With rented flats, the question of a rent increase will generally arise at some point. In view of rising costs, landlords too must try to keep letting financially viable and offset inflation. An increase may also be appropriate following refurbishment or modernisation. The consumer protection association Wohnen im Eigentum (WiE) explains the options available to landlords for increasing rent and where the limits lie.
Landlords can make their first decision about adjusting the amount of rent when the tenancy agreement is concluded. It may be sensible to agree an index-linked or stepped rent. “Especially in regions with no rent index, it is difficult to increase the rent during a tenancy if the tenant does not agree,” says Dr Sandra von Möller, Executive Board member of the consumer protection association Wohnen im Eigentum (WiE). With a stepped rent, the rent increases at specified intervals by an amount set in advance. An index-linked rent rises in line with the Federal Statistical Office’s consumer price index, which reflects average housing costs. It must be remembered, however, that further increases are largely excluded with stepped or index-linked rents. They are then possible, for example, only for refurbishment that landlords are legally required to carry out.
Check the rent cap when re-letting
When a flat is re-let, the rent can generally be adjusted upwards. However, landlords must comply with any rent cap that applies in the municipality. In that case, the rent for a new tenancy may be no more than ten per cent above the standard local comparative rent. Exceptions apply, for example, to new buildings first used and let after 1 October 2014, following comprehensive modernisation equivalent to a new building, or if the previous rent was already higher.
Mutual agreements
Landlords can ask tenants to consent to a rent increase. If consent is given, there is a mutual agreement. Sometimes such an agreement can also arise through conclusive conduct. If tenants pay a higher rent three times, landlords may assume that the new amount has been accepted. To be safe, however, landlords should always obtain brief written confirmation.
If no mutual solution can be reached, landlords have several options for enforcing a rent increase unilaterally:
Consent to an increase to the standard local comparative rent (Section 558 BGB)
Landlords can demand tenants’ consent if the rent is to be raised to the standard local comparative rent, provided that it has remained unchanged for 15 months by the time the increase is first intended to take effect. The standard local rent is the average rent agreed for comparable flats in the tenant’s locality during the past six years. The comparative rent is generally determined using the municipality’s rent index – municipalities with 50,000 or more inhabitants must provide one. If there is no rent index, the demand for an increase must be substantiated with data from a rent database or three comparable flats. This procedure is very complex and involves many details and pitfalls. “It is therefore advisable to seek advice from a specialist lawyer for tenancy and condominium law,” says Dr Sandra von Möller.
A cap applies to increases to the standard local comparative rent: within three years, the rent may rise by no more than 20 per cent (Section 558(3) BGB). In areas with a tight housing market, however, the cap may be limited to 15 per cent; federal states can stipulate this by statutory instrument.
Landlords may submit a demand for a rent increase no earlier than one year after the previous increase. They must notify tenants in text form at least three months before the increase begins and provide reasons; otherwise, it is invalid.
It is important that even where a rent increase is justified, landlords cannot demand the increase unilaterally. In this case, they can demand only consent to the increase, meaning an amendment to the contract. If tenants refuse to consent, landlords must bring an action for consent within a further three months. If landlords miss this exclusion period, they must begin the demand again, losing time and money.
Rent increase following modernisation measures
If modernisation measures are carried out, landlords may subsequently increase the rent under certain conditions (Section 559 BGB). This applies, among other things, to energy-efficiency modernisation and structural alterations that permanently increase the rented property’s utility value or permanently improve general living conditions, such as insulating the façade, installing a lift or creating a children’s playground on the outdoor green space. Maintenance measures are not covered.
Landlords may then permanently pass on eight per cent of the modernisation costs to tenants each year. A cap applies here too: within six years following modernisation, the rent may rise by no more than three euros per square metre of living space, provided that the original rent was more than seven euros per square metre. For flats with rent below seven euros per square metre, by contrast, a modernisation-related increase is limited to two euros per square metre.
Rent increase because of heating-system replacement
It is also possible to claim a rent increase following implementation of requirements under the Building Energy Act (GEG), colloquially known as the “Heating Act”. This allows 10 per cent of the cost of replacing a heating system to be passed on to tenants (Section 559e BGB). The conditions are that the GEG requirement for 65% renewable energy is met and government funding is actually used.
Important: only the cost of replacing the heating system may be taken into account, not additional costs such as new pipes or planning costs. Funding must also be deducted from the total costs. The remaining costs must be reduced by a flat 15 per cent to reflect maintenance costs saved. A cap of 0.50 euros per square metre per month applies.
“Landlords should first calculate which form of rent increase is financially more advantageous in the specific case,” says Dr Sandra von Möller.