Modernization risk

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When determining the mortgage lending value of real estate, the modernization risk is the expected costs for necessary adjustment measures, which are necessary in addition to the maintenance costs to maintain marketability and to permanently secure the initial rental level.

The modernization risk is part of the management costs according to Section 11 of the Mortgage Lending Value Determination Ordinance (BelWertV) and is deducted from the annual gross profit. The modernization risk to be applied in the assessment is specified in Annex 1 BelWertV as a proportion of the new construction costs depending on the type of property.

An example of modernization is the adaptation of the technical infrastructure of an office building (EDP cabling, etc.) to the state of the art at regular intervals. It is not enough to maintain the cables once they have been installed and to keep them ready for operation. When new cabling technologies emerge, the entire cabling may have to be replaced.

Example sentences for the modernization risk
(per year, in each case in% of the production costs without ancillary costs and outdoor facilities)
no modernization risk Residential houses, small office buildings, warehouses 0 - 0.3%
low to medium modernization risk larger office buildings, shopping centers 0.2 - 1.2%
higher modernization risk Hotels, department stores 0.5-2.0%
very high modernization risk Clinics, leisure properties, hotels with a particularly high standard 0.75 - 3.0%

Individual evidence

  1. Ordinance on the determination of the mortgage lending value of real estate in accordance with Section 16 Paragraphs 1 and 2 of the Pfandbrief Act (Mortgage Lending Value Determination Ordinance, BelWertV)