Property tax as operating costs: Three current questions and answers

As part of the operating and ancillary costs, the property tax levied on a rented residential or commercial property can regularly be passed on to tenants. The property tax reform came into force on January 1, 2025. Property tax will now be determined on the basis of the new statutory rules and new municipal assessment rates. Tenants are likely to take a very close look at the first property tax assessments issued under the new rules when they receive their utility bills for the 2025 calendar year. Landlords therefore already have a number of questions that should not be postponed. We would like to comment below on the most important property tax issues for commercial property management: How exactly do landlords themselves have to check the property tax assessments they receive before they charge the tax on, and what happens if a tenant finds errors in the tax assessment?

Does a landlord have to check the property tax assessment notice before allocating the property tax as operating costs?

Yes, every landlord who passes on the property tax has a secondary contractual obligation towards his tenants under the rental agreement to check the tax bases of a property tax assessment and its accuracy. As a manifestation of the principle of economic efficiency, every landlord may only pass on to the tenant those costs that are justified on conscientious consideration of all circumstances and in the ordinary course of business and which he would also be prepared to bear himself if he were to use the property himself. The landlord must therefore not only check the tax assessment, but also notify the tax office of any changes in the property portfolio if they are relevant to the tax bases, such as a change in the use of the property. This alone presents property owners with major challenges. The obligation to check already relates to the property tax assessment notice, which property owners in Germany have generally already received. This is because, according to the Federal Fiscal Court, the property tax assessment notice acts as a basic assessment notice for the property tax assessment notice, which in turn is a basic assessment notice for the property tax assessment notice. If the property tax assessment notice is final, taxpayers can no longer take action against the assessment of the property tax value. Landlords therefore have to deal with the property tax for their properties several times: with regard to the correct property tax value, the correct tax assessment figure and finally the correct multiplication with the new assessment rate applicable in the municipality for property tax assessment.

What must a landlord do if his or her tenant discovers an error in the property tax assessment notice and complains about the utility bill?

If it turns out that the property tax assessment is incorrect and the tax stated in the utility bill is too high, tenants of residential or commercial premises are entitled to a new bill. However, residential tenants can only claim a correction to the statement within the time limit set out in Section 556 (3) sentence 5 BGB, i.e. by the end of the twelfth month after receipt of the statement at the latest. Tenants of commercial premises often agree a similar exclusion period for claims. Otherwise, the statutory limitation period of three years applies in accordance with Section 195 BGB. The tenant may also be entitled to claim damages from the landlord for unnecessary costs in the event of incorrect re-invoicing.

Until when can a landlord correct an incorrect statement of operating or ancillary costs if he himself subsequently discovers errors in a property tax assessment?

In the case of residential leases, landlords must submit the statement of operating costs to their tenants by the end of the twelfth month after the end of the billing period at the latest. Changes to the statement can generally no longer be asserted after the deadline, unless the landlord is not responsible for the late assertion. This would be the case, for example, if the property tax assessment notice is not issued in good time before the deadline expires or has to be adjusted again if it was initially incorrect. If, on the other hand, the landlord has submitted the property tax return too late or checked the property tax assessment notice too late, he can generally no longer make additional claims against the tenants after the twelve-month period has expired. It is therefore recommended that residential landlords check property tax assessments very soon after receipt. Landlords of commercial properties should also do this, even if the twelve-month period only applies directly to them if agreed in the tenancy agreement. In any case, it is advisable for landlords to make it clear in the tenancy agreement that they may assert additional claims if they receive notices after the deadline through no fault of their own. The property tax assessment notice and the tax bases, the property tax value, the property tax rate and the assessment rate should also be checked very thoroughly; a quick plausibility check is not sufficient. The tenant regularly has twelve months to check the notification sent with the utility bill in detail. Subsequent corrections and reimbursement payments are annoying for any landlord. Authors:
KPMG AG Wirtschaftsprüfungsgesellschaft: Jürgen Lindauer
KPMG Law Rechtsanwaltsgesellschaft mbH: Dr. Rainer Algermissen, Human Aghel