On January 23, 2025, the Hessian Fiscal Court (Ref. 3 K 663/24) confirmed that the new Hessian State Property Tax Act (HGrStG) meets constitutional requirements .
Background to the lawsuit
A private real estate owner who owns a two-family house on a developed plot challenged the basic property tax assessment amount set by the tax office as of the key date January 1, 2022. She argued that the new state model violates the principle of certainty pursuant to Art. 20 Sec. 3 of the Basic Law, as well as the principle of equality under Art. 3 Sec. 1 of the Basic Law. In her view, the assessment is excessively based on area-related figures, without adequately taking into account actual infrastructure costs, particularly since the model primarily aimed to ensure a consistent level of revenue .
Statutory structure of the Hessian model
H3 Area-Factor System
The HGrStG bases its property valuation primarily on the land and building area, multiplied by standardized assessment figures and location factors based on standard land values .
Role of standard land values
Standard land values are only used to determine a location factor, but do not themselves serve as an assessment basis in the sense of a value-based tax . Thus, the calculation method remains typifying, but not explicitly value-oriented.
Court’s assessment
Principle of certainty
The Fiscal Court concurred with the Federal Constitutional Court in the view that at the time of issuance of the assessment notice, the specific tax amount does not have to be known precisely – it is sufficient that its approximate magnitude is reliably predictable . As the recommended uniform levy rates for municipalities are expected to limit fluctuations to a temporary scope, there are no violations of the rule of law principle .
Principle of ability to pay and equivalence
The court found that ownership of real property generally indicates ability to pay within the meaning of Art. 3 of the Basic Law. The linking to area and location is appropriate, since larger properties typically cause higher infrastructure usage – regardless of the year of construction . Moreover, the distinction between developed and undeveloped land is not only factually justified but legally required, as undeveloped plots require significantly fewer municipal services .
Principle of logical consistency & municipal infrastructure
The court saw the assumption that larger properties utilize more municipal infrastructure as an admissible instrument of typification. Capturing the actual cost structures of municipalities would be inadmissible and unnecessary, as the property tax does not constitute a direct consideration for specific services .
Hessian Constitution
Finally, the court affirmed that Art. 47 Sec. 1 of the Hessian State Constitution, which requires consideration of social and family differences in taxation, was not violated. Property tax is designed as an object-related tax and does not account for person-related factors .
Outlook
An appeal to the Federal Fiscal Court was permitted due to the fundamental importance of the case . Consequently, a supreme court decision on the general constitutionality of the Hessian regulation may be forthcoming.
Significance for those affected
- Planning security
- Owners can now more reliably estimate their tax burden, as the HGrStG uses transparent parameters.
- No computation-free return to standard values
- By omitting municipality-specific infrastructure costs, the system remains practical and comparable.
- Future levy rate decisions
- Another source of risk remains municipal sovereignty over levy rates – if the rate is increased, a higher burden must be expected from now on.
Conclusion
With its judgment, the Hessian Fiscal Court confirms the constitutionality of the state law on property tax reform. It adheres to constitutional guidelines – particularly with regard to certainty, equality, and ability to pay – and finds the typification via area and location factors to be justified and practical. The court’s confirmation provides affected owners and the Hessian administration with greater legal certainty in tax matters. The final say now rests with the Federal Fiscal Court.
For companies, investors, or high-net-worth individuals who see a need for action in light of the new property tax regulations, MTR Legal Rechtsanwälte offers tailored support. Whether you need to adjust investment or real estate strategies, or require legal assistance in opposition and court proceedings — please feel free to contact us.
