Update on German Holiday Apartments, Boarding Houses and Serviced Apartments

In Germany, several cities have issued ordinances on the so-called “prohibition of misuse” or “ban on misuse” (Zweckentfremdungsverbote) to address this issue. We take a closer look at the resulting impact on the letting of holiday apartments and boarding houses.

Legal framework

The German Land Use Ordinance (BauNVO) contains regulations concerning the type and extent of the use of real property. The BauNVO defines various types/subtypes of areas (e.g. residential, core, mixed use, commercial and industrial) and the various kinds of construction/activities that are allowed principally or exceptionally in those areas (e.g.  residential, stores, pubs, restaurants, commercial, offices, hospitality, administrative, leisure, sport, petrol stations).

The BauNVO (sec. 13a) expressly defines “holiday apartments” (“Ferienwohnung”), as premises/ buildings made available to a constantly changing group of guests for temporary accommodation purposes, in return for payment, which are suitable and intended for the establishment of a separate dwelling. An apartment can only be considered a holiday apartment if it is regularly made available on a daily or weekly basis for leisure and/or holiday purposes.

The BauNVO does not contain an express definition for boarding houses or serviced apartments. The latter types of accommodation are generally categorised as hospitality businesses/establishments (Beherbergungsbetriebe), depending on the specific individual case, e.g. the length of the letting, letting via platforms and/or the offer of additional services typical of hospitality businesses. Boarding houses or serviced apartments are generally described in legal articles and case law as apartments made available for longer-term stays for business purposes rather than for leisure and/or holiday purposes.

Exceptionally, holiday apartments can be classified as hospitality establishments if they are structurally subordinate to the main use of a building. This may be the case, for example, if a self-contained apartment (Einliegerwohnung) is let as a holiday apartment.

The general use of premises for residential purposes on the one hand and as holiday apartments or hospitality establishments on the other, are regarded as a fundamentally different types of use under German law.

When is a building permit required?

The construction of holiday apartments or boarding houses, as well as the change of use of a residential apartment into a holiday apartment or boarding house, requires a building permit (Baugenehmigung), with certain exceptions. A building permit will be granted if the intended use is in line with the permitted type of use as defined by the BauNVO and the local zoning plan.

Holiday apartments are generally classified in the BauNVO as so-called non-disturbing commercial enterprises (nicht störender Gewerbebetrieb) and are typically permitted, for example, in mixed-use areas (Mischgebieten) and core areas (Kerngebieten)- which are often in the city centre. Holiday apartments are generally not permitted in residential areas, but an exception can be made. The building authority must take into account that the character of the relevant area must not be changed by the granting of an exception.

Hospitality establishments such as boarding houses or serviced apartments are generally permitted in areas including mixed- use ,urban, core and village areas. They are however only permitted in general or pure residential areas as an exception.

Even if a holiday apartment or boarding house fulfills the conditions for a permit under the building planning law provisions of the BauNVO, municipalities can make further restrictive stipulations in specific zoning plans.

If the construction or change of use takes place without the required permit, the building supervisory authority can issue a ban on use or demand the removal of the holiday apartment or boarding house.

Prohibition of misuse/ban on misuse

A “prohibition of misuse” (or “ban on misuse”) of residential space may also be relevant even though the use of premises as a holiday apartment or boarding house is permitted under building planning law. 

Such prohibitions of misuse have been introduced in a number of the larger German cities with a particular housing shortage (e.g. Munich, Hamburg, Berlin, Frankfurt am Main). While various prohibitions like this have appeared over the last decade or so, some of them were in fact introduced more than 40 years ago.  The regulations aim to ensure that the population is provided with sufficient housing by prohibiting the use of existing residential premises for other purposes- or by making it dependent on the granting of a permit. In most cases, the prohibition prevents the conversion of existing living space into holiday apartments or boarding houses.

Permission for a change of use must be granted if it can be shown that an interest in using specific premises as holiday apartments or hospitality establishments outweighs the interest in maintaining them as residential units, noting that the pure commercial interests of the owner/ operator of the premises would not be a sufficient justification. 

A permit can also be granted if the interest in the preservation of residential space can be provided for through compensatory measures (e.g. compensation payments or the provision of replacement living space).

Violations can result in severe fines. In Munich, for example, the fine can be up to EUR 500,000. Depending on the applicable prohibition, the authorities may order the termination of unauthorised misuse or even the temporary withdrawal of ownership of a property in the event of a violation of the permit requirements.

In principle, the prohibition can also apply to a use as holiday apartment or hospitality establishment established before the relevant prohibition became law and which has continued thereafter. Transitional regulations have been created in some cases e.g.in Berlin and Munich. In Berlin, a use that violates the prohibition on a misuse that started before the prohibition became law, may continue for another two years after the law came into force. In Munich, the ban on misuse does not apply if the premises were already being used for purposes other than residential before the ban became law and they have been used for that purpose without interruption since then.

The freedom of ownership and occupation that is protected by the Basic Law for the Federal Republic of Germany (Grundgesetz) may arguably be limited by these prohibitions and the possible retroactive effect of the relevant legislation. So far, however, these prohibitions have in most cases been held to be legally effective at the level of the German federal states, for example by the Higher Administrative Court of Berlin-Brandenburg (OVG Berlin-Brandenburg (5th Senate).

Summary

The requirements under German building planning law and where applicable for the specific location, the prohibition of misuse of residential space, can pose major challenges for both private and commercial landlords of holiday apartments or hospitality establishments such as boarding houses – all of which makes a thorough prior legal assessment of the specific regulatory framework in the relevant city highly necessary for relevant owners/occupiers.

An alternative possibility for the development of such activities could be - from a legal perspective - the conversion of commercial properties such as vacant office or retail space into holiday apartments or boarding houses.  Such conversions would in most cases also need a building permit, thus requiring assessment of their permissibility under building planning law. The limitation resulting from a prohibition of misuse, which affects the conversion of existing residential, space would not however apply to such projects.