Since 01 April 2020, the Act on the Extension and Improvement of the Regulations on the Permissible Rental Amount at the Start of the Tenancy has also been in force. The corresponding legal regulations can be found in the German Civil Code (BGB).
Extension in this context means the authority of the Land governments, extended until 31.12.2025, to determine the rent brake in areas with a tight housing market by statutory order. In Bavaria, the Mietpreisbremse is currently valid in 162 cities and municipalities (including the city of Munich) until the cut-off date of 31.07.2020. However, it is assumed that the Bavarian state government will extend the validity of the Mietpreisbremse.
By improvement, the legislator means the tightening of the legal regulations at the expense of landlords for tenancy agreements concluded from 01.04.2020. More on this in a moment.
When will the Mietpreisbremse be enacted?
According to the legislator, the rent brake can be imposed by the Land governments if the increase in rents or the average rent burden on households is significantly higher than the national average, if the growth in the residential population is significantly higher than new, necessary housing is created, or if there is a high demand for housing with low vacancy rates.
What does the Mietpreisbremse regulate and how does it work in Munich?
The legal consequence is that the rent at the beginning of the tenancy may exceed the local comparable rent by a maximum of 10 per cent. In the city of Munich, the local comparative rent is determined by the qualified rent index.
Example of the maximum permissible rent
The basis for all the following examples is this initial data:
Flat in city of Munich; rent brake; year of construction 2005; living space: 100 m²; customary monthly rent: 15 € / m² = 1500 €; new letting on 01.05.2020
Maximum permissible rent: Local rent + 10 % = € 1500 + € 150 = € 1650
Where can I find the local comparative rent for my city or municipality?
For some cities and a few larger municipalities, there is a so-called rent index. This is intended to make the determination of the local comparative rent transparent. Since there is no obligation to draw up a rent index, it does not exist for every municipality or city. A distinction is made between the simple and the qualified rent index. The qualified rent index must be drawn up every two years and is based on scientific guidelines. There is a qualified rent index for the city of Munich.
Consequence for landlords in case of violation of the Mietpreisbremse (rent brake)
The consequences for the landlord in the event of a breach of the Mietpreisbremse have become significantly more severe since 01.04.2020. What is new is that the tenant can now also claim the total amount of the rent that exceeds the permissible rent from the landlord retroactively. To do so, the tenant must give notice of the landlord's violation of the Mietpreisbremse within the first 2.5 years after the beginning of the tenancy and the tenancy must not have ended when the notice is received.
For all tenancy agreements concluded before 01.04.2020 for which the Mietpreisbremse applies, the rule continues to apply that the landlord only has to adjust the rent to the permissible rent from the time of receipt of the complaint. A repayment of the rent portion that was set too high in the past is not prescribed here.
Example of violation of the Mietpreisbremse (rent brake)
Instead of the maximum permissible monthly rent of 1650 € (see example above), the flat is rented on 01.05.2020 for 2000 €. On 15.09.2022, the landlord is notified of the tenant's violation of the Mietpreisbremse.
→ The landlord must refund the tenant the following amount: (2000 € – 1650 €) x 28 = 9.800 €
From 01.10.2022, the rent must then be adjusted to the maximum permissible rent of € 1650.
Exceptions for the Mietpreisbremse
There are four exceptions which mean that the Mietpreisbremse does not apply. In this case, the landlord is allowed to charge a higher rent than the local rent plus 10 % when renting a new property.
1. higher rent level in the previous tenancy
If the previous tenant paid a higher rent on the basis of an older contract than permitted by the Mietpreisbremse, the landlord may also set the same, higher rent for the new tenancy agreement to be concluded if he complies with the obligation to provide information described above. In principle, however, rent increases agreed within the last year before termination of the tenancy are not taken into account, with the exception of rent increases under graduated and index-linked tenancy agreements.
Example of higher previous rent
Rent previous tenant: 1750 € / month, termination on 01.03.2020, new tenant on 01.05.2020
Instead of 1650 €, the landlord may demand 1750 € rent per month.
2. modernisation measures in the last three years
The rent may exceed the local rent by more than 10 % when re-letting if modernisation measures have been carried out in the last three years. This is the case if the landlord has not yet claimed the possible rent increase during the last tenancy or if the modernisation was carried out during the vacancy before the new tenancy.
The rent is then increased by the amount that may also be added in the context of an existing tenancy due to a modernisation measure. The maximum permissible modernisation surcharge per year is eight percent of the modernisation costs.
Example of modernisation
Modernisation costs in the last 3 years: € 18,000
→ Annual modernisation surcharge = 8 % x 18,000 € = 1440 €, this corresponds to 120 € per month
→ Allowable rent for a new tenancy: €1650 + €120 = €1770
3. new buildings
If a flat is used and let for the first time after 01.10.2014, the rent brake does not apply.
Example of higher allowable rent due to new construction
A flat is used and rented for the first time after completion on 01.05.2020. The landlord demands 1850 €.
→ This is permissible although the maximum amount is 1650 € due to the Mietpreisbremse.
4. comprehensive modernisation measures
Even if the flat has been modernised so comprehensively that the investment amounts to approximately one third of the expenditure required for a comparable new flat, no Mietpreisbremse applies to the first new letting after the modernisation. Although the Mietpreisbremse then applies from the second letting, the landlord can invoke the first exception, i.e. the higher rent level in the previous tenancy, in order to achieve the same rent for the second letting.
Example of comprehensive modernisation
Before the start of the tenancy on 01.05.2020, the landlord extensively modernised the flat.
→ The landlord has the right to rent out the flat, for example, at 1900 € instead of the otherwise permissible rent of 1650 € calculated on the basis of the Mietpreisbremse.
Landlord's duty to provide information
First of all, an important point: Since 01.01.2019, the landlord must provide the tenant with unsolicited information before the conclusion of the contract in all four exceptional cases regulated by law as to the legal reason why he may set the rent more than 10% above the local rent. This information must be provided in text form (e.g. fax or e-mail). For legal security, the information should be recorded in the tenancy agreement.
If the landlord does not fulfil his duty to provide information, this has serious financial consequences for him. Even if the landlord can provide information about the reasons for the permissibility of the higher rent after the conclusion of the contract, the landlord may only increase the rent to the amount permitted by the respective exemption regulation two years after the late provision of information.
Example of the landlord's failure to provide information
Permitted rent due to a legal exemption: 2000 € / month, but the landlord does not inform the tenant about this until July 2020, although the tenancy agreement was already concluded on 01.05.2020.
→ The landlord may not increase the permissible rent from € 1650 per month to € 2000 until 01.08.2022. He can therefore not claim this amount in the meantime: (2000 € – 1650 €) x 24 = 8.400 €.
Conclusion on the Mietpreisbremse
Opinions differ as to whether the rent control makes sense or not. Everyone will find good arguments for their point of view. The fact is that the rent brake applies in 162 cities and municipalities in Bavaria and is currently required by law there. To avoid misunderstandings and trouble, it makes sense for the landlord of a flat to know the maximum permissible rent and not to exceed it.
This article presents the main features of the Mietpreisbremse. Legal subtleties must be analysed precisely in each individual case. Feel free to contact us to let your property with the help of Isar Estate.