Anyone selling a rented condominium may, under certain circumstances, have to give the tenant the first opportunity: The statutory right of first refusal under Section 577 of the German Civil Code (BGB) allows the tenant to enter into the purchase on the same terms as an outside buyer. However, the decisive factor is whether the apartment was converted into condominium ownership only during the ongoing tenancy – the provision applies only in that case. We explain when the right of first refusal arises, how to notify the tenant correctly and within the deadline, and how it differs from the municipality’s right of first refusal.
What Is the Tenant’s Right of First Refusal?
The tenant’s right of first refusal is governed by Section 577 of the German Civil Code (BGB). It is intended to protect tenants from being displaced when their rented apartment is converted into a condominium and subsequently sold. If you sell such an apartment to a third party, the tenant may enter into the purchase agreement already concluded and acquire the apartment themselves.
It is important to understand: This is a right of first refusal, not a right to a discount or to force a sale. The tenant can neither demand that you sell at all nor request a lower price. If they exercise the right, exactly the same conditions apply to them – above all, the same purchase price – that you negotiated with the third-party buyer.
When Does the Right of First Refusal Arise – and When Does It Not?
The right of first refusal requires two conditions, both of which must be met:
- Conversion after moving in: Condominium ownership was established for the apartment after it was handed over to the tenant – or the division is still to be established. The tenant must therefore have moved in first, and only afterward is the rental property converted into a legally independent condominium.
- Sale to a third party: You sell this apartment to a person outside the protected group.
No right of first refusal exists, by contrast, in these common cases:
- No conversion during the tenancy: If the apartment was already an independent condominium before the tenant moved in, Section 577 of the German Civil Code (BGB) does not apply. A mere change of ownership of an already divided apartment does not trigger a right of first refusal.
- Sale to family or household: If you sell to a family member or to a member of your household, the Right of first refusal excluded (§ 577 para. 1 sentence 2 BGB).
- Resale: As a rule, the right of first refusal arises only upon the first sale after the conversion. It does not arise again upon a subsequent resale.
The Federal Court of Justice interprets the protection narrowly in accordance with the purpose of the provision. Thus, the right of first refusal applies correspondingly even when condominium ownership is replaced by partial ownership. Conversely, the family's priority has limits in favor of the seller: In its judgment of September 27, 2024 (Case No. V ZR 48/23), the Federal Court of Justice ruled that a real right of first refusal held by a relative and registered in the land register takes precedence over the tenant's right of first refusal—and that divorced spouses also qualify as family members within the meaning of the exception.
Tenant's right of first refusal or municipal right of first refusal?
When real estate is sold, the term “right of first refusal" appears in two completely different contexts. You should clearly distinguish between the two:
- The tenant's right of first refusal under § 577 BGB is a private-law protective right. The beneficiary is a specific person—the tenant of the converted apartment.
- The municipal right of first refusal under § 24 BauGB is a public-law urban planning instrument. The beneficiary is the municipality, which may exercise it in the public interest—for example, in social preservation areas (“milieu protection") under § 172 BauGB.
The municipal right of first refusal has been noticeably restricted in recent years: In 2021 (Case No. 4 C 1.20), the Federal Administrative Court ruled that a municipality may not base its right of first refusal in a milieu protection area solely on the assumption that a buyer will use the apartments in violation of preservation requirements in the future. For you as the seller, this means: The two rights pursue different objectives, concern different beneficiaries, and are examined independently of each other. This guide addresses the tenant-related case.
How to notify the tenant of the right of first refusal within the deadline
The procedure is prescribed by law. In practice, it runs through the notary and in the following order:
- Conclude the purchase agreement with the third-party buyer: First, the notarized purchase agreement with the external buyer is concluded. Only this agreement triggers the right of first refusal.
- Inform the tenant: You or the buyer provide the tenant with the full contents of the purchase agreement and also inform them at the same time of their right of first refusal (§ 577 (2) BGB). The notification must contain all essential contractual points, in particular the purchase price and payment terms.
- Two-month period begins: Upon receipt of this notification, the tenant has two months (§ 469 (2) BGB) to decide.
- Exercise or waiver: If the tenant exercises the right of first refusal, this is done by written declaration to you as the seller (§ 577 (3) BGB). The purchase agreement then comes into effect with them under the same conditions. If they let the period expire, the sale to the third party is completed.
Take the notification seriously and have it properly documented through the notary. If the tenant is not informed or the information is incomplete, the period does not begin to run at all—the tenant may then assert their right for a long time after the sale. If they lose the opportunity to purchase at a favorable price due to a notification that was omitted or defective, claims for damages against the landlord may also be considered.
Incidentally, whether you offer your rented apartment through an agent or commission-free on a metasearch engine such as TraumImmo does not affect the right of first refusal: It depends solely on the conversion and the sale, not on the distribution channel.
What the conversion otherwise means for sellers
If a rental apartment is converted and sold, two additional protective mechanisms apply alongside the right of first refusal, affecting the value and marketing:
- Notice protection period under § 577a BGB: After the purchase, an acquirer may invoke owner-occupancy or termination for realization purposes only after three years. In areas with particularly endangered housing provision, the states may extend this protection period to up to ten years. The restriction also applies if the property is sold to a partnership or to several acquirers.
- Conversion approval under § 250 BauGB: In areas with a tight housing market, even the division into condominium ownership requires official approval. In principle, buildings with more than five apartments are affected; the states may set a different threshold of between three and 15 apartments. The regulation was initially limited until the end of 2025 and was extended until December 31, 2030 extended. Berlin, for example, brought a new conversion ordinance into force on January 1, 2026.
For you as a seller, this means: Check early whether approval is required for the conversion at all – and factor the three-year lock-up period into your sales pitch, because it can limit the pool of prospective owner-occupier buyers.
FAQ on the Tenant’s Right of First Refusal
Do I have to offer my rented apartment to the tenant first?
No, not in advance. You first conclude the purchase agreement with a buyer and notify the tenant of it. The tenant can then enter into this agreement – but only if the apartment was converted into condominium ownership during their tenancy.
Can the tenant demand a lower price?
No. The right of first refusal does not give them a price advantage. The same conditions as in the agreement with the third party apply, in particular the same purchase price.
Does the right of first refusal apply to every rented apartment?
No. It requires a conversion after the tenant moved in. If the apartment was already a condominium before the tenancy began, or if you sell it to a family member, there is no right of first refusal under Section 577 of the German Civil Code (BGB).
How long does the tenant have to exercise the right of first refusal?
Two months from receipt of the notification of the purchase agreement (Section 469 (2) BGB). The written declaration exercising the right must reach you within this period.
What happens if I do not inform the tenant?
Then the period does not begin to run and the right of first refusal remains in force. The tenant may assert it later, and you may face claims for damages if they have suffered a disadvantage as a result.
Can I exclude the right of first refusal in the tenancy agreement?
No. Any agreement deviating to the detriment of the tenant is invalid under Section 577 (5) BGB. The right cannot be contractually negotiated away.
Advantages and Disadvantages for Sellers and Tenants
The right of first refusal affects both parties differently – here are the key points:
- Advantage for the tenant: Protection against displacement and the opportunity to purchase their own apartment on terms already negotiated.
- Disadvantage for the tenant: They must secure the full financing within the short two-month period and pay the same, potentially high market price.
- Advantage for the seller: You suffer no financial disadvantage – the purchase price remains the same, regardless of whether the third party or the tenant purchases. A tenant willing to buy can even be a particularly secure buyer.
- Disadvantage for the seller: The sale may be delayed by the deadline, and until the deadline expires, it remains uncertain who will ultimately buy. Errors in the notification can be costly.
Conclusion: Check the conversion first, then notify correctly
Whether your tenant has a right of first refusal depends on one question: Was the apartment converted into condominium ownership only while the tenancy was ongoing? Only then does Section 577 of the German Civil Code (BGB) apply—upon the first sale to a third party and outside the family circle. Clarify this point at the outset, then provide complete notice of the purchase agreement, documented through the notary, and observe the two-month deadline. This allows you to complete the sale of your rented apartment in compliance with the law and avoid subsequent claims for damages. On TraumImmo, you can reach both investment buyers and the tenant themselves as potential buyers.