Tenancy law changes

Feb 17, 2016

On 01.06.2015 a new law (Mietrechtsnovellierungsgesetz) came into effect in Germany.  It has two main components: the Bestellerprinzip which is concerned with estate agents’ fees and the Mietpreisbremse which aims to restrict rent increases.

Prior to the new laws coming into effect on 01.06.2015, landlords could engage an estate agent to find a tenant for an apartment, but the agent’s fees were payable by the tenant.  The Bestellerprinzip establishes the principle that the party mandating the estate agent pays the fees, which can then be either landlord or tenant. These fees are already legally set at 2 months’ rent (net of charges) plus VAT.

Estate agents’ associations criticised the introduction of the new law, anticipating a negative effect on their industry through a fall in revenue, widespread redundancies and so on. A common view was that many landlords would henceforth opt to save the agents’ fee by looking for their own tenants, not a very difficult task in the main urban centres. Some agents, however, believe that once landlords try to go it alone they will realise that the process is not as straightforward as it seems on the outside, raising the possibility that their profession could become more appreciated and valued as a result. It is likely to take several years before any objective assessment of the effect of these changes can be made.

The main changes contained in the new rent control law are:

  • When offered for lease, the rent on existing apartments may not exceed the comparable rent level pertaining locally by not more than 10%. ‘Comparable rent levels’ can be established by an official expert or by reference to a local rental index where one exists.
  • The law does not apply everywhere – individual state authorities are empowered to specify for a period of 5 years those areas where the law will apply, typically areas where rents are under pressure from lack of supply.
  • New and fully renovated apartments are excluded from the rent control when they are first offered for lease. Existing rents which exceed comparable rent levels need not be retrospectively reduced.
  • An apartment may be re-offered for lease at the existing agreed rent so that a landlord is not compelled to lower the rent when that apartment has become vacant.
  • When a renovated property is re-rented, a higher rent can be demanded in accordance with the basis set out in the existing lease.