Reasons for modernization
There are countless reasons to modernize a property such as your own house or apartment.
The measures for modernization are set out in the Bürgerliches Gesetzbuch (BGB) under § 555b. Some of these measures, for example, result in lower water consumption, reduced final energy demand, or improved living conditions. Installing a water meter or a new heating system can achieve these results.
The first reason to mention is, of course, the increase in general living quality. If you use only state-of-the-art materials in the modernization—materials that, unlike older counterparts, are completely free of harmful substances and safe for allergy sufferers—life in the modernized house will even be healthier than ever before.
Using such materials is also one of the many contributions a modernization can make to environmental protection. In addition, modernization can significantly improve overall safety, since today's modern windows, doors and shutters are virtually burglary-proof.
Improvements in fire safety are also possible through the appropriate modernization. Likewise, modernizing the electrical system contributes to increased safety.
A modernization is not the same as maintenance or repair. This distinction often leads to disputes between tenant and landlord because the costs are borne differently. In the case of a modernization, the landlord may pass the costs on to the tenant, which results in a rent increase. For maintenance measures, the landlord must bear the costs himself (§ 535 Abs. 1 Satz 2 BGB). If the landlord passes on the modernization costs to the tenant, the tenant can raise a hardship objection if the rent increase represents too great a burden for the tenant. After the rent increase, the rent must not exceed 30–40% of the household's net monthly income. If the landlord sets a new rent that exceeds this 30–40% threshold, the tenant may file a hardship objection.
Financial reasons in favor of modernization
A sensible modernization can reduce energy costs significantly, which—given the skyrocketing electricity and heating bills—is likely the decisive argument for most homeowners. At the same time, optimizing energy efficiency is increasingly becoming a required duty, and the relevant regulations are already very stringent and will likely be expanded further in the future. If final energy consumption can be sustainably reduced, this measure counts as an energy-related modernization.
Furthermore, modernization can open up new usage and income opportunities. For example, converting a cellar or attic can create new living space that can then be rented out. As a landlord, however, certain rights and obligations of both tenant and landlord must be observed.
If the building to be modernized (including rental property) is not intended for personal use but for renting from the outset, improving energy efficiency increases the chances of finding tenants. In addition, you may justify a rent increase because of the lower ancillary costs. If a rental unit, such as an apartment, is already occupied by a tenant, the landlord must announce the modernization measure beforehand. This announcement must be given to the tenant at least three months before the start of the modernization (§ 555 c Abs. 1 BGB). It is also important that the announcement is made in writing. Since the 2013 rent law amendment, tenants can no longer object to the modernization announcement itself; they can only object to the rent increase. However, if the landlord does not comply with the required form and deadline for the announcement, the tenant is not obliged to accept it.
It should also be noted that most modernization measures lead to a substantial increase in the value of a property. This is interesting if you want to sell the property—such as a house or apartment—for a profit. On the other hand, an increase in value has a positive effect on the creditworthiness of the homeowner. As a result, modernization can be worthwhile even if you live in the house yourself. In any case, real estate remains one of the safest investment options overall.
Useful modernization measures for a better energy balance
Heating costs are by far the largest item among ongoing expenses. Unfortunately, a not insignificant portion of costly heat escapes unused from most buildings. A sensible thermal insulation can help. Ideally, this starts with modernizing windows and exterior doors, since most heat is lost through them.
In any case, today's thermally insulated windows also contribute to sound insulation, which in turn has a positive effect on living quality. It should be noted, however, that excessive insulation—as is the case with triple glazing, for example—can also prevent rooms from being warmed by the sun, which would be disadvantageous for heating cost optimization.
Since warm air rises, the roof should also be well insulated. If the attic is not used as living space, insulating the ceiling between floors is usually easier and more cost‑effective. The cellar should also be insulated so that cold from the surrounding ground does not penetrate and then travel up into the living areas. Basement windows and the cellar door to the outside deserve special attention.
Reasons to insulate exterior walls
Exterior walls should also be thermally insulated. There are at least three reasons to insulate from the outside.
- The first reason is that external insulation allows for a comprehensive thermal barrier without so‑called thermal bridges.
- The second reason is that the interior rooms remain continuously habitable, which is not the case with extensive internal insulation.
- The third reason is that with internal insulation the masonry is not warmed by the heating and therefore cannot release heat. Although there are special insulating materials that can at least partially warm the masonry, comparable insulating materials for the exterior exist, so external insulation is clearly the better choice.
If external insulation is not permitted due to building regulations, for example in connection with preservation orders, or is not desired for purely aesthetic reasons, internal insulation is the only sensible alternative.
In addition to extensive insulation measures, modernizing the heating system can help reduce heating costs. Depending on the house's location and the roof's inclination, a solar thermal system for hot water preparation can be worthwhile. It may even be that solar yield is so good that the actual heating system can be relieved by an appropriate solar installation.
If that is the case, you should also consider installing a photovoltaic system to generate electricity, especially since you can feed self-generated electricity into the grid for a fee.
Depending on the modernization, you may be entitled to subsidies
Modernizing a building always involves costs. Just the materials required for a given modernization can be enormous. If you cannot carry out the work yourself, additional modernization costs for skilled craftsmen will apply. Although most of these costs pay off over time, they initially represent a financial burden that few can shoulder without assistance.
Fortunately, many modernization measures are subsidized by the state. This includes at least those modernizations aimed at optimizing energy efficiency and creating additional living space. However, when viewed more closely, subsidies often do not even cover the tax burden associated with the necessary modernization expenses. In addition, the amount of grants has been decreasing for some time.
Nevertheless, you should definitely apply for subsidies. Often the tradespeople involved or the suppliers of the materials will help with the application. They can usually also offer useful advice regarding loans for the modernization.
Financing the modernization
Even though subsidies are a welcome help, they are not enough to fund a complete modernization. However, there are specific loans with reduced interest rates for financing modernization measures, and a conventional loan taken out for modernization can also be a worthwhile investment in the future. Depending on the modernization carried out and the repayment agreement with the lender, the monthly expenses may already decrease noticeably due to the permanently reduced energy consumption.
Obtaining a loan to modernize a property, such as an apartment, should be no problem given that you can offer the property itself as collateral. You should also bear in mind that the property's value usually increases significantly as a result of modernization, which again noticeably improves the chances of obtaining financing.