Rent increase – your rights, claims and the index rent

For many tenants a nightmare and yet it happens regularly in Germany. The rent increase. But this is not always permissible, because rent increases require certain formal and substantive rules. How you can protect yourself and what simple rules there are to follow, you can find out here.

Rent increase options – what is the landlord allowed to do and what not?

Rent increases are regulated by law. To be more precise, the German Civil Code, the BGB, is responsible for this. Rent increases can therefore not be arbitrary, but require one of three reasons. These include the local comparative rent, the graduated rent or the index rent.

Comparable rent customary in the locality – comparable properties as a basis

The local comparative rent refers to the amount of rent paid on average for comparable properties in a region over the last four years. The local comparative rent could therefore be a reason for a rent increase. The landlord then states in the letter, for example, rent index, expert opinion, rent database, at least three comparative apartments as a reason for the increase. In the latter case, the comparative apartments must be described very specifically, including location, type, size, condition and price per square metre. The rental databases used to collect the data must be freely accessible. The local comparative rent can be increased by the landlord every fifteen months, as it is stipulated that the rent must remain constant for at least one year. If there is another rent increase after fifteen months, the tenant has two months to agree to it. If he does not, the landlord can take legal action against the tenant and enforce the rent increase, if it is legal.

Graduated rent – planned rent increase

The graduated rent is a safe option for the landlord, but it is subject to strict rules. With graduated rent, the rent increase is determined in advance and is often part of the lease agreement. In order for this graduated rent to become effective, the following rules must be observed:

• The graduated rent must be recorded in writing
• The increases in rent must always be constant for at least one year
• Additional increases, such as the adjustment to the local comparative rent or due to modernizations are not permitted (except for ancillary costs).
• The date and final amount of the rent increase must be clearly stated (in the written version); percentage statements are not permissible.
• An exclusion of termination may have been stipulated in the rental agreement for a maximum of four years
• If the rent exceeds the local comparative rent by 10 percent or more, the increase is inadmissible and can be rejected by the tenant.

If these points are given, the graduated rent is legal and can be stipulated in the rental agreement.

Index rent – dependent on the market

The index rent is based on the price index for the cost of living of all private households in Germany and is therefore a variable rent. The figures for the survey are published by the Federal Statistical Office. Landlords who offer their properties according to local comparative rents take advantage of this opportunity, as they would hardly be able to increase their rent in any other way. Again, some rules are observed. The tenant must be informed of the rent increase in writing and it must remain constant for one year afterwards. In addition, the landlord must be able to transparently present his calculations to the tenant. If the rent is increased with the help of the index rent, increases for modernization are not allowed as long as there are no legal requirements against it. Further rent increases based on local comparative rents are also not permitted. For landlords, this method becomes so attractive because they do not need your tenant’s consent. Once a tenant receives a notice for a rent increase, the increased rent must be paid by the month after next after the notice is served. There is then not much the tenant can do as long as the formalities have been complied with.

Formalities in the rent increase – what is involved

As already described, the rent increase must follow precise formalities, otherwise it becomes ineffective. First of all, the tenant must receive the rent increase in writing. The letter must show a precisely calculated total rent including all operating costs. In addition, the letter must show an exact and detailed reason for the rent increase. This can be a current rent index but also a list of comparable apartments or a copy of an expert opinion. The tenant must agree to such a rent increase within a set period of time, otherwise this is invalid and cannot be carried out on the set date. If the tenant refuses, the landlord has three months to enforce the increase in court, as long as the increase is legal.

Modernizations for sustainable improvements permissible

The Civil Code again provides some rules that are necessary to increase the rent. Namely, § 559 of the BGB states that the work on the property must actually increase the value of the property. Literally, it says: “If the landlord has carried out modernization measures within the meaning of § 555b number 1, 3, 4, 5 or 6, he may increase the annual rent by 11 percent of the costs spent on the apartment.″ This includes a wide variety of things. For example, such modernizations, in which sustainable energy or water is saved but also structural measures that increase the utility value or generally provide for improved living conditions, are included. Modernisation work prescribed by the authorities also falls under this category, whereby the landlord must inform the tenant three months before the start of the construction work, but the increase may only take place after completion. If such a case exists, the rent increase with the reason of modernization is quite permissible and must be accepted by the tenant. This is probably still the most pleasant reason for tenants, as the quality of life increases.

Operating costs – advance payments or flat rate?

An increase in operating costs is also possible. As soon as these increase, the landlord has the right to pass on the increase to the tenant. The prerequisite for this is the written agreement of both parties regarding a flat rate for operating costs or advance payments for operating costs. If the costs increase, the landlord must inform the tenant of the increase despite this written agreement. However, a justification for the increase is only required by law in the case of an operating cost flat rate. In the case of advance payments for operating costs, a statement of reasons is not mandatory. The adjustment or increase usually results from an operating costs statement. If the advance payment was not sufficient and additional payments are due, these must be adjusted to the annual costs incurred.

Capping limit – the rent brake

Of course, tenants should also be protected from a rent increase, which is why landlords cannot increase rents indiscriminately. Certain rules are intended to protect against inadmissible increases. These include that in a tenancy the rent may be increased by a maximum of twenty percent within three years up to the local comparable rent. In countries with a housing shortage, it is possible to reduce the cap to a maximum of fifteen percent. If your rent is increased, check in advance whether all important formal and substantive rules have been observed and whether the increase is really legal.