Part 1: What is the Rent Brake
The ‘rent brake’
is a literal translation of the German term Mietpreisbremse, referring to the rent control legislation introduced in 2015 in response to escalating rents in Germany’s major cities.
What is the Mietpreisbremse, and what does it do?
Under federal legislation, individual states can designate specific areas or districts as having an ‘overheated’ or ‘tense’ housing situation. Following this classification, landlords in the area may only raise rents for new leases to no more than 10% above the local index.
It seems straightforward, but the law has many exemptions built in. Not only that, there are also issues with how the local index is calculated.
First of all, the exemptions:
The law does not apply to new buildings.
The law does not apply if the building has had major improvements or comprehensive modernization.
This only applies to the first lease after the upgrades have been done (§ 556f clause 2 BGB). For subsequent leases, if the landlord has not taken advantage of the exemption, the law still applies, though an upgrade surcharge may still be allowed; in this situation it’s best to seek expert advice on exactly what one is allowed.
Ignorance is an excuse.
There is an old saying that ‘ignorance of the law is no excuse.’ But in the case of the rent brake, ignorance is a valid defense. Mietpreisbremse regulations do not require any reduction for existing rents. so if a landlord has previously charged more than 10% above the allowed limit, they are under no obligation to reduce the rent, even if the tenant moves out and someone else moves in. )§ 556e BGB).
A reminder for landlords: when sending a notice of rent increase, you need to note that the tenant has the right to object and that it needs to be in writing. Once the tenant starts paying the new amount, the tenant loses the right to object.
Issues with rent indices
There are a number of issues with the Mietpreisbremse, such as the fact that so many cities across Germany do not have reliable ‘qualified’ rent indices or ortsübliche Vergleichsmiete from which landlords can determine the local comparative rents. This makes it difficult to determine how much they can legally raise the rent. I suspect many do as I have done, which is to check sites like Scout-24 to see what a similar unit would rent for. The problem with this is that many landlords will only choose the most expensive ‘comparable’ properties on which to base the rent increase.
There is an ongoing legal case in Berlin regarding the ortsübliche Vergleichsmiete (local rent index) being used as a basis for calculating the official Mietspiegel (rent index). The court is examining the methodology and data used to compile the index, to determine whether it is correct and legal.
No Supervisory Authority
The other issue is that even if one suspects their landlord has raised the rent illegally, there is no supervisory authority to which tenants can turn. In reality, the Mietpreisbremse only works if tenants themselves are able to find out what previous tenants were paying, and are willing to take their landlord to court if the rent they are charged is too high. Under current market conditions, very few tenants have taken advantage of their rights to complain about unfair rent increases.