Rent increase

Rent increase / Mieterhöhung

November 03, 2023

Pursuant to section 535 (2) of the German Civil Code (BGB), it is the tenant's primary obligation to pay the agreed rent to the landlord. The agreement is limited in amount insofar as according to section 5 of the Economic Offences Act an unreasonable payment for the provision of housing (thus 20%, exceptionally 50% above the local rent) constitutes an administrative offence and there are further special regulations for price-linked housing (social rented housing) or according to the housing promotion laws of the States.

A subsequent increase of the rent agreed in the tenancy agreement is only permissible under the conditions of the provisions in sections 557 cont. BGB. According to the legislator's intention, these provisions serve to balance the landlord's interest in the highest possible rent and the tenant's interest in the rent remaining unchanged for as long as possible. A fair balance is ensured by the connecting factor of the comparable rent customary in the locality, so that the landlord can demand the payment for comparable housing in the same municipality in the case of an existing tenancy, but not the rent which he could achieve in the case of a new tenancy.

The rent increase can already be agreed for the future when the contract is concluded, for example within the framework of a graduated rent agreement, section 557a BGB or an index-linked rent agreement section 557b BGB. During the existing tenancy agreement the rent can be increased to the level of the local comparative rent sections 558 cont. BGB, due to modernisation, sections 559 cont. BGB and under limited conditions also due to an increase in operating costs, section 560 BGB.

According to section 558 BGB, the landlord has a claim against the tenant for consent to increase the rent if the conditions there and the formal requirements of section 558a BGB are met.

Waiting period section 558 (1) BGB

The rent must have remained unchanged for 15 months, i.e. not less than 15 months may have passed since the beginning of the tenancy or the last rent increase before the new rent level comes into effect.

In addition, the landlord's request for a rent increase must not have been sent before the expiry of one year since the last rent increase, otherwise it is invalid as a whole.

Accordingly, increases due to modernisation pursuant to sections 559 cont. BGB do not count as the last rent increase (as far as they were reasonable in amount) and increases in operating costs according to section 560 BGB.

Comparative rent customary in the locality as upper limit section 558 (1) and (2) BGB

The local comparative rent is the upper limit for rent increases and is defined in section 558 (2) BGB as the usual charges agreed or changed in the last six years for residential accommodation of a comparable type, size, fixtures and fittings, quality and location, including energy-related fixtures and fittings and quality, in the municipality in which the flat concerned is situated.

If there are no comparable dwellings in the same municipality, comparable housing in neighbouring municipalities may be used as a basis.

The comparison is made on the basis of the above-mentioned criteria:

The type of living space, i.e. the layout of the house, must be comparable (single-family/multi-family/apartment house).

The size of the flat does not take into account adjoining rooms such as cellars; the living space stated in the contract is not binding. The living space is calculated as contractually agreed, in case of doubt according to the Living Space Ordinance.

The condition includes all facilities influencing the living comfort, such as sanitary facilities, the type of heating, a lift, etc.

The condition includes the structural condition and architectural design of the flat, i.e. the layout of the rooms, the energy consumption and any renovations.

The location of the flat is determined taking into account the influence of the environment and surroundings on the residential value, e.g. the character of the residential area and the infrastructure.

For the determination of the usual charges, only the current rents, i.e. the rents agreed/changed in the last six years up to the receipt of the request for increase, are to be taken into account. However, since the rent level generally increases over time, it is sufficient if the rent index used for the determination shows the rents agreed within six years up to its preparation.

The local comparative rent comprises a range of customary charges and not just an exact value, so that increases may be made up to the maximum value of the range.

Capping limit as upper limit section 558 (3) BGB

The cap is a further limit for the rent increase demanded. If the rent is still below the local comparative rent, it may not be above the cap. According to section 558 (3) BGB, the rent may not have increased by more than 20 % within the last three years before the rent increase becomes effective. The limit is 15% if the adequate supply of rented housing for the population is at risk and a corresponding ordinance has been issued by the federal state naming the municipality of the affected flat. In Berlin, the lowered limit of 15 % will continue to apply until May 2023 due to the Capping Limits Ordinance of 2018.

The 15 or 20 % are calculated from the net cold rent paid three years before the targeted start of the new rent increase. Rent increases according to sections 559 cont. BGB due to modernisation and increases in operating costs are not taken into account.

The cap does not apply to rent increases due to modernisation, increases in operating costs and within the framework of index-linked or graduated rent agreements.

Reduction amounts section 558 (5) BGB

According to this provision, the third-party funds/subsidies received for modernisation pursuant to section 559a BGB must be deducted from the relevant comparative rent pursuant to section 558 (1), (2) BGB within one year.

If the landlord does not state the amount of these amounts in his request for an increase, the rent increase is invalid.

If the landlord did not comply with the limits of the local comparative rent and the cap when requesting the rent increase, the request remains formally effective. However, the tenant is not obliged to agree to the request to the extent that it exceeds these legal limits; the landlord only has a claim to consent to the extent that the request complies with the limits.

Formal requirements of § 558a BGB

If the landlord does not comply with the formal requirements of section 558a BGB when requesting a rent increase, the request is invalid.

First of all, the request must be in text form and must be justified. If there are several landlords and/or tenants, it must be addressed by all landlords and/or to all tenants. However, most tenancy agreements provide for a mutual authorisation of the tenants, according to which it is sufficient if one of the tenants receives such requests and agrees to them.

The statement of reasons must refer to the material requirements of section 558 BGB and the landlord must use one of the means specified in section 558a(2) BGB for this purpose. Justification of the expiry of the time limit under section 558(1) BGB and compliance with the capping limit under section 558(3) BGB need not be given, only compliance with the local comparable rent.

Pursuant to section 558a (2) BGB, simple or qualified rent indexes pursuant to section 558c or section 558d BGB, information from a rent database pursuant to section 558e BGB, expert opinions as well as information on comparative flats may be considered as means of justification. If the landlord uses the reference to a rent index as justification, it is sufficient to indicate the rent index field applicable in his opinion, unless there is an evaluative differentiation according to several criteria in the rent index, in which case he must also provide information on this. Since the rent index (Mietspiegel) is usually publicly accessible, the landlord does not have to attach a copy to the request.

The rent index referred to must meet the requirements of either section 558c or section 558d BGB. In a decision in January 2022, the Spandau Local Court denied the Berlin rent index 2021 the quality of a qualified as well as a simple rent index, so it remains to be seen here whether further case law will recognise it as a permissible means of justification.

If the justification is insufficient or contradictory, the request for an increase is invalid. If the requested rent is above the range given in the rent index, the request is only invalid if it exceeds the range. Even if the landlord does not use a rent index as justification, if a qualified rent index exists according to section 558d BGB he must refer to the values there (section 558a (3) BGB), otherwise the demand is invalid.