Milieu protection, rent brake & conversion ordinance in Berlin

This is what you should know as a property owner

Milieu protection in Berlin: 78 social preservation areas

Currently, 78 social preservation areas have been designated by district ordinances. Mostly referred to in the media as "milieu protection areas", these are legally correct areas for the preservation of the composition of the residential population. We have summarised for you the procedure used to designate milieu conservation areas and the restrictions that can result for owners and landlords.

The legal basis

The legal basis is § 172 of the German Building Code (BauGB). It states in part: The municipality may designate areas in a development plan or by other statute in which the demolition, alteration or change of use of built structures requires approval in order to preserve the composition of the residential population.

Legal and political development

The legal provisions for preservation statutes have existed at the federal level since 1976. In the Land of Berlin, the power granted to the Länder to enact preservation statutes was first used in the early 1990s for the district of Moabit. Since 2001, a reform of district self-administration has made it possible for Berlin's districts to establish preservation statutes independently.

Current dimension in Berlin

There are currently 78 so-called "milieu protection areas" in Berlin. According to the Berlin Tenants' Association, they are located in the districts of Charlottenburg-Wilmersdorf, Friedrichshain-Kreuzberg, Lichtenberg, Mitte, Neukölln, Pankow, Reinickendorf, Spandau, Tempelhof-Schöneberg and Treptow-Köpenick. According to estimates by the Berlin Tenants' Association, there are about 630,000 flats in the 78 areas, in which about 1,100,000 people live. This is about 36 per cent of Berlin's rented flats.

Enactment of areas and decisions to establish them

Milieu protection areas are established by legal decree of the boroughs if an expert social study has proven that, among other things, displacement of the resident housing population is to be feared. While the preliminary study is still underway, the district can pass a decision to set aside modernisation measures in the existing building stock as well as building applications in the affected area for 12 months (§ 172 para. 2 BauGB in conjunction with § 15 para. 1 BauGB). The decisions are published in the Berlin Gazette (Gesetz- und Verordnungsblatt für Berlin).

Municipal right of first refusal

There has been considerable movement on the municipal right of first refusal. This practice for milieu protection was very controversial. In 2021, a ruling by the Federal Administrative Court caused a stir. Such a right of first refusal may not be exercised on the basis of the assumption that the other buyer could presumably displace the tenants from the area in the future, the court in Leipzig ruled (judgement of 9 November 2021, ref.: BVerwG 4 C 1.20). The ruling of the Higher Administrative Court (OVG) of Berlin-Brandenburg of 22.10.2019 (ref.:10 B 9.18) was thus overturned - the complaint of a real estate company was upheld. The consequence: According to the ruling, the Berlin districts can de facto hardly influence the trade in properties in milieu protection areas.

Measures requiring approval

In addition, modernisations, conversions such as deconstruction and structural changes as well as changes of use are subject to approval in milieu protection areas. The approvability of the project depends both on the policy of the district in which the property is located and on the individual negotiations with the relevant department. For example, a measure may be approved with the proviso that its costs are only partially passed on to the tenants, in deviation from the legal requirements.

As a rule, adaptations to contemporary living standards can be approved:

• Installation of a fitted kitchen and insulated windows
• First installation of a balcony (max. 5 m² usable area)
• Installation of a lift
• Legally required thermal insulation

Not eligible for approval are upgrades that are not absolutely necessary and are regarded as so-called luxury refurbishments:

• Merging of flats
• Changes to the floor plan
• Changes of use to holiday flats or businesses
• Installation of a second bathroom or guest toilet
• Installation of underfloor heating
• Installation of loggia, terrace or conservatory

Additional preservation area: urban development character

In addition to the social preservation or milieu protection area, the Building Code also provides regulations for areas "for the preservation of urban development character" (Section 172 (1) sentence 1 no. 1 BauGB), the aim of which is to preserve characteristic building forms and utilisation structures, so that in addition to the demolition, alteration or change of use of building structures, their construction must also be approved in these areas. These legal approval requirements are not to be equated with those of monument protection.

In Berlin, preservation areas include, for example, Karl-Marx-Allee, Westend, Kurfürstendamm and Friedrichstadt.

The Mietpreisbremse (rent control)

With the tightened rent brake, the Berlin housing market is characterised by another controversial topic in addition to the protection of the milieu. The Mietpreisbremse has applied throughout Berlin since its introduction in June 2015. Additional tightening has been in force since 1 January 2019, and in August it was also decided to extend its validity by five years until 2025. Almost simultaneously, the Federal Constitutional Court ruled that the Mietpreisbremse was not unconstitutional.

Obligation to provide information, modernisation levy and exceptions for new construction and refurbishment, modernisation

The following applies to new leases: If the rent is more than 10% above the local comparative rent, the landlord must inform the tenant of the reason for this before the contract is concluded and provide information on his own initiative about the existence of an exception to the Mietpreisbremse. For example, the landlord must inform the tenant whether a higher previous rent is protected and, if applicable, disclose the previous tenancy agreement. Another new feature is the tenant's right to complain about alleged violations of the Mietpreisbremse by means of a "simple complaint".

New buildings that were used and rented for the first time after 1 October 2014 remain exempt from the rent brake (§ 556 f sentence 1 BGB). Comprehensive refurbishment, the cost of which must correspond to one third of the cost of the new building, also leads to exemption from the rent brake when the property is let for the first time after it has been carried out (§ 556 f sentence 2 BGB).

Another change is the reduction and capping of the modernisation levy from 11 % to 8 %. For flats with net cold rents below 7 euros/m², the rent may be increased by a maximum of 2 euros/m² within six years after modernisation; for units with rents above 7 euros/m², increases of a maximum of 3 euros/m² are permitted.

Added to this is the simpler possibility of claims for damages against the landlord in the case of demonstrable "displacing modernisation" due to new presumption regulations, as well as the tightening of the regulations on a corresponding administrative offence.

In the case of violations of the rent brake, a repayment obligation for landlords provides that tenants can reclaim overpaid rent for up to 30 months after the start of the contract.

The Conversion Ordinance

The Conversion Ordinance, which came into force on 14 March 2015, additionally places the conversion of rented flats into owner-occupied flats in milieu protection areas in the state of Berlin under a reservation of approval. As a rule, this approval is only granted if the owner undertakes to sell these flats only to the respective tenants for seven years, which considerably restricts their economic usability.

The Building Land Mobilisation Act

In August 2021, the Berlin Senate decided to issue the legal ordinance on a reservation of approval pursuant to Section 250 (1) sentence 1 of the Building Code (BauGB) for the establishment or division of residential property or part ownership in areas with tight housing markets (Conversion Ordinance pursuant to Section 250 BauGB).

According to the Senate Department, the conversion ordinance according to § 250 BauGB is a new instrument and was inserted into the BauGB by the Building Land Mobilisation Act.

It applies: From now on, there is a permit requirement for existing residential buildings with more than five flats throughout Berlin, especially for the conversion of rental flats into owner-occupied flats. The establishment or division of residential property in such residential buildings is thus generally prohibited.

The new, significantly stricter regulation also takes precedence over existing regulations in areas where social preservation ordinances ("Milieuschutz") already exist, as far as existing residential buildings with more than five flats are concerned, according to the Senate administration.

Milieu protection in Berlin - strategic advice for your success

Is your property located in a Milieu Conservation Area or has a decision been made to develop it?

Even if your property is not (yet) located in one of the social preservation areas in Berlin, you should be aware of the associated changes and your options for action - because the expansion of the protection of the milieu is politically desired and is being actively promoted.

We will be happy to provide you with further information at any time in person, by telephone or by e-mail. Our more than 70 real estate experts for the Berlin residential and commercial property market look forward to hearing from you.