REALWorld Law

What are the key laws governing residential leases in your country which are different from non-residential leases?

Generally, the rent can be agreed freely, however, there are certain limitations to this principle.

Firstly, there is a ban on excessive rent increases (Verbot der Mietpreisüberhöhung). If the rent for an apartment exceeds the local comparative rent (ortsübliche Vergleichsmiete) by more than 20% and there is only a limited availability of comparative apartments, the agreement is invalid with regard to the rent exceeding this limit. The local comparative rent is determined by taking into account the usual rent agreed in the municipality for residential spaces of a comparable type, size, equipment, condition and location in the last six years. This limit does not apply if the higher rent is necessary to cover the landlord’s current expenses, provided that these expenses are not conspicuously disproportionate (auffällig unverhältnismäßig) to the landlord’s performance.

Additionally, the German law prohibits rent usury (Verbot des Mietwuchers). Agreements that are 50% above the local comparative rent and in which the landlord exploits the predicament, inexperience, lack of judgement or considerable weakness of will of the tenant are valid with regard to the rent exceeding the limit and are punishable by up to three years in prison or a fine.

Furthermore, if a new lease is concluded for residential premises located in an area with a tight housing market (Gebiet mit einem angespannten Wohnungsmarkt) as determined by statutory order, the rent at the beginning of the lease may not exceed the local comparative rent by more than 10 percent (however, there are also exceptions to this) (Mietpreisbremse). The law therefore allows a maximum 10% increase of the rent in a new lease contract over an agreed tent table of index for the relevant area. Germany’s federal states are empowered by law to designate areas within their jurisdiction which fall into this category. This law was introduced in 2015 and is aimed to cap the amount by which residential rents are permitted to rise in urban areas which are threatened by "overheating". In currently 453 German cities and municipalities, landlords have to comply with this rent control (Mietpreisbremse). In some federal states, this will continue to be the case until mid-2025 at least, and in others until the end of 2025. Whether the rent control will be extended is currently the subject of political discussions and depends on which government is in charge in Germany in the future.

There are the following exceptions to the rent control

• The previous tenant was already paying a higher rent than allowed under the rent control;
• The rental property is a newly built apartment and is rented out for the first time after 1 October 2014;
• The apartment has been extensively modernised;
• Furnished apartments;
• Short-term letting;
• The space is part of the landlord’s home;
• The apartment is a youth or a student accommodation;
• The space has been rented from the public sector in order to make it available to people with urgent housing needs.

An increase of an existing residential lease is only permitted subject to the following restrictions: Under statutory law, rents can be increased up to the market rent for equivalent properties in the area but in principle not by more than 20% in any period of three years (Kappungsgrenze) and only if the rent has been unchanged for at least 15 months. In some cities and municipalities in Germany with a particularly tight housing market, this cap is set at 15%.

In case of certain modernisation measures, the landlord can increase the annual rent by up to 8% of the costs incurred for the apartment. Measures allowing an increase of the rent are all measures intended to save energy and water and to increase the utility value or general living conditions.

The landlord may also increase the rent if a graduated rent (Staffelmiete) or an index-linked rent (Indexmiete) has been contractually agreed. In case of a graduated rent, the 10% limit applicable in areas with a tight housing market under the rent control has to be considered every time the rent is increased. If the rent is index-linked, the limit of the rent control only applies to the initial rent. In both cases, the rent must remain unchanged for a year before a new increase is possible.

Last modified 13 Mar 2025

What are the key laws governing residential leases in your country which are different from non-residential leases?

Indexation of rent can be agreed in principle, but it is however, not yet the market standard. The rent must remain unchanged for at least one year as part of an indexed rent. In addition, the restriction on rent increases under the German Civil Code applies if the leased premises are located in a respective restrictive area.

Last modified 13 Mar 2025

What are the key laws governing residential leases in your country which are different from non-residential leases?

Ordinary termination of the residential lease by the landlord requires legitimate cause according to the German Civil Code. Termination for the purpose of rent increase is prohibited. The ordinary termination right of the landlord can only be exercised if the landlord can prove its legitimate cause. This is in particular the case if

• the tenant has culpably and significantly breached its contractual obligations;
• the landlord requires the lease object for personal use, that is to say for itself, its family members or members of its household; or
• if the landlord is prevented from appropriately commercially utilising the lease object by continuation of the lease and it suffers significant disadvantages as a result.

The legitimate interest can also be demonstrated in other cases, provided that the interest can be given the same weight and be considered equally important as the interests listed.

For an ordinary termination, the notice period for the landlord is three months, six months for tenancies that have existed for at least five years and nine months for tenancies that have existed for at least eight years.

The tenant can contradict a notice of termination of the landlord and require the continuation of the tenancy, if the termination of the tenancy for him or his family would mean a hardship, which cannot be justified even under appreciation of the legitimate interests of the landlord.

The landlord's right for extraordinary termination without notice is also governed by the German Civil Code. The landlord requires a good cause for an extraordinary termination. The German Civil Code provides examples in which cases such a good cause is given, eg if the tenant has not paid the rent for two consecutive months.

Contractual agreements between the landlord and the tenant to deviate from the aforementioned provisions in the German Civil Code, especially to the disadvantage of the tenant, are generally void. However, it is possible to contractually agree on a minimum duration for the lease, meaning that neither landlord nor tenant can terminate the lease agreement for a defined time period. The exclusion of the termination right only affects the ordinary termination right.

Last modified 13 Mar 2025

What are the key laws governing residential leases in your country which are different from non-residential leases?

Generally, the tenant may ordinarily terminate the residential lease with three months' notice. The notice of termination must have been received by the landlord by the third working day of the month in order for it to be valid for the month in question. A shorter notice period may be agreed in the case of housing rented for temporary use only. The contractual agreement of a shorter notice period for the tenant is possible, provided that it does not disadvantage the tenant. An ordinary termination does not require good cause or a specific reason.

In the case of housing rented by a legal person under public law or a recognized private welfare organization for the purpose of providing it to persons in urgent need of housing if, at the time of conclusion of the contract, it drew the tenant's attention to the purpose of the housing and the exception to the above provisions, notice of termination is admissible at the latest on the 15th of a month to the end of this month.

Landlord and tenant may agree on a reciprocal waiver of the ordinary termination right, up to a period of four years. However, the exact thresholds for the validity of such a waiver are subject to jurisprudence, eg such a waiver may not be agreed with a student as a tenant.

The extraordinary termination right without notice by the Tenant corresponds with the extraordinary termination right without notice by the landlord. An extraordinary termination is possible for good cause which  is eg given if the landlord does not provide the contractually agreed state of the premises to the tenant.

Contractual agreements to the disadvantage of the tenant between the landlord and the tenant to deviate from the aforementioned provisions in the German Civil Code are generally void.

Last modified 13 Mar 2025

What are the key laws governing residential leases in your country which are different from non-residential leases?

In this case, the landlord is entitled to an extraordinary termination right without notice . The termination notice must be delivered in writing and must state the reasons for termination, specifying exactly for which months the rent has not been paid. The termination notice must also be signed by the landlord itself, or if a third person is acting with power of attorney, the original power of attorney must be attached to the notice. Otherwise the tenant may object to the termination notice.

If the tenant does not move out voluntarily, the landlord must file an action for eviction in order to regain possession of the leased premises. It can take up to one year for the landlord to regain possession of the premises through an eviction procedure.

Once an eviction proceeding is filed in before a court, the tenant is entitled to remedy the grounds for termination for a time period of two months as of delivery of the eviction notice to the tenant. If the tenant remedies all outstanding amounts within the aforementioned timeline, the termination of the landlord is invalid and the tenant may remain in the leased premises. The aforementioned right of the tenant to remedy a termination by the landlord due to default payment of the rent does not apply if the tenant is in default of payment of the rent for the second time within two years and the tenant has in the first instance already made use of its remediation right. Moreover, the right of the tenant to remedy a termination by the landlord relates only to the rescission of the extraordinary termination. Provided that an ordinary termination was also based on this reason and fault on the part of the tenant can be proven, the ordinary termination shall remain in effect even if the outstanding rent is paid subsequently.

Last modified 13 Mar 2025

What are the key laws governing residential leases in your country which are different from non-residential leases?

The operating cost regulation (Betriebskostenverordnung) regulates which expenses can be triggered to be paid by the tenant.

This includes:

• property tax;
• water supply costs;
• drainage costs;
• heating costs;
• hot water costs;
• costs of associated heating and hot water supply systems;
• costs of operating the passenger or goods lift;
• costs of street cleaning and garbage disposal;
• cost of cleaning and pest control;
• costs of garden maintenance;
• costs of lightning;
• costs of chimney cleaning;
• costs of property and liability insurance;
• costs for the caretaker;
• costs of operating laundry care facilities; and
• other operating costs (eg such as maintenance costs for smoke detectors or drinking water analysis).

What kind of other operating costs can be triggered to the tenant is subject to jurisprudence. It has been found that general maintenance and repair costs of the leased residential premises cannot be requested to be paid by the tenant. Therefore, the concept of ‘triple net rent’ cannot be achieved in residential leases. The tenant may only be obliged to carry out cosmetic repairs (Schönheitsreparaturen) and the repair of minor defects (Kleinreparaturen) that occur in the leased premises (up to an amount of EUR 100 per defect and a maximum amount of 6-8% of the annual net rent).

Since 2021, an additional CO₂ levy has been charged for heating with oil or natural gas. Since January 2023, the CO₂ costs in the lease are split between landlord and tenant, with the percentage of the tenant’s participation depending on the energy efficiency of the building: The worse the energy condition of a building, the higher the share of costs for landlords. The new regulation emphasizes the task of landlords to equip apartment buildings with climate-friendly heating systems and to ensure good insulation. At the same time, tenants retain their own responsibility to heat as economically and efficiently as possible, as part of the CO₂ costs will continue to be passed on to them.

Since July 2024, with the amendment to the Telecommunications Act [Telekommunikationsgesetz], landlords are prohibited from automatically passing on TV cable fees to tenants with the ancillary costs.

Last modified 13 Mar 2025

What are the key laws governing residential leases in your country which are different from non-residential leases?

Tenants are obliged to register their place of residence at the residents’ registration office. The Federal Registration Act obliges landlords to issue the tenant with a confirmation of residence for this purpose. Otherwise, a registration of the lease itself is not required. Particular taxes for the conclusion of the lease itself do not apply.

Last modified 13 Mar 2025

What are the key laws governing residential leases in your country which are different from non-residential leases?

If ownership of the leased premises is planned to be or is converted after possession of the leased premises to the tenant into home ownership (Wohnungseigentum) and the landlord wants to sell the leased premises to a third party, the tenant has a pre-emptive right. The landlord has to inform the tenant about the planned sale, the tenant then has two months to decide whether to exercise the pre-emptive right. The pre-emptive right is not applicable if the landlord wants to sell the leased premises to family members or a member of its household. A deviating agreement between the landlord and the tenant is void.

Otherwise, no pre-emptive right in favour of a tenant exists by statutory law.

The Building Land Mobilization Act (Baulandmobilisierungsgesetz) came into effect on 23 June 2021 and has introduced Sec. 250 of the Federal Building Code, under which the conversion of leased premises into owner-occupied dwellings (home ownership), and consequently the sale of a flat to a third party, in a building with more than five flats in tense residential housing markets according to a statutory ordinance is subject to the approval of the local municipality. The aim of this legislation is the creation of residential accommodation. The statutory ordinance will be passed by the federal states (Länder) and will be valid until 31 December 2025. The federal states are authorized to deviate from the requirement of five flats and can include in the scope of their respective statutory ordinances buildings, which have between three and fifteen flats (Sec. 250 (1) sentence 6 of the Building Land Mobilization Act).

Last modified 13 Mar 2025