Anyone who owns one or more apartments jointly with another owner is part of a joint ownership community. This article explains how joint ownership works and who is responsible for filing the property tax return in a joint ownership community.
Definition – What is a joint tenancy?Link to this section
As the name suggests, joint ownership involves multiple owners owning a property in certain proportions. Each owner owns a fraction of the total property, either in equal or varying shares.
Joint ownership is one of four main types of property ownership under the German Civil Code (BGB). In addition to joint ownership, the BGB also provides for sole ownership, joint ownership, and condominium ownership.
Is a condominium association a joint tenancy? What's the difference?Link to this section
One Homeowners association (WEG) A condominium association is an association of owners of multiple apartments within a property who make joint decisions regarding the management and use of the shared property. In a condominium association, the property is divided into separate and shared ownership.
Each owner therefore owns an apartment (separate property) as well as shares in common areas such as the stairwell, elevator, or garden (common property). Each owner's share is determined in the declaration of division.
The rights and obligations of the owners as well as the rules for management and financial matters are set out in Condominium Act regulated.
Joint ownership: Beware of the risk of confusionLink to this section
There is often confusion between joint ownership and joint tenancy. In fact, joint ownership is the complete opposite of joint tenancy.
In a joint ownership, several owners have ownership rights to an asset. However, their respective share is of a non-material nature. Unlike in a joint ownership, this share may not be sold. The individuals in a joint ownership own not only a non-material but also an actual, definable and clearly defined share in the asset.
Joint ownership of real estate: legal and tax differencesLink to this section
While in a joint ownership community all persons own a joint share of the entire property and no individual part can be used exclusively, the persons in a joint ownership community each have their own, separate share that they can use exclusively.
The rights and obligations in a joint ownership community are often contractually regulated in a usage agreement, whereas in a joint ownership community they are registered in the land register.
From a tax perspective, there is no option for separate property tax assessment in joint ownership. The tax is divided among the co-owners proportionally. In joint ownership, however, the co-owners have a choice: they can opt for joint or individual assessment.
In the case of a joint assessment, the property tax is calculated for the entire community; in the case of an individual assessment, it is calculated separately for each co-owner.
Is a community of heirs a joint ownership?Link to this section
No, thisThese are legally distinct constructs. A community of heirs is a joint ownership in which all heirs are joint and indivisible owners of the estate.
In contrast, in a joint ownership, each heir has a specific share of the shared property. To achieve greater flexibility, a joint ownership can be converted into a joint ownership.
Is a married couple a joint tenancy?Link to this section
Yes, when spouses jointly purchase a property, a joint ownership is created. Both spouses are registered as co-owners in the land register and usually each own half. Each person has independent rights to their share and can transfer this, for example, through sale.
How does a joint tenancy arise?Link to this section
A joint ownership is created through a contract or legal regulations, such as a condominium (WEG). It refers to the joint ownership of an asset, such as a piece of land or a building. Each co-owner owns a fraction of the property and can sell, bequeath, or gift this share.
Decisions regarding the use and management of the shared property must be made jointly by all co-owners, unless otherwise agreed in a division agreement or a fractional agreement.
The main difference to a condominium association is that a condominium association is specifically created for the joint ownership and management of apartments and common areas within a property, while a joint ownership community allows for joint ownership of any property and the free disposal of it.
ExampleA good example of a joint ownership is the joint ownership of a property by married couples who purchase it jointly. The property is owned equally by each married couple.
The administration of the joint ownershipLink to this section
What happens in a joint tenancy is in the hands of the members. Managing a joint tenancy therefore requires good communication and cooperation among members to make decisions and share responsibilities.
Most administrative matters are usually based on a contract between the members of the community. This agreement stipulates how decisions are made, how costs are shared, and how the use of the property is divided. Everyone can freely dispose of their share of the property.
Decisions regarding the property, however, are made collectively. In principle, one may sell one's share, allowing a new person to subsequently join the community. However, a single member cannot sell the entire property.
Joint ownership and renting: What should you pay attention to?Link to this section
In a joint tenancy, renting is only possible with the consent of all co-owners. This means that all members of the joint tenancy must agree to the rental and sign the house or apartment lease. However, a different basis is possible if it has been agreed upon in writing in advance.
Joint ownership property tax: Who pays if there are multiple owners?Link to this section
If several people jointly own a property, they are all jointly responsible for the property tax. This means that, in principle, each owner owes the entire property tax.
However, this does not mean that every property owner has to pay the full amount. The municipality can only demand property tax once—therefore, the property tax only needs to be paid once. If one property owner pays the entire tax, the others are relieved of responsibility.
Shared responsibility for property taxes for joint ownershipLink to this section
The jointly owned property is jointly responsible for ensuring that the property tax is paid in full. This is stipulated by law. The simplest solution is a joint account from which the property tax is regularly deducted. This way, there are no disagreements within the jointly owned property.
Problems can arise if the owners cannot agree on who pays the property tax. To avoid trouble, it is advisable for joint owners to agree on the payment of property tax early on and, if necessary, to set up a joint account.
Property tax: Meet payment deadlinesLink to this section
To ensure smooth cooperation in the joint ownership, it is important that you clearly define the payment obligations for shared costs, such as property taxes, in advance.
The user agreement should regulate the distribution of costs among the individual users and specify precise payment deadlines. This helps avoid misunderstandings and ensures a fair distribution of costs.
The property tax return of theJoint tenancyLink to this section
Filing a property tax return is an important aspect of managing a joint tenancy, especially when it involves real estate. Every owner is generally obligated to pay property tax. Through property tax, owners contribute to the costs incurred by the municipality in maintaining their properties.
If you are part of a jointly owned property, you must inform the tax office with your declaration of assessment which member will be the "authorized recipient." This member will then receive all correspondence from the tax office.
The declaration of determinationLink to this section
The assessment declaration calculates the property tax for the joint ownership, based on various data such as the property size. The ELSTER tax portal is used to submit the assessment declaration. To avoid errors, some joint ownership communities prefer to work with a tax advisor.
Joint ownership and VAT: What should you pay attention to?Link to this section
Until 2018, joint tenancy agreements were treated for tax purposes like businesses, which were required to pay VAT on rentals. Due to a change in the law, each individual member, not the joint tenancy agreement itself, is now liable for VAT.
This change is based on the fact that joint ownership partnerships do not have legal capacity under civil law. Consequently, it is no longer the joint ownership partnership that is liable for VAT, but its members.
Joint ownership and land register: What you need to knowLink to this section
For a joint ownership, the land register plays a crucial role, as it records the ownership of the property.
The land register therefore provides official confirmation of ownership and protects against unfounded claims by third parties. Anyone can verify the ownership of a property and what rights exist to it by examining the land register.
What does the land register say about a joint tenancy?
Owners:The names of the co-owners are registered, often with their respective shares.Type of ownership:It is noted that this is a joint tenancy.Burdens and rights:All encumbrances on the property, such as mortgages or land servitudes, are recorded here.Restrictions:Any restrictions on use, such as building encumbrances, are also noted here.
Frequently Asked QuestionsLink to this section
Is a joint ownership partnership a GbR?No, a joint ownership partnership is not a GbR (German Civil Code). In a joint ownership partnership, each co-owner has a clearly defined share of the property. In a GbR, on the other hand, the entire property belongs to the partnership, not to the individual partners.When is a division into fractions given?Fractional division occurs when an asset—such as real estate—is divided among several people. Each owner receives a clearly defined share.What if I want to dissolve the joint tenancy?If you want to dissolve your joint ownership, there are several options. Either all parties agree to sell the property to a third party, or one member takes over the other members' shares. If no agreement is reached, a forced sale (partition auction) can be requested. Since this often results in a lower sales price, it should only be considered as a last resort.I have questions about property taxes and joint tenancy. Who can I contact?If youIf you have any questions about property taxes and joint tenancy agreements, please contact your property management company. Ralph will be happy to help.
Property tax and joint ownership: No more unanswered questions with RalphLink to this section
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