German municipalities are pushing for a significant shift in property law, advocating for a communal right of first refusal in compulsory auctions and insolvency proceedings. The proposal, spearheaded by Bernd Düsterdiek, Deputy President of the German Association of Cities and Municipalities (DStGB), aims to address the burgeoning issue of “problem properties” and derelict buildings plaguing urban centers.
Currently, the right of first refusal – a mechanism allowing municipalities to purchase property before a private buyer – is notably absent during auctions stemming from foreclosures and insolvency processes. Düsterdiek argues that reinstating this right could serve as a vital tool in combating the proliferation of these distressed assets, which often contribute to urban decline and exacerbate housing shortages. While acknowledging the current legal provisions prioritize creditor protection, he contends that the public welfare should also be considered a paramount concern justifying the municipal prerogative.
The drive for a revised legal framework extends beyond simply acquiring properties at auction. The DStGB is also advocating for a streamlining of modernization, maintenance and demolition orders, currently hampered by bureaucratic complexities. Specific proposals include simplifying descriptions of property defects, restricting appeals against such orders targeted at problem properties and mandating that property owners compensate municipalities for increased property value generated by demolition and redevelopment projects.
The most ambitious proposal involves a revision of the Building Code to specifically tackle “scrot properties” – vacant and long-term unused buildings that negatively impact surrounding neighborhoods. Düsterdiek highlights the devastating “trading-down effect” these properties create, diminishing the overall quality of life in affected areas while simultaneously depriving the housing market of desperately needed residential units. Critics, however, warn that such extensive municipal intervention risks further complicating property transactions, could potentially stifle investment and warrants careful consideration of its long-term economic consequences. The debate underscores a growing tension between the need for municipal control in urban development and the preservation of private property rights.