
umbauen
to remodel
To structurally change, renovate, or redesign a building or room. In this meaning, the verb is separable (baut um).
Wir lassen die alte Scheune zu einem Wohnhaus umbauen.
We are having the old barn converted into a house.
to remodel / surround
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to remodel
To structurally change, renovate, or redesign a building or room. In this meaning, the verb is separable (baut um).
Wir lassen die alte Scheune zu einem Wohnhaus umbauen.
We are having the old barn converted into a house.

to surround
To surround something with a structure. In this meaning, the verb is inseparable (umbaut).
Man hat das Schloss mit einer hohen Mauer umbaut.
The castle was surrounded with a high wall.
This verb has two forms with different meanings. The separable form 'umbauen' (stress on 'um') means 'renovieren' (to renovate/remodel). The inseparable form 'umbauen' (stress on 'bau') means 'mit etwas umgeben' (to surround with something) and is much rarer.
Die Familie baut ihr altes Haus um.
The family is remodeling their old house.
In the common meaning 'renovieren' (to renovate/remodel), the verb is separable. The prefix 'um' goes to the end in a main clause. In subordinate clauses or with modal verbs, the verb stays together.
Wann baut ihr endlich das Badezimmer um?
When are you finally remodeling the bathroom?
In the meaning 'renovieren' (to renovate/remodel), the verb is often used for buildings and rooms. Typical objects are 'ein Haus' (a house), 'eine Wohnung' (an apartment), 'die Küche' (the kitchen), or 'das Büro' (the office).
Die Firma hat die alten Büros komplett umgebaut.
The company completely remodeled the old offices.
to surround
Umgeben neutrally describes something lying all around a place. In its inseparable meaning, umbauen can express the same spatial arrangement, but it explicitly refers to structures enclosing something. Use umgeben for a general spatial description and umbauen for an enclosure formed by buildings.

Vier geschlossene Gebäudeflügel umbauen den Innenhof.
Four enclosed wings of the building surround the courtyard.
Mehrere alte Gebäude umgeben den Innenhof.
Several old buildings surround the courtyard.