Is the rent index grounds for a permissible rent increase in Germany?
In Germany, landlords have various options for justifying a permissible rent increase. They often use the rent index in Germany as a data basis. Find out below how the rent index could be affecting your rent as an Expat in Germany.
What is a rent index?
The rent index is a collection of data that shows the rental prices of similarly equipped properties in a specific location (borough, district, municipality). It serves as a basis for determining the local comparative rent (average rent per residential area) for privately financed apartments.
The original aim of the rent index was to protect tenants from overpriced rents and rent increases. Nowadays landlords use the rent index to justify a permissible rent increase.
A rent index contains different categories that describe the characteristics of a property accordingly. These include, for example:
- Macro and micro location
Cities or larger municipalities (or those commissioned by them) determine the rent index every two years based on scientific criteria and publish it, for example, in their official gazette or on the Internet. In order to serve as a binding basis for a rent increase, it must be a qualified rent index. This means that it must also be recognized by the municipality and by representatives of the tenants ‘and landlords’ interests. However, there is no obligation to create it.
In addition to the rent index, landlords also have the option of using these sources to justify an increase to their tenants in the event of a planned rent increase up to the local comparative rent :
- an independent database with a collection of rentals
- three other comparable properties including relevant data (address, size, etc.)
- an expert report (e.g. from a real estate appraiser )
What is the permissible rent increase for a new rental?
If a tenant moves out of an apartment, landlords have the option of increasing the rent when they are re-let – but not indefinitely. Because here the rent brake that came into force on June 1, 2015 regulates the amount of the permissible rent increase. Accordingly, the rent for a new rental may be a maximum of 10% above the local comparative rent according to the rent index.
For many cities and municipalities, however, there is no binding rent index. In these cases, the rent brake is ineffective. The rent may then be up to 20 percent above the local comparative rent.
This legal regulation provides for further exceptions: For example, the rent brake does not apply to new buildings that were rented for the first time after October 1, 2014. That means: landlords are free to determine the rent amount in this case. The same applies if you rent a house or an apartment for the first time after extensive renovation. However, the legislature leaves it open when a renovation is considered comprehensive. As a rule, it can be assumed that a renovation will amount to around a third of the new construction costs. The laying of new flooring or the installation of a modern kitchen are also considered renovation measures.
The following are generally excluded from the rental price brake:
- furnished flats
- temporary living
Good to know: In principle, the rent brake does not affect existing rents – not even if they are far above the local comparable rent. Graduated rents agreed before the law came into force remain unaffected by the rent brake. The situation is different with graduated leases concluded after the introduction of the rental price brake. The rent may not exceed the local comparative rent in the course of the graduation.
Are there any other reasons for a permissible rent increase?
In addition to re-letting and a general adjustment to the local comparative rent, a rent increase is also possible after modernizing a building. This is the case if the modernization contributes to an appreciation of the property, that is: increases the value of the property.
The same applies to energetic renovations . Since January 1, 2019, landlords have been able to transfer 8 percent of the costs incurred as a permissible rent increase for the measures to the annual rent of their tenants (previously it was 11 percent).
If the landlord and tenant agree on a so-called index rent, the rent brake only applies to the first rent. According to Section 557b of the German Civil Code (BGB), index rent is a rent that is based on the cost of living for all private households in the Federal Republic of Germany. If the general price level rises faster than the local rents, landlords are entitled to increase the rent. The rent index no longer plays a role here.
Are there limits to the rent increase?
According to § 558 BGB the landlord may “[…] the approval of an increase in rent to the local comparative rent charge if the rent at the time at which the increase should occur in 15 months is unchanged.”
This landlord the rent, however, do not increase every 15 months, the legislature has built a cap into the law. Accordingly, the rent may not increase by more than 20 percent within 36 months. In cities and municipalities with a tight housing market (e.g. metropolitan areas such as Berlin), the cap is 15 percent.
How do landlords correctly announce the rent increase?
Landlords must notify their tenants of a planned rent increase in writing or ask for their consent to the increase. Because a rent increase always requires the consent of the tenant – after all, a different rent was agreed in the apartment rental agreement or house rental agreement. The rent does not increase until the third month after receipt of the letter. If a tenant refuses to give his consent, landlords have the opportunity to sue for consent in court.
What is a rent index?
The rent index is a collection of data that shows the rental prices of similarly equipped properties in a specific location. It serves as a basis for determining the local comparative rent for privately financed apartments.
The rent index includes various features such as micro and macro location, year of construction, equipment and energetic state. In order to serve as a binding basis for a rent increase, the rent index must be qualified.
This means that it must also be recognized by the municipality and by representatives of the tenants ‘and landlords’ interests.
What are the reasons for a permissible rent increase?
In addition to re-letting and a general adjustment to the local comparative rent, a rent increase is also possible after modernizing a building. To do this, the modernization must increase the property’s value. The same applies to energetic renovations.