Buildings insurance: who pays the costs – tenant or landlord?
03.04.25
10
Minutes
Katrin Straub
Managing Director at nextsure
The question of who bears the cost of buildings insurance affects millions of tenants and landlords in Germany. Unclear arrangements can quickly lead to financial disagreements. This article examines the responsibilities and shows how costs can be distributed fairly and in compliance with the law.
The topic in brief and concise terms
The landlord takes out the building insurance, but can pass the costs on to the tenants if this is contractually agreed through the service charges.
The basis for the allocation is Section 2 No. 13 of the Operating Costs Ordinance (BetrKV); the principle of economic efficiency must be observed.
Tenants have the right to inspect the insurance policy and to review the service charge statement within twelve months and, if necessary, lodge an objection.
Understanding the cost allocation of residential buildings insurance
The responsibility for taking out buildings insurance lies primarily with the property owner. They also initially pay the insurance premiums. The annual costs for a detached house with one hundred square metres can be between two hundred and seven hundred euros.
However, under certain conditions, these costs can be passed on to tenants. This is a common practice, but it must be clearly regulated in the tenancy agreement. Without such an agreement, the landlord bears the costs alone. The apportionment is then usually made via the annual service charge statement. For tenants, it is important to know that they must bear part of these costs if this has been contractually agreed.
Key points on cost coverage
Here are the most important points on the question of who pays for buildings insurance:
The landlord takes out the buildings insurance and pays the premiums.
The costs can be passed on to tenants if this is agreed in the tenancy agreement.
The apportionment takes place via the service charge statement.
The legal basis is § 2 number 13 of the Betriebskostenverordnung (BetrKV).
Tenants have the right to inspect the insurance policy.
Not all insurance costs are chargeable to tenants; pure landlord risks such as rent loss insurance are excluded unless rent loss is part of the buildings insurance.
These quick facts offer a first overview of the complex field of insurance costs. The following sections explore these aspects in more depth with practical examples and legal details.
Apply the legal basis for apportioning insurance costs precisely
The most important legal basis for the apportionment of operating costs, including residential building insurance, is the Operating Costs Ordinance (BetrKV). Specifically, section 2 no. 13 BetrKV lists the „costs of insuring the building against fire, storm, water and other natural hazards“ as recoverable ancillary costs. This provision creates the basis for landlords not having to bear the premiums alone. An natural hazard insurance policy can also fall under this.
For the apportionment to be lawful, it must be expressly agreed in the tenancy agreement. A general reference to the BetrKV is often sufficient. If such a clause is missing, the landlord bears the costs. The costs must be shown clearly and comprehensibly in the service charge statement as „insurance“ or „buildings insurance“; a collective label such as „other ancillary costs“ is insufficient. Tenants have the right to inspect the insurance policy and proof of payment in order to check the accuracy of the statement and compliance with the principle of economic efficiency. This principle obliges the landlord not to take out unnecessarily expensive insurance. Exceeding the usual market costs by more than twenty per cent may be considered uneconomical.
The correct application of these legal requirements is crucial for a conflict-free tenancy.
Structuring the allocation of residential building insurance correctly in practice
In practice, the allocation of residential building insurance costs is usually based on the proportion of living space. For example, if a flat has eighty of a total four hundred square metres of living space in the building, the tenant of that flat bears twenty per cent of the insurance costs. This allocation key must be specified in the tenancy agreement or, if no arrangement has been made, follows from Section 556a of the German Civil Code (BGB), which likewise provides for living space as the standard basis.
A landlord who owns a house with three flats (one hundred square metres, two at fifty square metres) could divide the costs accordingly: fifty per cent for the large flat, twenty-five per cent each for the smaller ones. What is important is that only the actual costs that may be apportioned are passed on. Costs that cannot be apportioned include, for example, the costs of pure rent default insurance or the landlord's private liability insurance. An exception is lost rent caused by damage to the building that is co-insured under the building insurance; according to a Federal Court of Justice ruling (VIII ZR 38/17), these costs may be apportioned. It is advisable for landlords to check the necessary insurance policies carefully.
The landlord should keep the following documents available for transparent apportionment:
The current insurance policy.
A clear overview of the apportioned cost shares.
The exact billing period.
Evidence of the premium payments made.
Careful documentation and clear communication help avoid misunderstandings regarding the service charge statement.
Expert knowledge: rights, obligations and recent rulings on cost coverage
Both tenants and landlords have specific rights and obligations regarding buildings insurance. Tenants may inspect the policy to check whether the premium is reasonable and correctly apportioned. If a tenant finds that the insurance is disproportionately expensive – for example, more than twenty per cent above the average of comparable policies – they can lodge an objection. The deadline for objecting to the service charge statement is twelve months after receipt.
Landlords are obliged to observe the principle of economic efficiency. This means they may not take out an overpriced policy and pass the cost on to tenants. They must also itemise the costs in the service charge statement accurately and transparently. Our expert tip: landlords should regularly review the terms of their buildings insurance and adjust them where necessary to ensure market-appropriate premiums. This is particularly relevant because the question “Do you need buildings insurance?” is usually answered with yes for the owner, but the allocation of costs is flexible.
A significant ruling by the Federal Court of Justice (BGH, case no. VIII ZR 38/17) confirmed that costs for loss of rent, which is covered as part of the buildings insurance, may be passed on to tenants. This differs from a separate loss-of-rent insurance, the cost of which must be borne by the landlord. For owners’ associations, taking out fire insurance, usually as part of more comprehensive buildings insurance, is even required by law (§ 19(2) No. 3 WEG). Knowing such details, as well as the difference between buildings insurance and household contents insurance, is advantageous for everyone involved.
Identifying cost factors and optimisation potential in residential buildings insurance
The cost of buildings insurance is influenced by a range of factors. These include the sum insured, the size and year of construction of the building, the construction method and the property's location. A house in a region with a high risk of natural disasters will tend to have higher premiums. Annual costs for a detached house can easily range from two hundred to seven hundred euros or more. The optional add-ons selected, such as extended natural perils insurance, and the level of the excess also play a role.
Landlords can often achieve significant savings by carefully comparing different offers, without compromising insurance cover. Ultimately, this also benefits tenants, as only reasonable costs may be passed on. The cheapest tariff is not always the best, but good value for money is crucial. nextsure will be happy to help you analyse your existing insurance situation and identify areas for optimisation. A change of policyholder or cancellation after purchasing a house are also situations in which a reassessment makes sense.
By proactively addressing the cost factors and regularly reviewing the insurance cover, both landlords and tenants can ensure that buildings insurance serves its purpose without placing undue strain on finances.
Your next steps to the best residential buildings insurance
The question “Who pays the residential building insurance?” has now been comprehensively answered. It is clear that a clear contractual arrangement and knowledge of the legal framework are crucial. For landlords, this means passing on the costs correctly and observing the principle of economic efficiency. For tenants, it is important to know their rights and carefully check the service charge statement. A well-chosen residential building insurance policy protects the value of the property and provides security in the event of unforeseen incidents. The costs can be fairly distributed if all parties act in an informed manner.
To ensure that your insurance cover is optimally tailored to your needs and your property, and that you do not pay more than necessary, an individual assessment is recommended. Make use of the expertise of specialists to review your current policy or find the right cover for your situation. Such advice can help you optimise costs while ensuring comprehensive protection.
Request an individual risk assessment now: Have your insurance situation reviewed free of charge and receive specific suggestions for optimisation.
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FAQ
Who is responsible for arranging the buildings insurance?
The owner of the property, usually the landlord, is generally responsible for arranging the residential building insurance.
What does the principle of cost-effectiveness mean in buildings insurance?
The duty of economic efficiency requires the landlord not to take out an excessively expensive residential building insurance policy, the costs of which are passed on to the tenants. The premiums should be in line with market rates.
Can the costs of natural hazard insurance be passed on?
Yes, the costs of insurance against natural hazards (such as flooding, earthquakes) may be apportioned to tenants as part of the building’s property insurance in accordance with § 2 No. 13 of the BetrKV, provided this is agreed in the tenancy agreement.
What happens to the buildings insurance when ownership changes?
When a property is sold, the existing residential building insurance policy usually transfers to the new owner. However, they have a special right of cancellation. You can find more information in our guide on the topic of change of ownership in residential building insurance.
What are the average costs of buildings insurance?
The annual costs for a detached house of around one hundred square metres in Germany average between two hundred and seven hundred euros, but can vary greatly depending on the region and scope of services.
What is the deadline for objecting to the service charge statement?
After receiving the service charge statement, tenants have twelve months to review it and submit a written objection to the landlord if they discover any errors.
