The German Association of Cities and Municipalities (DStGB) is pushing for a significant shift in property law, advocating for a municipal right of first refusal in compulsory auctions. Currently, this right – which allows local authorities to preemptively purchase properties – is explicitly excluded during foreclosure proceedings and insolvency cases, a measure intended to protect creditors. However, DStGB argues that this exclusion undermines the potential of municipalities to address the growing problem of derelict and problematic properties.
Bernd Düsterdiek, a DStGB deputy, stated in an interview with the Rheinische Post that extending the right of first refusal to compulsory auctions could serve as a crucial tool in combating the proliferation of “scrapped” or problematic real estate. While recognizing the current legal framework prioritizes creditor protection, Düsterdiek argued that the well-being of the community should be considered a paramount concern, justifying municipal intervention.
The proposal isn’t solely focused on seizing assets. DStGB is also calling for a practical overhaul of existing regulations pertaining to modernization, maintenance and demolition orders. Proposed reforms include streamlining the description of property defects, eliminating the right to appeal these orders – particularly for problematic buildings – and mandating that property owners compensate the municipality for any increase in property value resulting from demolition and redevelopment.
The association’s ambition extends to legislative reform, with a call for an amendment to the German Building Code specifically targeting “scrapped” properties. Düsterdiek highlights the detrimental impact these vacant and long-term unused properties have on municipalities, contributing to a “trading-down effect” within affected urban areas and crucially, depriving the housing market of urgently needed residential units. Critics suggest this move, while potentially beneficial for tackling blight, could face resistance from lender groups and raise concerns regarding municipal overreach and potential devaluation of assets. The debate underscores a growing tension between creditor rights and the need for municipalities to actively manage urban decline and safeguard community well-being.
