Recommendations for the rent cap

The law on rent limitation in the housing sector in Berlin - MietenWoGBln - better known as "rent cap" will come into force on February, 23rd, 2020. Until then there are no obligations for landlords, but after publication, Berlin landlords must react very quickly. We summarize the most urgent questions here.

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Disclaimer

This article has been investigated to the best of our knowledge and belief. It is provided without any liability and does not replace advice from a lawyer. We are at your disposal for your questions.

Measures before entry into force (immediate measures)

  • Until the law on rent limitation comes into force, the regulations of the German Civil Code (BGB) alone shall apply to the non-price limited housing stock. No obligations for landlords arise until publication in the law and ordinance gazette. On the website of the Senate Department for Urban Development and Housing it reads " The law on rent limitation in housing in Berlin (MietenWoG Bln), the so-called rent cap, was passed by the Berlin House of Representatives. Until the law actually comes into force, various steps will have to be taken in the coming weeks. The law will only take effect after the day of publication in the law and ordinance gazette. Until then, no obligations or rights arise from the law, neither for tenants nor for landlords".
  • Landlords who are about to let an apartment should do so, if possible, before the law comes into force, in order to ensure that the apartment is let in accordance with the German Civil Code. This is important in so far as the agreed rent would regain validity if the law should fail or expire.

Measures from February 23rd 2020

1. no rent increase with effect after 18.06.2020

  • If no rent increase has taken place after 18 June 2020, the agreed rent can initially continue to be claimed. In a later phase of the law, tenants will be given the opportunity to reduce the rent to 120 percent of the table value if the demanded rent exceeds this amount.

2. rent increase with effect after 18.06.2020

  • In this case, the landlord will revert to the rent effectively agreed between the landlord and tenant before 18.06.2020.
  • With coming into force of the law, landlords must, in accordance with §6 of the law, inform their tenants, without being asked, about the basis for the calculation of the rent according to the rent cap. For this purpose, the following information must be provided to the tenants:
    • Year of construction of the apartment
    • Collective heating or bathroom
    • Location classification (simple,medium,good)
    • Equipment features according to §6 Abs. 3 MietenWoG Bln
    • Buildings with no more than two apartments

Although landlords are obliged to inform tenants of the basis on which the rent caps are calculated, they are not obliged to calculate the rent for tenants or to state a specific amount. It has not yet been clarified how to proceed if tenants continue to pay the previously agreed rent despite notification by the landlord, even if it exceeds the values in the rent table.

Attention: Caution is advised when phrasing the letters to tenants. The obligation to limit the payment of rent is not equivalent to a reduction. This is important in order to ensure that the previously agreed rent can be taken again if the law fails, but at the latest when the law expires.

Measures from (expected) November 2020

The second stage of the rent cap stipulates that nine months after the law comes into force, those rents that exceed the tolerance value of 120 percent of the rent table, taking into account value-increasing and value-decreasing features, will be reduced to the cap limit of 120 percent.

Landlords must carry out the reduction without being asked and on their own initiative.

The calculation of the maximum permissible rent is carried out in accordance with § 5 para. 1 MietenWoG Bln according to the following scheme:

→ basic value (rent table) → correction for surcharges and deductions → correction for features increasing the residential value → increase by 20 % → permissible maximum value

New letting after the entry into force of the rent cap

For rental agreements concluded after the date on which the rent cap has come into force, the rent caps from paragraph 4 AND the limitation to the rent effectively agreed up to the effective date of 18 June 2019 shall apply. If the last rent demanded from the previous tenant was lower than the table rent, this is also the new rent. If the previous rent was higher than the table rent, the new rent falls back to the table value to be assessed.

The wording of rental agreements after the coming into force of the MietenWoG Bln is of particular importance. Since the law is limited to a five-year period and since there is the chance that it will fail before the Federal Constitutional Court, landlords must ensure in new tenancy agreements that in both cases, i.e. after expiry or in the event of failure, the rent permitted under the German Civil Code flows again. This is only possible if the calculation of the rent according to the German Civil Code continues to be made in rental agreements, but only the rent cap rent is demanded for the duration of the law's effect, i.e. until it expires or fails. The law stipulates in § 4 that the rent demand is to be limited to the rent caps according to §§b 6 and 7, but not which rent cap is determined according to the BGB, waiving the demand of the same.

Modernisation and rent increases ( allocations)

Rent increases (allocations) after modernization are handled differently in the rent cap than in the German Civil Code. Irrespective of the scope of the modernisation measures, the rent may be increased by a maximum of 1 euro per square metre during the period of validity of the Act. Even several independent modernisation measures may not be allocated by more than 1 euro in total.

Landlords have to notify the IBB of intended rent increases of up to 1 euro per square metre through apportionable modernisation measures but must not have them approved.

Only such measures that meet the following conditions are considered eligible for allocation:

  • Measures based on legal obligations
  • certain insulations
  • use of renewable energies
  • energy-efficient window renovation
  • Heating replacement
  • Elevator attachment
  • certain work to remove physical barriers

Measures that exceed the charge of 1 euro per square metre can be carried out, but not allocated. If necessary, support programmes of the IBB can be taken up. Please note: IBB subsidy programmes may be subject to further restrictions concerning the rent.

Also already approved, already announced, but not yet carried out modernizations fall back on the rules of the rent cap.