Community

Concept and significance of the community in law

The concept Community is one of the central legal terms in German civil law as well as in other areas of law, and generally designates a unit borne by several legal subjects for the purpose of jointly exercising rights, managing, or utilizing an asset or legal position. The legal structure as well as the rights and obligations of participants in a community vary according to its type, origin, and purpose. The following provides a detailed legal overview of all types of communities.

General legal foundations of the community

In civil law, the term “community” lacks an explicit legal definition, but numerous provisions govern the application and legal consequences of different types of communities. The community contrasts with joint ownership (Gesamthand), collectives, and partnerships and is to be distinguished in particular from corporate structures such as the partnership under civil law (GbR).

Co-ownership community (§§ 1008 ff. BGB)

Concept and formation

Die Co-ownership community arises when several persons jointly acquire ownership of an object (§ 1008 BGB). Ownership is assigned as a fractional share, i.e., an ideal portion of the entire object.

Legal relations of co-owners

• Power of disposal: Each co-owner is free to dispose of their share.
• Administration: Decisions regarding the administration and use of the object generally require the consent of all co-owners (§ 744 BGB).
• Usage rights: Use is carried out jointly; deviations require an agreement.
• Dissolution of the community: Every co-owner may at any time demand the dissolution of the community (§ 749 BGB), which generally leads to division of the object or its sale.

Distinction from partnership by joint ownership (Gesamthandgemeinschaft)

In contrast to joint ownership (e.g., inheritance community, GbR), where the participants jointly dispose of the assets, in co-ownership by fractional share each person holds a transferable and chargeable share.

Communities by joint ownership (Gesamthandsgemeinschaften)

Characteristics and applications

The community by joint ownership is characterized by the fact that the community assets (joint assets) belong collectively to the association of participants; ownership by fractions does not exist.

Examples are:

• Inheritance community (§§ 2032 ff. BGB)
• Partnership under civil law (§§ 705 ff. BGB)
• Community of accrued gains (§§ 1415 ff. BGB, marital property law)

Rights and obligations of joint owners

• Disposal: Dispositions of joint assets may only be made jointly by all participants.
• Administration: Internal management is governed by statutory provisions or contractual agreements.
• Settlement: Dissolution of the community (settlement) leads to a settlement of the assets and termination of the community.

Inheritance community (§§ 2032 ff. BGB)

Formation and Purpose

An Inheritance community arises by operation of law upon the death of a person, provided several heirs exist. The estate as a whole passes to the heirs as a community by joint ownership.

Rights and obligations of co-heirs

• Joint administration: All administrative measures require a majority of the heirs (§ 2038 BGB).
• Restriction on disposition: Dispositions over estate objects are only possible with the consent of all co-heirs or as otherwise provided by law.
• Settlement claim: Each co-heir may at any time demand settlement (§ 2042 BGB).

Community of apartment owners (WEG community)

Die Community of apartment owners is a statutory special form of a community (§§ 10, 21 WEG – Act on Apartment Ownership), which is created upon registration of the first special owner in the land register.

Legal status and organs

• Legal capacity: The community of apartment owners has partial legal capacity and may be the holder of rights and obligations (§ 9a WEG).
• Community property: The community property is held jointly by all apartment owners.
• Administration and adoption of resolutions: Decisions regarding administration and maintenance are made by the owners’ assembly.

Community of fractional ownership (§§ 741 ff. BGB)

Basic structure

Die Community of fractional ownership describes the legal entity in which several persons participate in a right or object as ideal fractional owners. It applies where neither law nor contract stipulate joint ownership.

Administration and use

• Parallel management: Measures of proper administration can be taken by majority resolution (§ 745 para. 1 BGB).
• Economic utilization: The community may regulate shared use and distribution of user revenues among the participants.

Community in other areas of law

Law of associations

According to §§ 21 ff. BGB, a community may be organized as an association, which acts as a legal entity and bearer of rights.

Tax law

For tax purposes, a community is regularly a partnership (e.g., inheritance community or partners in a partnership), subject to principles of tax transparency.

Public law

In public law, communities include, for example, special-purpose associations or public law corporations (such as municipalities), which jointly fulfill a specific purpose as a community.

Dissolution and settlement of the community

The community is, by nature, usually conceived as a transitional form. Settlement takes place upon application by a participant, unless dissolution is legally or contractually prohibited.

Procedure

• Division: Division of the shared object shall take place according to statutory provisions or agreements made.
• Auction: If physical division is not possible, an auction can take place under the provisions of the Act on Forced Auction.

Rights and obligations of community members

• Right of termination at any time: In many cases, each participant can dissolve the community at any time to preserve individual freedom.
• Obligation to cooperate: Participation in the administration and maintenance of the community matter is mandatory.
• Liability: Each participant is liable in proportion to their share, unless the law prescribes joint and several liability or other liability arrangements.

Legal distinction and significance

Die Community is differentiated from partnerships, legal associations or corporations particularly by the fact that it lacks its own legal personality (exception: community of apartment owners with partial legal capacity).

The community plays a significant role in German law as a fundamental institution for jointly holding, managing, and exploiting rights and assets, and is, alongside partnership, association, and corporation, a central legal institution.

Literature and further information

• Palandt, Civil Code, commentary on §§ 741 ff., 1008 ff., 2032 ff. BGB
• Schmidt, Joint Ownership (Series: Specialist Lawyer’s Handbook), Verlag C. H. Beck
• Bamberger/Roth, BeckOK BGB, current commentary on community-related provisions

Note: This presentation provides a comprehensive overview of the most important legal aspects of the community. For detailed questions, the relevant legal texts should be consulted.

Frequently asked questions

Who is liable within a community for damages incurred?

In a community, such as a partnership under civil law (GbR), a community of apartment owners (WEG), or an inheritance community, the question often arises as to who is liable for damages caused jointly or by individual members. Liability provisions depend decisively on the legal form of the community. In a GbR, all partners are, as a rule, liable jointly (as joint and several debtors) and with their private assets for obligations entered into in the name of the community (§ 421 BGB, § 128 HGB by analogy). In a WEG, however, each apartment owner is liable only in proportion to their co-ownership share for shared costs and damages (§ 16 WEG). In an inheritance community, the heirs are also jointly and severally liable for estate debts, i.e., creditors can, in principle, turn to any co-heir (§ 2058 BGB). A contractual limitation of liability is possible in some cases but is often only effective to a limited extent against third parties. If damages are caused by individual members, it depends on whether they acted within the context of the community relationship and whether internal settlement among the members occurs.

How are resolutions passed within a legal community?

The adoption of resolutions within a legal community is likewise determined by legal – and, where available, contractual – regulations. In a GbR, resolutions are, as a rule, passed unanimously (§ 709 para. 1 BGB), unless otherwise agreed. Each partner thus has a right of veto. In communities of apartment owners, resolutions are passed according to heads, co-ownership shares, or by apartments (§ 25 WEG), and most decisions can be made by a simple majority of those present and represented; for certain matters, however, a qualified majority or unanimity is required. In an inheritance community, a majority of votes is generally decisive for the administration of the estate, with voting rights determined by shares in the estate (§ 2038, § 745 para. 1 BGB). For particularly important actions or dispositions over the assets as a whole, however, unanimity is required (§ 2040 BGB). If no regulation exists or if there are uncertainties regarding voting competence or majority, a judicial clarification is often advisable.

Who represents the community externally and how is this regulated?

External representation of a community is a central legal issue. In a GbR, representation is generally exercised jointly by all partners, unless otherwise provided in the partnership agreement (§ 714 BGB). A deviation, such as sole power of representation, may be stipulated in the agreement. In a WEG, representation is typically carried out by the appointed manager, who takes on communal and administrative tasks and lawfully represents the community externally (§ 27 WEG). In an inheritance community, generally all heirs may only act jointly; individual actions are thus only effective if approved by all co-heirs or if a power of attorney exists (§ 2039 BGB). If there are several representatives, attention must be paid to whether joint or sole representation has been agreed, as this affects the community’s ability to act.

What are the legal requirements for joining and leaving a community?

Joining and leaving as a member depends on the type of community and is governed differently by law. In a GbR, the admission of additional partners is generally possible by unanimous decision of the existing partners (§ 709 BGB). Leaving is only possible in statutorily provided cases or according to the rules of the partnership agreement (§ 723 BGB, right of termination). If a partner dies, the GbR is dissolved unless a continuation clause exists. In a community of apartment owners, acquisition of ownership requires notarization and registration in the land register as a prerequisite for entry. ‘Leaving’ in the literal sense is not possible but occurs de facto through the sale of the unit. In an inheritance community, an heir joins upon acceptance of the inheritance and leaves through renunciation, disclaimer, or assignment of the inheritance share (§ 1942 BGB). The community relationship generally continues until the estate has been settled.

How are disputes within a community legally resolved?

Disputes within a community are resolved according to the applicable legal foundations and any agreed dispute resolution mechanisms. In a GbR, the law does not provide for special conciliation procedures, so disagreements must, if necessary, be settled in the ordinary courts. Many partnership agreements, however, contain arbitration clauses or mediation agreements. In a WEG, resolutions violating the law or the community regulations may be judicially reviewed by a rescission action (§ 44 WEG). In inheritance communities, in the event of disputes over administration or settlement of the estate, recourse to civil courts is also possible, in particular through actions for consent to certain measures or for distribution of the inheritance. Before initiating court proceedings, it is regularly advisable to try amicable settlement, for example, by involving a neutral third party or a Rechtsanwalt.

What are the legal consequences of dissolving a community?

Dissolution of a community has different consequences depending on legal form. In a GbR, dissolution leads to what is called the liquidation phase, during which existing business is concluded, the partnership assets are realized, and any surplus after satisfaction of the liabilities is distributed among the partners according to their shares (§ 730 ff. BGB). In a WEG, dissolution in the true sense is not provided for, since every owner has inalienable special property. The community continues as long as at least two owners exist. The inheritance community ends with the complete settlement of the estate, i.e., the distribution of assets in accordance with the inheritance shares to the co-heirs (§ 2042 BGB). During the dissolution process, members’ ongoing rights and obligations, especially regarding transparency and proper winding-up, must be strictly observed. In the event of disputes during liquidation, the court can be called upon.

What rights to information and disclosure do members of a community have?

Members of a community generally have extensive rights to information and disclosure vis-à-vis other community members or the administrative bodies. In a GbR, every partner may inspect the company’s books and documents at any time and inform themselves about company matters (§ 716 BGB). In homeowner associations, there is a comprehensive right to inspect administrative documents and minutes, but not to receive original documents (§ 18 WEG, court-specified). In communities of heirs, every co-heir has entitlement to information and accounting claims regarding the administration of the estate against the other co-heirs, especially when one of the heirs is acting as the administrator of the estate (§ 2027, § 2038 para. 2 BGB). This right to information serves as a means of control and transparency, and can be enforced in court if necessary.