------ Sufficient knowledge of German You must have an adequate command of the German language (level B 1 of the Common European Framework of Reference for Languages).
If you were in possession of either a residence permit or a residence authorisation on 31/12/2004, you only have to demonstrate basic knowledge of the German language (level A 1) to be granted a permanent settlement permit. ------
In practice the staff giving interviewing you have leeway to assess your German level on the spot, but applying without demonstrated adequate German levels could lead to wasting ones time.