The term rent defines a consideration received by a lessor from a person renting for the use of a thing. The use granted by contract is limited to a fixed period and differs significantly from a lease. According to the German Civil Code, property is objects with solid, liquid or gaseous bodies. Among other things, land, houses and apartments are leased.
Things to know about the rental contract
As the owner of a property, you conclude a contract with a tenant that specifies the duration of the tenancy and defines the amount of rent to be paid. This is a formless contract for an indefinite period of time or for a specific period of time. In the case of the latter, we are talking about a temporary tenancy agreement, with which the tenancy is limited to a certain period of time and ends without any further notice period. The legal basis is the German Civil Code (BGB) with sections 535 to 580a in the reformed version of the tenancy law of June 2001.For tenancy agreements with a validity of more than one year, the agreements must always be in writing and signed by all parties with their names. According to section 126 of the German Civil Code, a document must always contain the signatures of both the tenant and the landlord. If you as a landlord violate the formal requirement, the contract will not be invalid, but its validity will be indefinite. In the case of pre-formulated tenancy agreements, make sure that they comply with the law on general terms and conditions (AGB).
Obligations arising from the collection of rent
Assuming you rent out an apartment or house and collect a rent specified in the rental agreement, certain obligations arise for you. You must not only grant your tenant the contractually stipulated use of the rented property, but also maintain it in a usable condition. You must also carry out repairs if damage has occurred due to wear and tear in accordance with the contract. However, it is important to distinguish whether damage has been caused by wilful action or improper use. In such cases, the tenant would have to bear the costs of repair. When renting commercially usable premises, you are also obliged to keep any competition away from your tenant. The rule here is good faith. As a landlord, you have a right to receive rent on time and, especially in the case of a leased property, a so-called landlord’s lien. This means that you can seize the tenant’s movable property if the claim is not met in accordance with section 562 of the German Civil Code (BGB).
Obligations of the tenant
A person paying rent is obliged to make proper use of the rented property entrusted to him and to carry out cosmetic repairs in accordance with the contract. In addition, it has to pay the agreed rent in advance, whereby monthly payments are usually agreed. Usually the rent consists of two different components. The so-called cold rent defines the price for the pure use of the rental property. The second component of the rent is made up of ancillary costs or operating costs.
Things to know about the “second rent
As a landlord, you are entitled to apportion the second rent to the tenant. These are operating costs arising from the rental, the allocation of which to tenants is common in the FRG. The basics of the allocation of operating costs are not always clearly and understandably formulated in standard contracts. The following text will familiarize you with the details of the second rent.
Operating costs by definition
The Operating Costs Ordinance (BetrKV) provides precise information in paragraph 1. It states that these are ongoing costs incurred by the owner of a house with land through the use of the building or the facilities located therein. A distinction must be made between warm and cold operating costs. You may only allocate certain operating costs to your tenant, among others:
- The property tax
- Costs for waste collection
- Amounts for cleaning, caretaker or gardening services
- Miscellaneous insurances
Expenses for maintenance, administration and repairs are not apportionable. Costs that you as the landlord have contractually agreed with your tenant are apportionable to the rent. According to BGH VIII ZR 137/15, you are not obliged to list all costs incurred if the term “operating costs” is mentioned in the contract. The statement of operating costs may include split wastewater charges in addition to the property tax and costs already mentioned. The sewage fee is calculated splitted, because you pay a consumption-dependent fee for waste water and the amount of the precipitation fee depends on the sealing of your property area. Irrespective of the splitting, the wastewater charge is apportionable, although only the wastewater portion can be charged according to consumption. Street cleaning and garbage collection are apportionable costs, but not the expenses for new garbage cans. The cleaning of staircases, elevators and laundry rooms can be apportioned to the rent as well as the expenses for vermin removal. The same applies to the lighting of generally accessible areas, but illuminants and repairs may not be passed on to the tenant. Maintenance costs for smoke detectors and expenses for drinking water analyses can also be apportioned.
What are warm operating costs?
According to the tenancy law regulations, the term “warm operating costs” includes all expenses for hot water and heating. As the landlord of a building with a central heating system, you are required by the Heating Costs Ordinance to allocate 50 to 70 percent of the total costs to your tenants based on consumption.
How is rent determined in real estate?
Subject to the statutory provisions, you can freely negotiate the rent for your house or apartment with the tenant. The benchmark here is the local comparative rent. The law sets stricter limits when it comes to rent increases. An increase is only possible if the rent has remained stable for the previous 15 months. Within three years, you may raise the rent by a maximum of 20 percent. However, you are free to contractually agree on a graduated rent with your tenant. In the case of graduated rent, an increase can take place every 12 months, within which period no further increase is permitted. After a modernization you are allowed to increase the rent up to the local comparative rent, under certain circumstances there are narrow limits. In any case, you must inform your tenants in writing about the rent increase and give detailed reasons for the demand. Any rent increase requires the tenant’s consent, and you must give them two months to think about it.
Considerations for rent increase
Of course, your interest in attractive returns is fully justified, however, the increase in rent can also result in a negative relationship with the tenant. A rent increase that is not understood by the tenant can be objected to. In the end, you are left with the time-consuming search for a new tenant when you move out. Vacancy also means a lack of income for running costs.
How is rent different from lease?
Many laymen use the terms rent and lease synonymously due to a lack of knowledge. It is correct that both cases are so-called existing contracts. The landlord or lessor grants the use of a house or land for a limited period of time in return for a contractually fixed final payment. Rent is due when you allow a person the private use of your house or an apartment located in it. Rent should be charged if the building or land is used for a so-called fruit purchase. Fruit occupation means the generation of income. Income can be generated, for example, by running a restaurant or by cultivating land that can be used for agriculture.
- Rent is levied on property the use of which, with diligence and labour, results in profit.
- Rent you take on the transfer of a property for residential purposes
In the case of commercial premises, the boundaries between rent and lease are often blurred. Landlords and tenants should inform themselves exactly about the differences in legal regulations before signing the contract. Regardless of rent or lease, the entrusted property must be returned in the same condition as it was taken over.