The rents in Germany are increasing consistently. This is good news for investors. However, for tenants, it has become very tough to find an affordable place to rent.
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Germany already has a rent brake (Mietpreisbremse) regulation. Under this rule, new rental contracts may not exceed the local comparative rent (Mietspiegel) by more than 10%.
If the rent exceeds by 20%, it’s an administrative violation. If the rent exceeds by 50%, it’s a criminal offense.
The issue is that landlords have found legal ways around this rule. Three practices in particular have become widespread.
- Index-linked rents,
- Furnished apartments, and
- Short-term leases.
The Mietrecht II package targets all three. Please note it’s currently a proposal and has not been officially passed.
The Five Key Changes Proposed in Mietrecht II
3.5% annual cap on index rent increases
Index-linked rental contracts (Indexmietverträge) tie your rent directly to the national consumer price index.
When inflation spiked after the COVID pandemic, some tenants faced rent increases of up to 7% in a single year. This is legal under the existing rental laws.
The draft legislation fixes this. It caps annual increases on index rents at 3.5% in areas with strained housing markets.
5% maximum furniture surcharge on furnished apartments
Under current law, landlords don’t have to itemize the furniture surcharge. This means you (as a tenant) cannot see what you pay for housing versus furniture.
So landlords increased the rent unevenly, even when they only put in a cheap bed and a table.
Under the new rules, landlords in tight housing markets must list the furniture surcharge separately in the rental contract. If they don’t, the apartment is legally treated as unfurnished.
Moreover, the new rule caps the furniture surcharge at 5% of the base net rent. For example, the monthly rent is €1,000. In this case, the landlord can charge a maximum furniture surcharge of €50.
Six-month maximum for short-term leases
Currently, short-term leases are exempt from the rent brake and have no statutory time limit. Some landlords take advantage of this and create rolling short-term rental contracts.
This way, the landlords sidestep rent control by claiming a short-term contract.
The new reform fixes this loophole by setting a six-month maximum term for short-term leases. If your rental contract is longer than 6 months, the rent break applies.
Additionally, the tenant must provide a reason for signing a short-term contract. This further protects the tenant.
Higher threshold for post-modernization rent increases
Landlords have the right to pass on part of the modernization costs to the tenant via a rent increase. Currently, the threshold for the rent increase process is €10,000. The reform raises it to €20,000.
This is one of the few measures that benefits landlords.
