Creating living space is currently one of the most urgent tasks for cities. That is why building land speculations on rising prices are pure poison – because valuable land for urban development remains undeveloped. A judgment of the Federal Court of Justice (BGH) on the so-called “right of repurchase” comes at the right time. The BGH has now strengthened the possibilities of the cities and municipalities in order to enforce the development of formerly municipal properties in the long term.
The repurchase right is an instrument for municipalities that strategically buy land themselves and then turn it into residential areas with the help of a development plan. The city of Ulm is such an example, sometimes buying up areas decades in advance in order to use them in a targeted manner. This repurchase right can be agreed in an urban development contract so that buyers do not simply leave such areas lying around in the hope of rising prices, but instead build residential buildings. The buyer must build on the property within a certain period of time – otherwise the municipality is entitled to buy it back on the agreed terms.
The BGH case concerned a property in a Bavarian market town, which the buyer had acquired in 1994 for 60,000 marks, i.e. the equivalent of a good 30,000 euros. That also corresponded to the market price. A ready-to-move-in residential building was to be there within eight years, otherwise the municipality was allowed to buy it back at the purchase price. The years went by, the house was not built, the community was initially quiet – only to then pull the trump card in 2014: they reclaimed the property. The owner thought it was too late. Waiting so long to assert a right is “impermissible exercise of rights”.
The BGH sees it differently. Only the construction period was agreed in the contract, but not the period within which the municipality could assert its right of repurchase. The statutory exercise period of 30 years thus applied. The BGH saw no indication that this was inappropriate. “Construction obligations serve the commendable urban planning purpose of ensuring the (timely) achievement of the goals pursued with the land use planning,” the decision says. They should also prevent land speculation. The deal “land sale only against right of repurchase” is in order.
In return, the buyer is not granted a favorable price
The BGH also has no objection to the 30-year period because it is not only to the detriment of the buyer. In this way, the municipality is flexible in giving buyers more time who cannot complete their house within the agreed eight years. For example, because money is tight. If the right to repurchase expired at the end of the construction period or shortly thereafter, the municipality would have no choice but to repurchase. At least if you don’t want to give up your planning tool. Furthermore, the BGH sees no need for the buyer to be granted a lower price in return for the right to repurchase.
The BGH thus clearly distinguishes these cases from the so-called locals model. There, buyers are much more closely tied: They receive affordable properties, which they have to use themselves in return. For such – very close – ties, the BGH sets significantly shorter deadlines. The mere obligation of a buyer to build on the property within a set period, on the other hand, “regularly does not represent a serious burden,” the BGH found.
This is not the first time that the Federal Court of Justice has strengthened the local authorities’ options under construction planning law. In 2018, for example, he considered a so-called “additional revenue clause” to be permissible. This allows municipalities to secure the profit that a buyer makes through the resale within a certain period of time after the sale of their land. Such a clause serves the urban planning goal, which is worthy of protection, that plots of land are actually built on and should not be used for short-term speculative purposes.