KfW 261 for an existing rental building: how renovation funding fits a WEG project

KfW 261 can finance the renovation of an existing rental building to an efficiency-house standard (Effizienzhaus), but in a condominium it only works as a collective project. The owners' association (Wohnungseigentümergemeinschaft, WEG) resolves the works and the financing, an energy-efficiency expert plans and confirms them, and the loan is applied for before work starts, either by the WEG through its administrator or by each owner for their share. For owners and WEGs it is a loan, not a grant: up to €150,000 per unit, with a repayment subsidy (Tilgungszuschuss) credited against the debt once the standard is proven. Buying a flat is not a renovation, and 261 does not fund it.

Whether 261 is the right programme at all is covered in our KfW routing matrix.

Under the federal guideline in force since 21 July 2026 (product sheet, Merkblatt, valid from 24 September 2026), KfW 261 funds renovation to Effizienzhaus 85, 70, 55, 40 or Denkmal (listed and similar buildings), each in a renewable-energy class (EE) or a sustainability class (NH, which needs a QNG-PLUS certificate) (261 product sheet). The key conditions:

• The building application must be at least five years old.
• At least 65 per cent of heating and cooling energy must come from renewables or unavoidable waste heat. This is a funding condition; the statutory 65 per cent rule was repealed in July 2026 (energy certificates and renovation costs). Gas heating is not funded.
• The loan covers up to 100 per cent of eligible costs, capped at €150,000 per unit after renovation, including VAT if the borrower cannot reclaim it. Planning fees, making good and the administrator's extra costs can count (KfW Infoblatt).
• 261 cannot be combined with individual-measure funding (BEG EM), which includes the KfW 458 heating grant; three years must pass between them. For a heating-only project, see heating grants for rented apartments.
• The building must stay in residential use for ten years. Letting counts.

The subsidy is a percentage of the approved loan:

Source: 261 product sheet and BEG WG guideline, section 8.4. The best case, 40 NH with both bonuses, is 40 per cent.

A worst-performing building has a final energy demand of at least 300 kWh per square metre a year or a demand certificate in class H; one with more than five units and central hot water also qualifies if built in 1957 or earlier with an essentially unrenovated envelope (KfW Infoblatt, 1.6).

Buying an existing apartment is not a funded measure. The only purchase route is the first purchase (Ersterwerb) of a building or flat freshly renovated to an Effizienzhaus standard, within 12 months of formal acceptance, with the renovation costs shown separately. You apply before signing, or sign with a condition linked to KfW's approval and apply before the first payment (261 product sheet). A resale flat does not qualify, however much work it needs.

Conversely, buying into a building with a running WEG loan puts its instalments in your service charge (Hausgeld); read the resolutions and economic plan first (the checks to make before buying).

For work on the common property (Gemeinschaftseigentum), KfW allows two routes (KfW 261):

1. The WEG applies as one borrower, through its administrator or another authorised representative, on the basis of resolutions on the renovation and the application.
2. Each owner applies for their share of the eligible costs, as allocated by the WEG's resolutions.

Work solely inside one owner's unit (Sondereigentum) is that owner's application.

Majority. Insulation, new windows or a heat pump beyond like-for-like repair are usually structural changes (bauliche Veränderungen) (§ 20(1) WEG); like-for-like repair is maintenance (§ 19(2) no. 2). Both pass by a majority of votes cast, one vote per owner unless the declaration of division (Teilungserklärung) says otherwise (§ 25 WEG). Changes that fundamentally reshape the building, or unfairly disadvantage an owner without consent, cannot be resolved (§ 20(4)).

Who pays. A majority alone does not make every owner pay. All owners share the cost by co-ownership share (Miteigentumsanteil, MEA) if the change passed with more than two-thirds of votes cast and half of all shares (unless disproportionately expensive), or if its costs pay back within a reasonable period (§ 21(2) WEG). Otherwise only those who voted for it pay and benefit (§ 21(3)). Owners can resolve a different split, but not one that shifts costs onto owners who would otherwise bear none (§ 21(5)). That payback test is for a lawyer to judge.

Borrowing. A WEG can take on debts (§ 9a(1) WEG), and the administrator may sign a loan contract only on the basis of an owners' resolution (§ 9b(1)). Ruling on a KfW façade loan, the Federal Court of Justice held that a long-term loan can be proper administration, but the resolution must state the measure, amount, term, interest rate or cap and whether the loan is fully repaid, and the minutes must show that owners discussed the risk of covering others' defaults (BGH, V ZR 244/14, 25 September 2015). It predates the 2020 WEG reform.

Liability. Towards the bank, each owner is liable only in proportion to their share for WEG debts that arose or fell due during their ownership; after a sale, the five-year rule for departing partners applies (§ 9a(4) WEG; § 728b BGB). Internally, a defaulting owner's share can return to the others as higher Hausgeld or a special levy (Sonderumlage).

Funding requires an expert from the federal Energy Efficiency Expert List, independent of the contractors and invoiced separately. The expert develops the overall concept, issues the confirmation needed for the application (Bestätigung zum Antrag, BzA), supervises the works, then confirms the standard reached and the eligible costs (Bestätigung nach Durchführung, BnD) (261 product sheet). For an apartment building, KfW lends up to €4,000 per unit for this, at most €40,000, and credits half (KfW 261).

Source: 261 product sheet; WEG sections as cited above.

Illustrative example. Fictional figures, not an offer or a forecast. Apartment A's building: Leipzig, completed 1996, assumed 12 units; A's assumed share 85/1,000 (8.5 per cent); A is let. In May 2027 the owners resolve, by more than two-thirds of votes cast and half of all shares, a renovation to Effizienzhaus 55 EE (insulation, common-property windows, heat pump replacing a gas boiler). Eligible costs €900,000 gross plus €30,000 for the expert. The WEG borrows it all: approval July 2027, 20 years, three repayment-free, 3.53 per cent nominal fixed for ten years (KfW's published maximum on 1 October 2026, KfW conditions), assumed unchanged afterwards. The BnD arrives after March 2029, so the credit lands at the four-year date, July 2031. No bonus applies.

The subsidy does not lower A's monthly payment. Set against the last instalments, it ends the loan 16 months early, saving €8,755: €5,100 of principal and €3,655 of interest. If the resolution let owners pay upfront, A would avoid €30,906 of interest but forgo the €5,100 credit; in nominal terms, borrowing costs €25,806 more than cash. The loan buys time, not a lower price. An individual loan on the same terms gives the same figures, with the credit check, collateral and full liability A's own.

• Your tenant. You, not the WEG, must announce a modernisation in text form at least three months before it starts (§ 555c(1) BGB).
• Rent. For a modernisation increase, public grants are deducted from the costs and the interest saving on a subsidised loan reduces the increase (§ 559a BGB).
• Tax. Under the income tax guidelines, a building grant is generally not rental income but reduces the costs you deduct or depreciate; if it arrives in a later year than the deduction, it is rental income in that year (R 21.5(1) EStR). If the works fall within three years of your purchase, check the 15% rule; for A, bought on 1 April 2026, that window runs to 31 March 2029.

Alpha Minoris's Vermieter-Autopilot, as manager of your unit and tenancy (Sondereigentumsverwaltung) in Berlin, Dresden and Leipzig, can coordinate the unit-level side: passing information about your unit to the administrator, forwarding the meeting papers and works schedule to you, and keeping your tenant informed and arranging access. You need not live in the city. It does not replace the WEG administrator or the owners' meeting and does not apply for funding; the vote, the loan and the tax treatment stay with you, the WEG, the bank and your tax adviser (Steuerberater). See who does what.

If your owners' association is discussing an energy renovation, put the draft resolution, the expert's concept and your share of the loan side by side before the vote. Discuss your first rental property with Alpha Minoris.