Germany’s government is entering constitutional “uncharted territory” in its effort to prevent the state of Berlin from seizing large portfolios of privately owned apartments from real estate companies, the Justice Ministry said.

By Michael Nienaber Chancellor Friedrich Merz has strongly rebuked a campaign promise by the anti-capitalist Left party, which is in talks to form a government in the German capital after winning a state election last month, to help ease surging rents by forcing the transfer of large property holdings into public ownership.

The Left’s plan, which would fulfill the results of a 2021 referendum in Berlin, hinges on an article of Germany’s post-World War II constitution that allows the state to socialize land, natural resources and means of production in exchange for compensation. The provision, Article 15 of the Basic Law, has never been wielded by a government or tested in court.

“There is no precedent for nationalization under Article 15, nor is there a precedent for a corresponding investment protection law,” Justice Ministry spokesman Eike Götz Hosemann told reporters in Berlin on Monday. “It has become clear in recent months through the public constitutional debate that a great many constitutional questions have arisen.”As the Left moves ahead with talks to form a government with the Social Democrats and Greens in Berlin, Merz and others have criticized the initiative as a form of expropriation that threatens private property and will deter investment.

The prospective coalition partners have agreed to pursue legislation that would force private landlords with more than 10,000 apartments to transfer holdings above that threshold into public ownership. Compensation would be capped at €16 billion ($17.9 billion), with legislation planned for 2028 and implementation the following year.

Merz’s federal coalition in July pledged to draft legislation to block any move to expropriate private property owners. Interior Minister Alexander Dobrindt introduced a proposal that would stop short of banning such moves, given Article 15.

Instead, the government would seek to require compensation to be made in cash at market value. Nationalization would also be permitted only if other alternatives were exhausted.

“We will make clear in an investment protection law that the left’s arbitrary fetish for socialization is incompatible with the Basic Law,” Dobrindt told Bild newspaper on Sunday. His ministry confirmed the outlines of the proposal.

Elif Eralp, the Left candidate set to become Berlin’s first mayor of Turkish descent if the party forms a governing majority, derided the proposal as itself unconstitutional.

“You can’t use a federal law to make impossible what the Basic Law provides for and what Berliners voted for,” Eralp told ZDF.

Campaigning on a platform of affordability, the Left secured more than 25% of the vote in the city-state’s election last month, in contrast with stunning gains made by the far-right Alternative for Germany in two other regional elections, and defeating the governing Christian Democrats.

Heimstaden Bostad AB, one of Europe’s biggest residential landlords, argued that the proposal and the debate around expropriation were making Germany “uninvestable.”The company, which owns some 20,000 apartments in Berlin valued at roughly €5 billion, won’t allocate more capital to Germany while the proposal remains on the table, Co-Chief Executive Officer Christian Fladeland told Bloomberg on Friday.

“Even though this is Berlin-specific, I think there’s very much spillover to how you can evaluate the risk of foreign direct investments in a country,” Fladeland said.