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06 06 2019

German Ministry of Justice Plans to Further Tighten Landlord-Tenant Law

Katarina Barley (Social Democrats), the former Minister of Justice who just resigned her brief for a seat in the European Parliament, submitted a draft bill for far-reaching amendments to the landlord-tenant legislation to the federal cabinet before leaving office. Its purpose, inter alia, is to prevent or slow rent increases and to limit the rights of landlords even further. One of the draft bill’s proposed measures is to ban the advertising of apartments at inflated prices by owners. If enacted, tenant associations, interested parties and consumer watchdogs would be able to take action and issue written warnings to owners in breach of the new regulation.1

The so-called “rent freeze” (“Mietpreisbremse”) rent control legislation is also to be amended. In early 2019, the landlord’s obligation to provide information was already expanded to include previous rent levels. When re-letting residential units, owners now must, without prompting, substantiate the rent that was paid under the previous lease. Only those prior rents that benefit from a grandfather clause may exceed the general limit of ten percent above the local reference rent.
 

Rent Freeze to be Extended

Soon, landlords could be obliged to pay back inflated rents for the entire lifetime of a lease. A claim for reimbursement used to exist only as of the time the tenant submitted a written complaint. Under the draft bill of the Ministry of Justice, an owner would generally be obliged to pay back whatever portion of the rent has exceeded the permitted rent from the start of the lease term.2

Prior to her transfer into European politics, Barley thus initiated yet another legal revision in line with her party’s housing policy guidance. Although the rent control legislation underlying the “rent freeze” was tightened further to the sole benefit of tenants as recently as January 2019, the initiative seeks to extend the currently temporary regulation that the German Laender use as basis for the respective rent control laws until 2025. Moreover, it intends to establish the legal rationale for state-level “rent freeze” zoning. In some cases, courts have already rejected the legitimacy of the instruments, arguing that the presented rationale fails to suffice to justify such massive interference with the freedom of contract.
 

Opposition to the Extended Assessment Period for the Rent Index

Some time ago, the minister had already expressed her intention to extend the assessment period for calculating the rent index from four to six years. She argued that doing so would slow the rent growth because it would cause older unexpired leases to be factored into the calculated average that defines the local reference rents. Actual calculations have shown, however, that the measure would probably have a limited effect.3 There is also a risk that tenancies with low rent rates would be overrepresented, resulting in a distorted snapshot of the market situation.

The legislative initiative instantly prompted a political uproar. The Haus und Grund property owners’ association objected to the allegation that landlords actively try to bypass the rent freeze, as the DIE WELT daily reported.4 Two Christian Democrat prime ministers of German Laender, Volker Bouffier (Hesse) and Armin Laschet (North Rhine-Westphalia), roundly rejected the proposals.
 

1 www.spiegel.de/wirtschaft/soziales/barley-mietervereine-sollen-vermieter-fuer-wucher-inserate-abmahnen-koennen-a-1268511.html
2 www.sueddeutsche.de/wirtschaft/barley-mietpreisbremse-vermieter-zurueckzahlen-1.4443290
3 www.berliner-zeitung.de/berlin/berliner-wohnungsmarkt--so-will-justizministerin-barley-die-mietenexplosion-bremsen--32573114
4 www.welt.de/finanzen/immobilien/article193594787/Katarina-Barley-Justizministerin-plant-Aenderungen-im-Mietrecht.html