Berlin rent cap 2020: a guide for landlords and investors

This article was researched to the best of our knowledge and is updated on an ongoing basis. The information is provided without liability and does not replace legal advice.

What is Berlin's rent cap?

On 23 February 2020, the "Law on Rent Limitation in Housing in Berlin" (MietenWoG Bln) came into force. The law freezes rents for approximately 1.5 million non-subsidised apartments in Berlin built before 2014 at their 18 June 2019 level for five years. It sets rent ceilings and prohibits rent increases. For property investors and owners, the framework has changed fundamentally.

Reference date: 18 June 2019

18 June 2019 is the decisive reference date for all tenancies. The rent effectively agreed on that day ("reference-date rent") is the new ceiling.

• If the rent was not increased after that date, it may continue to be charged for now, provided it is not classified as excessive.
• Rent increases that took effect after 18 June 2019 are immediately void. Landlords must revert to the prior level.

This regulation affects market trends, particularly for owners in boroughs such as Neukoelln, where rent adjustments were common in recent years.

Immediate obligations for landlords

Once the law took effect, landlords had two months to proactively inform tenants about the basis for calculating the rent ceiling. This includes year of construction, residential location category (basic, mid-range, good), the presence of central heating and a bathroom, and additional amenities.

There is a disclosure obligation, but no duty to calculate the actual new rent.

Re-letting and the "shadow rent"

When re-letting, the rent may not exceed either the statutory ceiling or the previous rent, whichever is lower. Because the law's constitutionality is disputed, legal experts recommend including both the MietenWoG-compliant rent and the rent permissible under the German Civil Code (BGB) as a "shadow rent" in the lease. This ensures that, should the law be struck down, the market-rate rent can be charged again.

Modernisation and the next phase

Rent increases following modernisation are tightly capped. Regardless of the scope of works, the rent may rise by no more than 1.00 EUR/sqm, provided the measures qualify, such as energy-efficiency upgrades. These must be reported to the IBB.

The second phase of the law is expected to take effect from November 2020. At that point, rents exceeding the statutory ceiling by more than 20% can be reduced at the tenant's request. Landlords should review their portfolios now.