment in German property can be structured as an asset deal or a share deal. The advantage of an asset deal is that the risk profile of the transaction is limited (in particular, regarding the potential (tax) liabilities of an existing company acting as the seller of real estate). On the other hand, a share deal may be advantageous in respect of mitigating German real estate transfer tax as a result of tax structuring.
There are several ways to invest in real estate in Germany. An individual can purchase a property directly or the investment can be made indirectly using a German corporation or partnership. Alternatively, the property can be acquired using a non-German corporation or partnership.
Investment in German property often takes the form of indirect investment via single corporations or partnerships that acquire the property (with the investors holding shares or interests in that entity), or by using a holding company that is the shareholder in one or more subsidiaries, each of which may own one or several properties. Further, such investment vehicle can be domiciled either in Germany or a foreign country.
For many transactions involving investment into German real estate by overseas investors, the investor establishes a new company outside Germany (but within the European Union) to serve as the property owning company (‘propco’). The purpose of the propco is to hold, manage and rent real estate assets. Such structures are aimed at limiting the German taxation to corporate income tax (15% plus solidarity surcharge, which results in an effective tax rate of 15.825%) and at excluding further taxation in the form of German trade tax or German withholding taxes. A typical legal form used for such types of transaction is a Luxembourg Sàrl or a Dutch BV. Depending on the relevant double tax treaty, other countries can also provide similar tax structuring options.
Planning and environmental issues
Which government authorities regulate planning and zoning for real estate development and use in your jurisdiction and what is the extent of their powers?
German planning law is structured hierarchically. Each federal state issues a state-wide development plan roughly defining the basic structures of spatial development. The state development plans are then fixed for the various regions through regional plans. The regional plans are drafted by the regional associations, each of which combines a number of municipalities.
Each municipality drafts a zoning plan for its entire territory which must be in line with the requirements in the state development plan and the applicable regional plan. On the basis of the zoning plan, each municipality then develops binding land use plans for the various parts of its municipal district. The land use plans must be in line with the state development plan, the applicable regional plan and the local zoning plan. Land use plans typically include detailed requirements for the development and use of a plot of land. For example, land use plans determine the type (eg, an industrial zone, a residential area or a special zone) and scope of use (eg, the maximum permissible number of storeys or the maximum permissible height of building). Land use plans are therefore of great importance to the question of how a plot may be developed and used.
The planning autonomy of the municipalities is strong in Germany. In particular, municipalities have the appropriate legal means to prevent any development that is not in line with their planning objectives.
If a plot is located outside the scope of a land use plan, but within a built-up area it may be developed and used in the same way as the neighbouring plots.
What are the eligibility, procedural and documentary requirements to obtain planning permission?
Planning permission is required for most large buildings. If a building is to be used for industrial purposes, approval under immission control regulations may be required instead. The applicant may be the owner of the plot or any other person acting with the owner’s consent, such as a tenant or a person interested in purchasing the plot.
Can planning decisions be appealed? If so, what is the appeal procedure?
If an application for grant of planning permission or an approval under immission control regulations is refused, the applicant may appeal the decision using certain legal remedies. Depending on the federal state where the project is to be realised, the appellant may have to file suit directly before the administrative court or, previously, lodge an appeal with the supervisory authority responsible for the approving authority.
If planning permission or an approval under immission control regulations has been granted, it may be contested by third parties (eg, neighbours). It depends on the federal state concerned whether the opponent must file suit directly before the administrative court or, previously, must lodge an appeal with the supervisory authority responsible for the approving authority. The administrative court or the supervisory authority will then examine whether the third party’s rights are violated by the permission or approval. This may be the case, for example, if the project creates excessive noise emission.
What are the consequences of failure to comply with planning decisions or regulations?
Both planning permission and an approval under immission control regulations can be granted only if the project complies with all regulations and requirements. Once permission or approval for a building has been granted and has become final and unappealable, no authority may demand the demolition or conversion of the building even if it violates regulations or requirements, except perhaps where there is potential for injury to life, limb or health, or where issues of immission control come into play.
If a building is erected or converted without the requisite permission or approval, the use of the building may be prohibited and its demolition ordered unless a subsequent permission or approval can be granted. In addition, an administrative fine may be imposed.
What regime governs the protection and development of historic and cultural buildings?
Each federal state has monuments and historic buildings acts. In addition, municipalities may enact statutes for certain parts of their municipal district in order to preserve the existing building structure. Such statutes may also relate to buildings without cultural or historic importance.
What regime applies to government expropriation of real estate?
In Germany, the legal foundations for the expropriation of real estate are not found in a single law, but rather in different federal and state laws. The law to be applied depends on the purpose of the expropriation. For example, the General Railway Act applies where expropriation is deemed necessary for the construction of railways, while the Federal Highways Act applies in the case of expropriation for the construction of federal highways.
What is the required notice period for expropriation and how is compensation calculated?
This depends on the expropriation law concerned.
What environmental certifications are required for the development of real estate and how are they obtained?
In principle, no further environmental certifications must be obtained apart from planning permission or approval under immission control regulations, as environmental aspects must be taken into account in the approval procedure and are laid down in the form of subsidiary provisions in the permission or approval.
What environmental disclosure obligations apply to real estate sales?
Any environmental legacies on a plot must be communicated to the purchaser before conclusion of the agreement.
What rules and procedures govern environmental clean-up of property? Which parties are responsible for clean-up and what is the extent of their liability?
This is primarily governed by the Federal Soil Protection Act, according to which the elimination of harmful soil changes and contaminated sites is incumbent not only on the polluter and the owner of the contaminated plot, but also on the holder of actual authority over the plot (eg, the tenant or lessee). The scope of rehabilitation of a plot is limited to what is necessary for the permissible use thereof. This means, for example, that the rehabilitation duties for a residential plot are much more comprehensive and stringent than those for a commercially used plot of land.
Are there any regulations or incentive schemes in place to promote energy efficiency and emissions reductions in buildings?
The energy efficiency requirements on buildings are defined in the Energy Saving Ordinance, which applies to virtually all buildings that are heated or air-conditioned. Moreover, private individuals may obtain government subsidies from KfW, a government-owned development bank which finances the construction and purchase of energy-efficient buildings, as well as the energy efficiency upgrading of legacy buildings, by means of substantial funds.