1. Comparative rent in your area
A landlord may increase the rent in an existing tenancy up to the locally customary comparative rent, provided that there has been no other rent increase in the 15 months after moving in and 12 months after the last rent increase (§ 558 BGB). The comparative rent describes how much is usually paid for a living space of comparable type, size, equipment, condition and location in a residential area. If a landlord wants to increase the rent up to the locally customary comparative rent, he also has to adhere to a statutory cap that limits rent increases to 20 percent within a period of three years and to 15 percent in residential areas with tight markets.
The landlord is obliged to announce the rent increase to the locally customary comparative rent at least two months before the beginning of the new rent in writing, i.e. by letter or e-mail. In addition, the landlord must state in the letter the comparative rent with which the rent increase is justified. For the presentation of the comparative rent, the landlord can refer to the following points:
For the rent increase to come into effect, the consent of the tenant within the applicable period of consideration is also required (see section "Periods"). Otherwise, the landlord can only enforce the increase by means of an action for approval. In addition to the specific requirements, basic formalities must also be complied with, such as the correct sender, the correct date, the names of all tenants, the date from which the new rent applies, and an original power of attorney signed by a representative. These requirements apply to all types of rent increases. The rent increase should always be checked with regard to the above mentioned modalities. If these are lacking, e.g. if there is no justification, we recommend that you inform your landlord that you reject the rent increase - an explanation or justification is not necessary. If the landlord threatens to sue for consent without remedy, you can safely ignore this. No lawyer will enforce a rent increase on the basis of an unfounded rent increase letter.
With the letter, the landlord has to grant a period up to the end of the 2nd full month after receipt. During this time you can decide whether you agree to the rent increase, partially agree or reject it or not react. If you do not agree or do not react within this period, the landlord has 3 months after the expiration of the consideration period to file an action for consent and thus to try to enforce the consent in court. Landlords often disregard the above-mentioned legal regulations when increasing the rent to the locally customary settlement rent. Therefore we advise you in principle: In most rent increases the rent index or the local settlement rent is given as justification. Here, too, landlords often make many mistakes "by mistake". Do not sign immediately, use your time to think about it: If you increase your rent on a rent index basis, the landlord must obtain your consent. After receiving the rent increase, they have at least two months plus the days until the end of the month to react to the letter. Only if you still have not reacted after this time can the landlord sue for approval. So do not sign immediately, but use the time to check the following points in particular:
Because rent increases after modernisation are sometimes very high, the term " outmodernise" is often used. However, rent increases due to modernisation are also subject to numerous regulations. If a landlord modernises a property, he can pass on part of the costs to the rent (§ 559 BGB). However, not every measure taken by the landlord automatically means modernisation. It can also be maintenance. To distinguish between modernization and maintenance, you can use the following as a guide: Modernisations generally lead to an improvement of the tenant's living situation, whereas maintenance only restores the contractual condition. If, for example, broken windows are replaced by equivalent ones, this is maintenance and not modernisation. The landlord is therefore not allowed to apportion the costs to the rent. Not all cases are clear and require technical expertise to assess whether it is a modernisation.
If the landlord's measures are modernisations, he may apportion up to 8 percent of the costs incurred to the annual rent (11 percent if announced before 1 January 2019).
In cases of particular hardship: If the rent after modernization apportionment amounts to more than 50 percent of the tenant's net income, the tenant may object to the increase in writing on the basis of a reason for hardship. Irrespective of this, however, the tenant must tolerate the modernisation.
Both the announcement of the modernisation before and the rent increase after the implementation of the measures require text form. The announcement letter is only effective if the rent increase is calculated and explained accordingly in the letter. Furthermore, no approval by the tenant is required for the validity of the rent increase. In addition to the specific requirements, basic formalities must also be complied with, such as the correct sender, the correct date, all tenants, the date from which the new rent is valid and an original power of attorney signed by a representative.
The letter announcing the modernisation measures must be sent to the tenant at least three months before the start of the modernisation. After the modernisation has been carried out, it is valid from the beginning of the third month after receipt of the letter of increase, even without the tenant's consent. If the landlord or the property management has not met deadlines, made general formal mistakes or has not correctly verified the costs, the landlord can correct this. In this case, the start of the rent increase is usually postponed by 6 months.
If the gross warm rent after modernisation is more than 30 to 40 percent of the household income, a social hardship case can be applied for. It is important that you observe the deadline of one month after receipt of the announcement. Unless the landlord did not specify a deadline in the announcement of the modernisation - in which case you have until the start of the planned work.
After receipt of the hardship application, the landlord can decide whether to carry out the modernisation anyway and increase the rent by an amount that no longer constitutes hardship or to abandon the modernisation. Note: In addition to the financial hardship, the tenant can also apply for the modernisation to be deemed unreasonable, for example because of his state of health
When apportioning modernisation costs, landlords often disregard the legal provisions mentioned above. You should therefore have them check whether your rent increase is legal. You could save money every month. Find out more here.
In the ARD Panorama article of 23 July 2020 (video on the left of the text) you can see how landlords systematically modernise in order to drive up rents.
3. Graduated and index rent
In the case of graduated and index-linked rents, the rent increase is already agreed in the rental contract. Therefore, neither a separate announcement nor the consent of the tenant is required. In the case of graduated rents, the rent increases by a fixed amount at a time specified in the contract. In the case of index-linked rents, the rent is also increased at a previously fixed point in time, but according to the past development of the so-called consumer price index, which measures the inflation rate. In both cases, however, the previous rent must have remained unchanged for at least 12 months.
If the landlord has decided on one of these two forms of rent increase, no further increases are possible due to modernisation or due to the locally customary comparative rent. An exception for modernizations applies if the landlord is legally obligated to do so (§ 557b paragraph 2 BGB).
ATTENTION: Neither for graduated nor index-linked rents may a landlord increase the rent without limitation. He still has to adhere to the rent control which is in force in many cities.
In principle, a graduated rent offers the landlord the possibility of increasing the rent without having to comply with the capping by the local comparative rent (or the rent index). On the other hand, there is a widespread misconception that a graduated rent can also be used to circumvent the rent brake. This is not the case. Where the rent brake applies, the graduated rent may not exceed the comparable maximum rent (local comparative rent plus 10 percent).
Only the official consumer price index of the Federal Statistical Office may be used to increase the rent according to the inflation rate. Other figures, e.g. estimates of the ECB or the DIW, or other indices, e.g. rent index, construction price index, are not valid. Nor are the inflation rates of sub-sectors applicable, such as for housing, electricity, water, gas or other fuels (or net cold rent).
Graduated rents: In order for a graduated rent agreement to be valid, either the increase amount or the future rent must be specified in the rental agreement in addition to compliance with the limits. Occasionally it happens that landlords only state by what percentage the rent is to increase. The tenant would then have to work out for himself what amount would result as the new rent. Such a graduated rent increase or letter is invalid and can be challenged. The same applies if the landlord merely states the amount by which the rent per square meter is to increase. Even then, the tenant would have to do the calculations himself and the agreement is invalid. Instead, the landlord would have to state specifically by what amount the rent increases in total or indicate the new total amount of rent.
Index rents: In the case of agreed rent increases through index rents, the landlord is obliged to notify the change in the price index and the new total amount of rent in text form.
Since no approval of the tenant is required for the graduated rent, there are no deadlines to be met. No approval is required for the index-linked rent increase either, but it must be announced two months in advance. Nevertheless, you can still object to the rent increase at any time. Since landlords often disregard the above-mentioned legal provisions in the case of graduated and index-linked rents, you should have legal experts check whether your rent increase is lawful. You could save money every month. Find out more here.