Info 1 2/2020 THE BERLIN RENT CAP Main Provisions and Practical Tips 1 Rent freeze or limitation of 4 Regulations in case of rent increases for existing leases landlord’s hardship 2 Rent caps when re-letting 5 Subsidies for tenants in case of landlord’s hardship 3 Reducing an excess rent BERLINER MIETERVEREIN madochab / photocase.de THE BERLIN RENT CAP MAIN PROVISIONS AND PRACTICAL TIPS On 23 February 2020 the law entitled “Gesetz zur Neuregelung Rent Freeze and Limitation of Rent Increases re- gesetzlicher Vorschriften zur Mietenbegrenzung“ [Law on the Re- garding Existing Leases vision of Legal Provisions regarding Rent Limitation] published in 1.1 Rent Cap – until 31 December 2021 no higher rent as the one the Law Gazette of Berlin 2020, page 50 – briefly called the “Rent effectively agreed on the effective date 18 June 2019 Freeze“ – came into effect after it had been passed end of January With the entry into force of the law the rents are principally frozen. by the Berlin House of Representatives. It represents a law of the Basis for the rent freeze is the so-called net rent effectively agreed on federal state of Berlin creating rent limitations based on its federal 18 June 2019. This effective date on which the Berlin Senate Ad- authority for housing. It prohibits exceeding of these caps and in- ministration passed its resolution on the rent cap’s basic points was cludes fines for breach of this law. The law is effective for a period chosen to prevent expected rent increases as soon as the rent caps of five years. Civil-law agreements between tenant and landlord are announced. Upon the tenant’s request a landlord must inform thus are no longer valid if they go beyond the rent caps defined by him/her at any time of the rent agreed or owed on the effective date. public law of the federal state of Berlin. “Normal“ rent increases of the net rent referring to existing leases are The rent freeze law consists of four sections: thus excluded up until 31 December 2021 regarding all leases of • rent freeze or limitation of rent increases (1.1 – 1.3) privately financed residential accommodations. This rent freeze also • rent limitation after modernisation (1.4) applies to stepped rent and index rent leases. There is, however, an • rent limitation when re-letting – conclusion of a new lease (2.) exception in case of modernisations which is explained in subsection 1.4. Refer to tips 1,3 & 5. • reduction of high rents (3.) Exceptions to these new rent caps may apply if the limitation consti- 1.2 Rent Increases between the Effective Date and the Entry into tutes a hardship for the landlord (4). This, however, may also entitle Force of the Law the tenant to receive a rent subsidy (5). A rent increase agreed upon after the effective date is not effective for future periods – i.e. up until expiry of the rent freeze law. From Note: the date of entry into force of the law only the rent agreed on 18 The rent freeze law does not apply to publicly funded residential June 2019 – i.e. before the rent increase - is owed. accommodations (social housing) and not to flats repaired or mod- If it is possible to reclaim the amounts of a rent increased and paid ernized with public funds and which are subject to rent control. In in the period between the effective date and the law’s entry into addition, the law does not apply to new buildings which became force cannot be answered for sure. This question must be resolved ready for occupancy for the first time on or after 1 January 2014 by the courts. Refer to tip 2. and not to former living space permanently uninhabitable or vacant 1.3 Increase of the Effective Date Rent starting January 2022 which was restored for residential purposes with expenses corre- From January 2022 on, rent increases of up to 1.3% of the sponding to newly built space. The law also excludes residential net rent agreed on the effective date are permitted based on units in dormitories and living space held by publicly recognized a random sample taken by the Federal Statistics Office on welfare institutions. 31 December of the previous year. The ultimately admissible percentage will be determined by a legislative decree of the com- petent Senate Administration. The currently applicable civil-law prerequisites for increasing rents must however still be reviewed. DEFINITIONS: Refer to tip 3. • The term “rent” means the net rent ex- 1.4 Rent Caps in case of Rent Increases after Modernisation cluding any operating and heating costs The new rent freeze law also limits rent increase possibilities after (“Nettokaltmiete”) but including for exam- a modernisation. The according construction measures are firstly ple surcharges for furniture and fixtures. limited to an energetic improvement of the building, eliminating barriers and facilitating access to the flat and secondly by capping • The “effective date rent” is the rent effec- the rent increase to a maximum of 1€/m2 per month. In the future, tively agreed on 18 June 2019. modernisation costs can therefore only entail a rent increase in Ber- lin if the modernisation • Rent caps are the rental amounts listed in • is mandatory by law (e.g. the installation of smoke alarms or the table(s) of the rent freeze law (includ- replacement of a heating system that is older than 30 years) ing surcharges and deductions). • constitutes thermal insulation of the building envelope, the basement ceiling or the top floor or roof, • includes the replacement of the heating system and at the same time optimises the same or • eliminates barriers (by removing thresholds, widening doors or remodelling bathrooms). THE BERLIN RENT CAP 2 If the modernisation represents one of the above mentioned con- In buildings with one or two flats the rent cap shown in the table struction measures, the landlord is entitled to increase the rent of (without modernisation) can be ten percent higher. Every two years existing leases and new leases (re-letting) provided that the effective after the law’s entry into force the Senate Administration of Urban date rent does not exceed the rent caps. In these cases the landlord Development and Housing must adjust the rent caps to the accord- can increase the rent by up to one euro per square meter per month ing real wage development. above the rent owed on 18 June 2019. Here again, the previously Rent increases even after modernisation requires further review of applicable civil-law prerequisites must be reviewed. the previous civil-law prerequisites – as e.g. the requirements to be As regards re-letting after the law’s entry into force the following met in the rent increase letter. If e.g. a financial hardship exists when regulations apply: If the vacant living space was modernized pur- the monthly rent is increased by one euro per square meter, this suant to the above conditions between the effective date and the may have an effect on the rent increase. conclusion of the lease, the rent caps can be exceeded as shown in Refer to tip 1. the table (see below) by up to 1 €/m2 monthly. In case of a modern outfit (see box) the rent can be exceeded by an additional 1€/m2 of the initial value listed in the table. This optional rent increase is also permitted if the modernisation measures took place after the date of re-letting. In these cases the rent caps below apply when re-letting and modernising the flat: Table 1: Every two years maximum net rent after modernisation and without modernisation for flats with central heating and bathroom: up to 1919- 1950- 1965- 1973- 1991- 2003- Year of completion 1918 1949 1964 1972 1990 2002 2013 without modernisation 6,45 6,27 6,08 5,95 6,04 8,13 9,80 2 after rent in €/m / modernisation 7,45 7,27 7,08 6,95 7,04 9,13 10,80 per month after modernisation with modern outfit* 8,45 8,27 8,08 7,95 8,04 10,13 11,80 Table 2: Maximum net rent after modernisation for flats with no central heating for flats with central heating or with bathroom: and no bathroom up to 1919- 1950- Year of completion up to 1918 1919 - 1949 1918 1949 1964 without modernisation 5,00 5,22 5,62 3,92 4,59 2 after rent in €/m / modernisation 6,00 6,22 6,62 4,92 5,59 per month after modernisation with modern outfit* 7,00 7,22 7,62 5,92 6,59 *MODERN OUTFIT: A flat with modern outfit is considered as such if at least three of the following features exist: 1. passenger elevator accessible without threshold from the flat and from the house entrance 2. fitted kitchen 3. high-quality sanitary appliances 4. high-quality flooring in the majority of the living spaces 5. energy consumption level of less than 120 kWh/(m²a). THE BERLIN RENT CAP 3 Rent Limitation when Re-letting (concluding a new lease) When concluding a new lease in an already existing residential building (re-letting) the net rent may not initially exceed the effective date rent, i.e. the rent agreed on 18 June 2019 with the former tenant of the flat. Where this effective date rent is higher than the rent cap amount shown in table 3 or 4, then however the maximum rent listed in the tables is the admissible rent which can be agreed when re-letting the flat.