GERMANY: Rent increase after renovation – Informations for renters

Sept 2, 2022 Benn-Ibler Rechtsanwälte

The German Federal Court of Justice (Bundesgerichtshof, BGH) recently had to rule on the formal criteria required in rent increase notices by landlords, following modernisation measures. Landlords must provide precise details of the costs required for renovation so that tenants can check them for plausibility.

In several lawsuits, the plaintiffs were tenants of apartments owned by the defendant landlord. The landlord had increased the monthly fixed rent after carrying out modernisation measures on the individual apartments as well as on the buildings. The landlord's notice of rent increase was accompanied by a summary of the costs and a calculation of how high the rent increase will be. The letter also contained some information on specific modernisation measures as well as the total costs incurred.

The plaintiffs deemed the rent increase notices to be formally invalid. The Court of Appeal concurred with the plaintiffs' opinion. In order to comply with formal requirements for rent increase notices under Section 559 b (1) Sentence 2 of the German Civil Code (Bürgerliches Gesetzbuch, BGB), a highly specific breakdown of the cost items of the renovation measures is required, for example by providing a breakdown according to various general works as well as individual items of work. This is the only way for tenants to verify the plausibility of a rent increase as well as to identify any non-apportionable costs of modernisation.

According to the German Federal Court of Justice (BGH), the formal requirements of a rent increase notice constitute the tenant’s offset to the right granted to landlords deviating from general contractual principles, here, to unilaterally determine the rent. Tenants should be given the possibility to examine the reasons for as well as the extent of the rent increase for its reasonableness, in order to then make the decision whether there might be a need for further checking, e.g. by a lawyer or an expert. Despite this, formal requirements cannot be excessive. According to the Federal Court of Justice (BGH), there would be a risk of landlords being unable to assert rent increases and, as a result, landlords would not carry out any modernisation measures.

It is therefore sufficient for the costs incurred for modernisation work to be specified as a total sum and the maintenance costs included therein to be clearly indicated.

Press Release No.114/2022 on Ruling uA BGH, VIII ZR 337/21 (20 July 2022)