Update on the rent price cap law: implementation regulations clarify ambiguities
05.05.2020 | The “Act on the New Regulation of Statutory Provisions on Rent Limitation” (MietenWoG Bln), known as the rent price cap (Mietendeckel), has been in force since 23.02.2020.
On 17 April 2020, the Senate Department for Urban Development and Housing published implementation regulations that clarify interpretation issues of the rent price cap law in more detail. The implementation regulations define the framework within which the administration can operate and also specify the level of the fines. These are not binding for courts.
We have summarised the main contents of the implementation regulations for you in English here.
The rent cap at a glance:
- The rent cap is a general rental price limit for five years that freezes rents at the level of 18 June 2019. For rental agreements concluded after this key date, the maximum amount that may be demanded is the previous rent for the same flat or the official upper rent limit, if lower. As of 2022, the law allows for rent adjustments of up to 1.3% annually. The rent cap regulation only applies to non-public housing.
- Excluded from the regulation: publicly subsidised housing, social welfare flats, dormitory flats in halls of residence and newly-built flats that were first ready for occupancy on or after 1 January 2014 or that were restored for residential purposes from uninhabitable and unoccupied former living space converted at a cost commensurate with a new building after 1 January 2014. In this case, a certificate of uninhabitability must have been authorised prior to the construction measures.
- Commercial space that has been converted and rededicated as living space at considerable expense is also excluded from the rent cap.
- The rent cap does apply to social housing which no longer falls under IBB commitment. In this case, it is not the rent on the effective date, but the last rent agreed in the commitment period that is to be used as the basis.
- For new leases, the amount of the previous contractual rent or the upper rent limit may not be exceeded. If the previous rent was higher than the rent cap, the maximum rent is the upper rent limit.
- Tenants do not have to take action for their rights to take effect. The rent cap was designed as a prohibition statute and thus has direct consequences for landlords.
- Landlords are obliged to provide their tenants with information on the relevant circumstances involved in calculating the rent ceiling within two months of the law coming into force and before concluding a new rental agreement, without being asked.
- In rental agreements in which no net base rent has been agreed, the landlord must, if required to do so and at the request of the competent authorities, provide tenants with the precise net base rent amount along with the data used for the calculation basis.
- With the rent price cap coming into force, it is generally prohibited to demand a higher rent than the rent on the key date. Tenants can report landlord violations to the district housing office or contact a district tenant advisory service to clarify the further procedure.
- The law stipulates a ban on excessive rents. However, this will not apply until nine months after the law has been adopted, i.e. starting on 23 November 2020. Rents that are more than 20% above the permitted rent ceiling, taking into account the residential location and residential value-enhancing amenities, are then considered excessive.
- Details on residential locations and residential value-enhancing amenities can be found at the end of this article under “How are rent ceilings and permissible surcharges calculated?”, as well as in our checklist for owners and landlords.
- Modernisation costs are only eligible for apportionment to the rent in the case of certain modernisation measures and only up to a maximum of € 1.00/sq. m. This limit also applies if there are multiple modernisations during the law’s validity period. The prerequisite is that landlords notify the Investitionsbank Berlin (IBB) of increased rent based on modernisation measures. The IBB is offering an online notification procedure. You can submit a modernisation notification here (only available in German).
- Apportionable modernisation measures are those to which landlords are obliged by law: for thermal insulation of the building envelope, basement ceiling, top floor ceiling or roof, for the use of renewable energies, for energy-efficient window replacement, for heating system replacement with heating optimisation, for the addition of a lift or for the removal of barriers through threshold removal, door widening or bathroom conversion.
- Funding programmes can be used for modernisation costs that go beyond this. However, it is then not permissible to allocate the costs to the tenants.
- A hardship clause protects landlords from permanent losses. This means that rent increases can be approved in cases of economic hardship if necessary to avoid endangering the building structure and permanent losses. You can submit a hardship application to the IBB here (only available in German).
- Violations of the rent price cap can be punished as an administrative offence with a fine of up to € 500,000.
How are rent ceilings and permissible surcharges calculated?
- Fitted kitchen
- High-quality sanitary equipment
- High-quality flooring
- Passenger lift, accessible without thresholds from the flat and from the building entrance
- Energy consumption value of less than 120 kWh/(m²a)
You can find detailed definitions of the five modern amenity criteria, as stipulated by the Senate Department for Urban Development and Housing rent cap implementation regulations, in our checklist for owners and landlords.
When re-letting residential space after an apportionable modernisation, the five modern amenity criteria mentioned above may not be additionally apportioned (in order to avoid an increase of the upper rent limit by up to 2 euros/sq. m).
Nine months after the law comes into force, landlords must reduce their rent if it is more than 20% above the permitted rent ceiling. This takes into account surcharges and discounts for simple location (-28 cents/sq. m monthly), medium location (-9 cents/sq. m monthly) and good location (+74 cents/sq. m monthly).
Whether the Berlin rent cap is constitutional is controversial – the final decision will rest with the Federal Constitutional Court.
There are several expert opinions that evaluate the rent cap as permissible. The red-red-green Berlin coalition argues that the rent cap is a matter of public law, which falls under the jurisdiction of the federal states. A final clarification by the Federal Constitutional Court is expected in the coming months.
Rent price cap in Berlin – what can I do as a property owner?
We would be happy to provide you with further information at any time in person, by telephone or by e-mail. More than 50 Engel & Völkers real estate experts for the Berlin residential and commercial property market look forward to hearing from you.
More information about the rent price cap:
This article is intended solely as general, non-binding information and should not replace detailed research or specialist advice. Although this article has been prepared with the greatest possible care, there is no claim to factual accuracy, completeness and/or topicality. The particular circumstances of the individual case must always be taken into consideration. The use of information contained in this article is the sole responsibility of the respective reader. Any liability on the part of Engel & Völkers Gewerbe Berlin GmbH & Co. KG and/or another Engel & Völkers licensee is excluded.
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