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  • #yourberlinagent by Peter Rabitz

There it is! Berlins "rental cover" - the law on rent limitation in housing

Aktualisiert: Aug 12

Since Sunday, February 23, 2020, one of the most controversial and heavily discussed laws has been in force - the law on rent limitation in housing in Berlin ("rental cover"). This state-regulated intervention in the free housing market is, in my opinion, a far-reaching intervention in the contract freedom of landlords and exposes countless small investors who have bought a small apartment to support retirement provision to an almost unmanageable risk. The real estate acquisition that has been courted by the Federal Government for years as a pillar of retirement provision is thus heavily torpedoed. What is important, namely the creation of new living space and, in particular, inexpensive living space, is punishably missed and even suppressed as investors will withdraw.

Even if a few lawsuits will soon be brought against the rental cover and courts will have to clarify within the next few months whether the law even exists, landlords are required to act in accordance with the law and thus comply with the requirements of the rental cover. I would like to present below what everything is about and what the terms and conditions are. I refer to an easy-to-understand summary of the Senate Department for Urban Development and Housing (click here for the link in German: https://stadtentwicklung.berlin.de/wohnen/wohnraum/mietendeckel/)

It is advisable to seek legal advice on explicit questions in detail and on existing cases, because the complexity is given and the emotions are high.


Questions and answers on the law on rent limitation in housing in Berlin ("rental cover")


1. Does the rental cover apply to all apartments?

No, there are exceptions:

- Public funded housing (social housing),

- Apartments subsidized with rents from public budgets for modernization and repair,

- Carrier apartments,

- Apartments in dormitories,

- Newly built apartments that have been ready for occupancy since January 1, 2014, or that have been restored for living purposes from formerly permanently uninhabitable and uninhabited living space, with an effort corresponding to the new building.


2. What does rent mean in the sense of the rent cover?

In the case of a rent in the sense of the rent cover, the net cold rent is meant (without operating costs and costs for heating and hot water), but including all surcharges.


3. What does rent freeze mean / What role does the cut-off date of June 18, 2019 play?

Anyone who lived in an apartment on the key date of June 18, 2019 and still lives in that apartment on February 23, 2020 (the day the law comes into force), will be frozen at the level of June 18, 2019.

If there is a change of tenants between the reference date and February 23, 2020, the rent agreed during this period will be frozen.

In both cases, the law prohibits taking a higher rent.


4. Does this also apply to graduated and index rents?

Yes, also for graduated or index rents, the rent is frozen at the status of June 18, 2019.


5. What happens when you re-let?

If living space is re-let from February 23, 2020, the law prohibits taking a higher rent than the frozen one. However, if the frozen rent is above the rent limit applicable to the apartment (rent table), the rent may only be made at the rent limit. If necessary, the surcharge for modern equipment and modernization must be taken into account in the rent limit.

In the case of apartments whose previous lease was less than € 5.02 / m², the rent may be increased by max. € 1 can be increased up to € 5.02 / m² if modern equipment is available.

Modern equipment is available if at least two of the following features are present:

- elevator accessible without thresholds,

- Equipped kitchen,

- high quality sanitary equipment,

- high quality flooring in the majority of living spaces,

- Energy consumption value of less than 120 kWh / (m² a)


6. What does the rent table / rent ceiling mean?

The rent table specifies how high the net rent, depending on the age and equipment of an apartment, can be when re-rented. The upper limit for a modernization can increase by a maximum of 1 € / m² (see modernization). When lowering excessive rents in existing tenancies, the location-dependent discounts or surcharges and a flat-rate surcharge of 20% must be taken into account.

For apartments with modern equipment, the value increases by € 1.00. Modern equipment is available if at least three of the following features are present:

- elevator accessible without thresholds,

- Equipped kitchen,

- high quality sanitary equipment,

- high quality flooring in the majority of living spaces,

- Energy consumption value of less than 120 kWh / (m² a)


7. How exactly is the upper rent limit calculated when re-letting?

Apartment in an apartment building:

Table value according to building age + possibly 1 € for modern equipment + possibly modernization = Upper rent limit


Apartment in a 1/2-family house:

Table value according to the age of construction + 10% allowance + possibly 1 € for modern equipment + modernization if necessary = upper rent limit


8. When and how can excessive rent in existing rental contracts be reduced?

The bill stipulates that excessive rent is prohibited. However, this ban only applies nine months after the law was promulgated.

The Senate Department for Urban Development and Housing monitors compliance with the ban, i.e. it can take action ex officio if it knows of an offense.

A rent is excessive if, taking into account the residential area, it is more than 20% above the relevant upper rent limit in the rent table. Renting higher than this is prohibited. For apartments in simple residential areas, a discount on the relevant rental price in the rent table of € 0.28 must be taken into account when calculating the rent limit, for apartments in medium-sized residential areas € 0.09 is deducted and for apartments in good residential areas there is a surcharge of € 0. 74 € to be taken into account.

It is planned to use the residential area from the Berlin rent index 2019 and to issue a legal ordinance. You can find the address classification of your apartment from the current rent index 2019 in the street directory.


9. What about single and two family houses?

The law also applies to them. If the living space is in buildings with no more than two apartments, however, the rent limit increases by a surcharge of 10% before any surcharges or discounts are added (see example calculation under question 9. "How is an excessive rent calculated?").


10. Are modernizations still possible?

Certain modernizations and their apportionment to the rent are generally permitted if this does not increase the rent by more than € 1.00 per square meter. This also applies in the case of multiple modernizations in the period of validity of the law.

Leasers must report the increased rent to the Investitionsbank Berlin.

What modernizations are allowed?

Modernization measures:

- to which the lessee is obliged by law,

- for thermal insulation of the building envelope, the basement ceiling, the top floor ceiling or the roof,

- for the use of renewable energies,

- for energetic window renewal,

- for heating system replacement with heating system optimization,

- for elevator installation or

- for removing barriers by removing thresholds, widening doors or remodeling bathrooms.


11. What is a hardship case and what follows from it?

The Investitionsbank Berlin can approve a higher permissible rent at the landlord's request to avoid undue hardship.

Unreasonable hardship exists in particular if maintaining the permissible rent would lead to long-term losses for the lessee or to the substance of the relevant economic unit. A loss exists if the current expenses exceed the income for the relevant economic entity. A substance is at risk if income from the economic entity is no longer sufficient to maintain it. An economic entity is a single apartment if there is ownership of the apartment, a building or several apartments or buildings if they are managed jointly and have a direct spatial connection.

A hardship case regulation can only be considered if the cause of a hardship case lies in the MietWoG. A hardship is also only possible if its entry is not the responsibility of the landlord. This is the case, for example, with expected increases in value, expected returns, financing costs outside the market, expected earnings, which are also based on excessive rents regardless of this law, and losses that result from the division into economic units.


12. Where do I as the tenant get the information about the permissible rent?

Leasers must provide the tenants with information about the calculation of the rent limit by 23.04.2020 (two months after the entry into force of this law on 23.02.2020) and before entering into a new rental agreement. The landlords must notify the tenants of the amount of the rental on the reporting date on June 18, 2019 on request. Before the contract is signed, the landlord must inform the future tenant of both of these without being asked.


13 How are violations punished?

In the event of violations of the rental cover, a fine of up to EUR 500,000 can be imposed.


14. How long is the rental cover valid?

The rental cover is valid until February 22, 2025 (5 years after the law comes into force).

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Peter Rabitz

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