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Serviced apartments: A new trend in the German hospitality market
By Sabrina Handke
During the last two years, serviced apartments have become a new trend in the German hospitality market with well known operators as well as new operators entering the market.
The term “serviced apartments” is not statutorily defined in Germany. The common meaning is furnished apartments, usually providing a kitchen and laundry facilities, which are let to long-term users (meaning longer than a typical hotel stay). Compared to self-contained apartments, serviced apartments usually provide additional services to their users (such as laundry, concierge, etc.).
Legally, serviced apartments can be classified as commercial use (such as a hotel) or residential use. Which they are, depends on the facts of each case. The most relevant criteria for such classification is the maximum stay allowed by the landlord and the scope of additional services offered. The shorter the duration, and the more extensive the scope of services, the more likely the use is classified as commercial. The classification has knock-on legal implications.
Social residential tenancy law
German law provides a number of mandatory provisions protecting residential tenants, such as the exclusion of ordinary termination rights for the landlord (with very limited exceptions) and the maximum level of the permissible amount of rent. If serviced apartments are classified as residential use, the social residential tenancy law applies.
Building law
German building law provides for different criteria and requirements for commercial and residential use. In particular, in terms of fire and safety standards and noise protection. A building owner should decide whether or not the owner wants a serviced apartment to be classified as commercial or residential before applying for a building permission as a subsequent change requires an adjustment of the building permission.
Change of use
Some German cities, where there is a shortage of residential units, have enacted laws prohibiting or restricting the change of use from existing residential units to commercial units (including serviced apartments). A breach of such statutes (e.g. by using residential units as commercial serviced apartments without the requisite permission) can lead to severe fines.
VAT
Where revenue is generated by serviced apartments that are only used commercially, the landlord is able to opt for VAT. The VAT option cannot be exercised for serviced apartments which are classified as residential use. This could lead to relevant financial consequences, in particular regarding the treatment of VAT on construction costs.
