Passing Property Tax (Grundsteuer) to Tenants in Germany: 2026 Landlord Guide

Property Tax: A Significant Ongoing Cost for Property Owners

Property tax (Grundsteuer) is one of the most significant recurring costs for real estate owners in Germany. It is levied by local municipalities and – contrary to what many owners assume – is not automatically borne by the tenant. Whether and to what extent property tax can be passed on to tenants depends on the contractual agreement and correct billing.

The legal basis for recoverability is §2 No. 1 of the Operating Costs Ordinance (Betriebskostenverordnung / BetrKV), which explicitly lists property tax as a recoverable operating cost. Since January 1, 2025, new assessment bases apply following Germany's property tax reform, which has led to changed property tax amounts in many municipalities. For landlords in the Rhine-Main region, it is therefore particularly important to understand the current legal framework and the concrete effects of the reform.

In this article, we explain step by step how property tax is passed on to tenants, what has changed due to the reform, and which practical tips will make billing easier for you as a landlord. As a professional rental management company in the Rhine-Main region, we support you with all questions relating to operating costs and utility billing.

What Is Property Tax (Grundsteuer)?

Definition and Legal Basis

Property tax is a municipal tax on real property, governed by the Property Tax Act (Grundsteuergesetz / GrStG). The taxpayer is always the owner registered in the land register – not the tenant. The tax is levied annually by the respective municipality and is due in four quarterly instalments on February 15, May 15, August 15, and November 15.

Property Tax A and Property Tax B

German law distinguishes two types of property tax:

Property Tax A: (agricultural): Applies to agricultural and forestry enterprises. This variant is not relevant for most landlords.

Property Tax B: (built-up): Applies to developed and undeveloped land, including rental apartment buildings, condominiums, and commercial properties. This is the property tax relevant to landlords.

Calculation: Property Tax Value × Tax Rate Number × Municipal Multiplier

Property tax is calculated in three steps:

Property Tax Value (Grundsteuerwert, formerly: Einheitswert): Determined by the tax office according to the respective state model. Since 2025, the new property tax values apply.

Tax Rate Number (Steuermesszahl): A legally defined factor that converts the property tax value into the tax assessment amount.

Municipal Multiplier (Hebesatz): Set by each municipality individually and varies considerably – in the Rhine-Main region, for example, between 440% and 595%.

Formula:** Property Tax Value × Tax Rate Number = Tax Assessment Amount × Municipal Multiplier = **annual property tax

Who Pays the Property Tax?

The person liable for property tax vis-à-vis the tax office is always the owner. However, the owner can pass the property tax on to the tenant as part of the operating cost statement – provided this is agreed in the lease.

Can Property Tax Be Passed on to Tenants?

Legal Basis: §2 No. 1 BetrKV

The Operating Costs Ordinance lists in §2 No. 1 BetrKV the "ongoing public charges on the property" explicitly as recoverable operating costs. Property tax is the most important case covered by this provision. This means: Property tax can generally be passed on to the tenant.

This applies even if the property tax has increased significantly due to the 2025 property tax reform. The Federal Court of Justice (BGH) has consistently held that recoverability does not depend on the amount of property tax – as long as the formal requirements are met.

Requirement: Agreement in the Lease

Passing property tax on to the tenant requires a valid operating cost clause in the lease agreement. There are two common variants:

Operating cost flat rate: The tenant pays a fixed monthly amount for all operating costs. Additional charges are not possible under this arrangement.

Operating cost prepayment with annual statement: The tenant makes monthly advance payments, and the landlord prepares an annual utility cost statement. This is the more common and more transparent variant for both parties.

Most standard German lease templates (e.g., from the German Tenants' Association or Haus & Grund) already contain such a clause. Nevertheless, review your lease carefully – if the agreement is missing, you as the landlord bear the property tax alone.

> Important: Separate tenant consent to the property tax allocation is not required. The operating cost clause in the lease is sufficient.

Allocation Key: Living Space or Co-Ownership Shares

In multi-unit buildings, the property tax must be distributed among individual tenants according to a fair allocation key. Common methods include:

Living space: (most common): Property tax is allocated proportionally based on the floor area of each unit.

Co-ownership shares (MEA):: For condominiums, the key often follows the co-ownership shares registered in the land register.

Uniform key:: The allocation key agreed in the lease for all operating costs also applies to property tax.

Calculation Example: Multi-Family House with Four Units

In this example, the annual property tax of €1,200 is allocated by living space across the four rental units.

Property Tax Reform 2025: What Changed for Landlords

New Assessment Bases from January 2025

Germany's property tax reform took effect on January 1, 2025. It was triggered by a 2018 ruling of the Federal Constitutional Court (Bundesverfassungsgericht), which declared the previous assessed values (Einheitswerte) unconstitutional – they were based on data from 1964 (West Germany) and 1935 (East Germany) and no longer reflected actual property values.

The reform brings two key changes:

New property tax values: All approximately 36 million properties in Germany were reassessed. The new property tax value notices (Grundsteuerwertbescheide) have been issued by tax offices since 2022.

Adjusted tax rate numbers: To compensate for the new, higher property tax values, the tax rate numbers were significantly reduced.

Federal Model vs. State Models (Hesse: Area-Factor Model)

The federal government developed a value-based model that uses standard land values and net cold rents for assessment. However, individual states had the option to introduce their own models. Relevant for the Rhine-Main region:

Hesse: uses the Area-Factor Model (Flächen-Faktor-Modell): Property tax is calculated based on the plot and building area, multiplied by a factor that accounts for location. This model is designed to prevent excessive burden in high-price locations (such as Frankfurt or Wiesbaden).

Rhineland-Palatinate: (relevant for Mainz) adopted the federal model, i.e., the value-based approach.

Impact on Property Tax Amounts

The reform was designed to be revenue-neutral – municipalities were expected to adjust their multipliers so that total revenue remains constant. In practice, however, there are significant shifts:

Winners:: Owners of properties in less sought-after locations, older existing buildings with low standard land values.

Losers:: Owners in prime locations with high standard land values, large plots, commercial properties.

Case-by-case:: Whether your property tax has risen or fallen depends on the specific location, plot and building size, and the adjusted multiplier of your municipality.

> Practical tip: Compare your 2025 property tax notice with the previous year's notice. If the property tax has increased significantly, it is worth checking the property tax value notice for errors. The objection deadline is typically four weeks after notification.

What Happens If Property Tax Increases Significantly?

Even with a substantial increase in property tax due to the reform:

Recoverability remains unchanged: – property tax is and remains a recoverable operating cost item.

No separate tenant consent: is required, as long as the operating cost clause in the lease is valid.

The landlord must reflect the increased property tax in the next operating cost statement and adjust prepayments if necessary.

For tenants, rising property tax means higher service charges. Combined with the rent cap (Mietpreisbremse), this can noticeably increase the total housing cost – even if the net cold rent remains unchanged.

Property Tax in the Utility Cost Statement

Correct Presentation

Property tax must be presented transparently and comprehensibly in the utility cost statement. The following information is required:

Cost item designation: "Grundsteuer" or "Ongoing public charges on the property"

Total amount: of property tax for the billing year

Applied allocation key (e.g., living space)

Tenant's share: of the total amount

Advance payments: made and resulting balance

For more details on correctly preparing utility cost statements, see our guide: Utility Cost Statement – Deadlines & Obligations for Landlords.

Billing Period and Mid-Year Adjustments

The billing period for property tax follows the lease-agreed billing period (typically the calendar year). If the municipality changes the property tax multiplier mid-year, the amount actually paid is decisive.

In case of a tenant change during the billing period, the property tax is allocated proportionally to the respective tenants. The actual months of tenancy (pro rata temporis) are decisive.

Common Errors in Property Tax Allocation

Property Tax in the Rhine-Main Region: Municipal Multipliers Compared

Property tax levels vary significantly across the Rhine-Main region, as municipalities set their multipliers individually. In the course of the property tax reform, many municipalities adjusted their multipliers effective January 1, 2025. The following table shows the current multipliers for key cities:

> Note: Municipal multipliers can change annually. Check the current property tax notice from your municipality. The figures above reflect the 2025/2026 status.

The differences are considerable: With an identical tax assessment amount of €500, the annual property tax in Mainz is €2,200, while in Offenbach it reaches €2,975 – a difference of €775.

Property Tax for Condominiums (WEG)

A common misconception concerns property tax for condominiums within a homeowners' association (Wohnungseigentümergemeinschaft / WEG): Property tax does not flow through the HOA annual statement. Each owner receives their own property tax notice directly from the tax office and pays the property tax themselves.

If you rent out your condominium, you can still pass the property tax on to your tenant via the individual utility cost statement – provided the lease agreement allows for it. The property tax then appears as a line item in your individual utility cost statement, not in the HOA annual statement.

Practical Tips for Landlords

1. Review Your Lease: Is the Allocation Agreed?

Take your lease agreement and check whether it contains a valid operating cost clause. Look for phrases such as:

"The tenant bears the operating costs in accordance with §2 BetrKV"

"The tenant bears the operating costs listed in the appendix"

"In addition to rent, operating costs are payable in accordance with the Operating Costs Ordinance"

2. Review Property Tax Notices Promptly

Carefully review every new property tax notice for:

Correct property and building data: (area, year of construction, usage type)

Property tax value:: Does it match the property tax value notice from the tax office?

Multiplier:: Has the municipality adjusted the multiplier?

Objection deadline:: For erroneous notices, the deadline is typically four weeks.

3. Update Operating Cost Clauses When Re-Letting

Use every new tenancy to update your lease agreement. A current, legally compliant operating cost clause protects you from later disputes. Pay attention to:

Reference to §2 BetrKV (not to the outdated Appendix 3 of §27 II. BV)

Clear regulation of the allocation key

Agreement on advance payments with annual statement

4. Digital Property Management Simplifies Billing

A professional, digital rental management service automates the entire process: from importing the property tax notice, through distribution according to the correct key, to timely preparation of the utility cost statement. Error sources are minimised, and you as the landlord save time and effort.

5. Adjust Advance Payments in a Timely Manner

If property tax has increased due to the reform, you should adjust your tenants' monthly advance payments promptly. This avoids large back-payments at year-end, which frequently lead to disputes. Adjustment is possible after each utility cost statement (§560 BGB).

Frequently Asked Questions About Property Tax Allocation

Can the landlord pass the full increased property tax on to the tenant?

Yes, provided the lease agreement includes a valid operating cost clause. Property tax is explicitly listed as a recoverable operating cost under §2 No. 1 BetrKV. Even a property tax that has increased due to the 2025 reform can be passed through in full – no separate tenant consent is required.

Does the tenant need to consent to the property tax allocation?

No, separate consent is not required. The only prerequisite is that the lease contains a valid operating cost clause that covers property tax. This is the case in most standard German lease agreements.

How is property tax handled in condominiums (WEG)?

In condominiums, each owner pays their property tax directly to the tax office – it does not flow through the HOA (WEG) annual statement. Landlords who rent out a condominium unit can pass the property tax on to their tenant via the individual utility cost statement.

How is property tax allocated when tenants change mid-year?

When a tenant changes during the billing period, the property tax is allocated proportionally (pro rata temporis) to the respective tenants. The allocation is based on the actual months of tenancy.

Professional Rental Management with Verto

Correctly allocating property tax, reviewing tax notices, and preparing timely utility cost statements are tasks that require precision and expertise. As a digital rental management company in Frankfurt and the Rhine-Main region, we handle these tasks for you – transparently, efficiently, and in full legal compliance.

Our rental management services include:

Review and processing: of all property tax notices

Correct allocation: according to the agreed distribution key

Timely utility cost statements: – every year, without delay

Adjustment of advance payments: when property tax changes

Digital owner portal: with real-time overview of all costs

Get in touch – we are happy to advise you on property tax allocation

---

*Last updated: February 2026. This article is for general informational purposes and does not constitute individual legal or tax advice. Municipal multiplier figures reflect the 2025/2026 status and may change through municipal decisions.*