Dispute over new tenancy law reform

The modernization levy is to be restricted

Rental law will also be tightened this year. To protect tenants from skyrocketing costs, the grand coalition plans, among other things, to limit the passing on of modernization costs in its second package of rental law amendments.

Currently, landlords are allowed to add 11 percent of their expenses to the annual rent when they modernize an apartment . The Federal Ministry of Justice and Consumer Protection (BMJV) wants to limit this annual surcharge to eight percent. This plan by Federal Justice Minister Heiko Maas goes beyond the agreement in the coalition agreement, which stipulated a reduction of only one percentage point.

Specifically, this means that if the modernization of your rented apartment cost €3,000, you can currently add €27.50 (€330 per year) to your monthly rent. If the new regulation comes into effect, this will only be €20 (€240 per year).

Only necessary modernizations

To prevent luxury renovations, only the costs of truly necessary modernizations should be allowed to be passed on to tenants. Provided the apartment is used accordingly, this also includes modifications for accessibility and barrier-free living. The costs of repairs that would have been necessary anyway are deducted from the total renovation costs. Since determining these maintenance costs is quite complicated and time-consuming, the rent increase procedure for small private landlords is to be simplified. They will be allowed to claim a flat rate. However, they can then only pass on four percent of the modernization costs annually instead of eight percent.

Rent increase cap

Furthermore, there is to be a cap on rent increases after modernization. According to this proposal, the rent may not increase by more than 50 percent over a period of eight years. A maximum surcharge of four euros per square meter of living space is being discussed.

The actual living space counts

The basis for rent and operating cost increases is the actual living space. Deviations of up to 10 percent are no longer permitted. In principle, tenants should not have to spend more than 40 percent of their net income on rent, operating costs, and heating. If this were to happen due to modernization, the tenant can claim financial hardship. If the landlord does not inform the tenant of this right in a timely manner, the tenant can still reject the modernization even if it has already begun.

Criticism from the coalition partner

The proposals from Federal Justice Minister Heiko Maas (SPD) go too far for the CDU:

"The new regulations must not lead to a cessation of investment in existing housing stock," warned Jan-Marco Luczak (CDU), the CDU's expert on tenancy law, in Berlin. He therefore views a reduction in the modernization levy to the extent proposed with skepticism. Criticism also came from within the real estate industry.

The CDU also rejects the reform of the regulations governing the creation of the rent index, as planned by the Federal Ministry of Justice and Consumer Protection (BMJV). The reform stipulates that the local comparative rent will no longer be calculated based on rents from the past four years, but rather on those of the past ten. Luczak pointed out that this would significantly lower comparative rents. "In conjunction with the rent control law, this would stifle any dynamism and any incentive for new housing construction."

In view of the disagreements between the coalition partners, the BMJV points out that a draft bill will not be available until spring 2016 at the earliest.

Sources:

German Press Agency (dpa)

"Saarbrücker Zeitung", Handelsblatt, BMJV