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Rent cover: What the verdict means for tenants and landlords

2021-04-15T11:55:54.500Z

The Federal Constitutional Court has declared the Berlin rent cap null and void: Do tenants have to pay extra money now? And what are the consequences of the judgment beyond Berlin? The most important questions and answers.



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Old buildings in Berlin Kreuzberg: Landlords can now demand rent payments

Photo: Jürgen Ritter / imago images

Now it's gone, the controversial rent cap in Berlin.

The Federal Constitutional Court in Karlsruhe has overturned the prestige project of the state of Berlin.

And now?

An overview.

How has the rent cover worked so far?

The rents for around 1.5 million apartments in Berlin are frozen at the June 2019 level.

Under certain conditions, the rule even forces landlords to lower rents.

The only exceptions are buildings that were ready for occupancy from 2014.

The details are complex: The red-red-green Senate has presented a price table in which the apartments are staggered according to year of construction and equipment and are given a maximum rent.

These prices correspond roughly to the rent index level of 2013. For example, for Wilhelminian-style buildings from the years before 1918, which are often in sought-after locations, a net rent of EUR 6.45 per square meter is allowed.

For apartments built between 1973 and 1990, only 6.04 euros.

If the current rent is more than 20 percent higher, landlords can only ask for the tabular value.

They may only rise again from 2022 to compensate for inflation, according to the current status by a maximum of 1.3 percent annually.

If an apartment is rented out again, the landlord must adhere to upper limits, which are based on the age, equipment and location of the apartment, as well as the last rent requested.

How does the court justify its current decision?

The clarity of the judgment leaves nothing to be desired: With the rent cap, Berlin has exceeded its legislative competence, which is regulated in the Basic Law.

The area of ​​competence of the federal states is therefore basically determined by the scope of the federal competence, not the other way around.

The multitude of provisions in the Civil Code also allows the conclusion that the federal government wanted to settle the issue conclusively.

In addition, it does not contain any reservations, opening clauses or authorization provisions that would enable the federal states to issue their own or deviating rental price regulations.

The Federal Constitutional Court has declared the rent cap null and void for formal reasons only: the content of the law has not been examined.

What does that mean for tenants now?

Berlin tenants who have to pay less rent because of the rent cap are now facing a problem.

Landlords could now demand payment of the rent saved.

Even representatives of the red-red-green coalition had always asked tenants to put money aside for this case.

Germany's largest housing group Vonovia has already announced that it will forego additional rent claims.

“Few tenants will have a money box in which they have put that portion of the rent, as politicians have recommended.

Especially not this year, when we are all afraid and worried about the pandemic anyway, "Vonovia boss Rolf Buch told SPIEGEL.

The company takes this into account.

On the other hand, Deutsche Wohnen tenants will face additional claims.

The company offers various options for settling the remaining amount of the rent due, from one-off and installment payments to deferrals.

In cases of social hardship, individual solutions will be found together with the tenants.

The company announced that no tenant would lose their apartment as a result of the decision.

The Berlin tenants' association stated that there was no immediate termination option because the tenants had obeyed the law.

A request for payment may not be necessary.

The repayment becomes due with knowledge of the decision.

"Anyone who cannot pay the outstanding amounts immediately should get in touch with the landlord," recommended the association.

Why did the Berlin Senate introduce the rent cap at all?

From the point of view of the red-red-green state government, the law should give tenants in the capital a “breathing space”.

Berlin is considered a Dorado for real estate investors because the demand for living space has increased massively in recent years.

The economic upswing also gave many people above-average increases in incomes.

In view of the scarce supply, this meant that rents rose at an above-average rate for several years.

According to calculations by the umbrella association Central Real Estate Committee (ZIA), new contract rents climbed by 27 percent between 2013 and 2019 alone.

All those who could not benefit from the upswing and whose incomes could not keep up with the rent increases remained behind.

Since mid-2015, the nationwide rent brake has allowed landlords in "areas with tight housing markets" to add a maximum of ten percent to the local comparable rent when new tenants move in.

From the point of view of critics such as the Berlin Senator for Urban Development Sebastian Scheel (Linke), however, it has not prevented the significant increase in rents in Berlin.

What consequences has the rent cap had so far?

In fact, rents have fallen in Berlin.

Between January 2020 and January 2021 they fell by almost eight percent, as an analysis by the real estate portal Immoscout24 shows.

However, people who live in sought-after residential areas such as Prenzlauer Berg, Wilmersdorf, Charlottenburg or Wannsee benefit above all.

According to a survey by the real estate association BFW Berlin / Brandenburg, tenants for a 171 square meter apartment in an old building on Ladenbergstrasse in Wilmersdorf had to pay 2619 euros in rent before the rent cap came in, after which it was only around 1483 euros.

Low-wage earners, who often lived in districts such as Neukölln, Rummelsburg or Mariendorf, would hardly be relieved by the law, according to the analysis of the BFW.

The alleged track record has been diminished for another reason: the supply of rental apartments has shrunk.

Since the cover came into force on February 23, 2020, the number of advertisements has fallen by 19 percent.

For apartments where the rent cap definitely works, it was even minus 30 percent.

If you are new to Berlin or want to move within the city, the rent cap made it even more difficult to find an apartment than before.

Within a year, the number of interested parties per property for the apartments covered by the rent cap rose from an average of 128 to 214.

The rent cap also hampered investments in existing properties.

The Swedish housing company Akelius had announced that it would not renovate any more apartments for the duration of the cover.

What developments can be expected now?

In connection with the heated mood in the city by politics and activists, the ruling could put a further strain on the relationship between landlords and tenants.

Vonovia boss Rolf Buch, for example, fears that the verdict could even fuel the conflict.

"I'm also worried about my employees," he said in an interview.

The ruling has a beneficial effect on the supply of rental apartments in the city, at least in the medium term.

Investors and cooperatives now have planning security again and enough income to continue projects that have been put on hold or to push new ones.

The lawyers still have to clarify whether the statutory rent index can be put back into force.

The instrument to limit rent increases is only valid if the prices are in line with the market.

If one assumes that the judgment of the Federal Constitutional Court puts everything back in the state before the law was passed, then the rent index would also be valid again.

But it is also conceivable that the instrument was inoperative for too long to be able to reflect the rent level that now existed under normal circumstances.

However, this would have serious consequences: The landlords would then have a freer hand to increase rent.

What significance does the judgment have beyond Berlin?

As a matter of principle, the Federal Constitutional Court has once again made clear the limits to which the federal states are subject to their legislation.

In this respect, the decision is of great importance for the discussion about the competing legislation between the federal and state governments.

The ruling is likely to have a very practical effect on the efforts of individual citizen movements that have started similar initiatives in centers with a tight rental market.

From now on it is clear that anyone who wants to limit the increase in rental prices must start a legislative initiative at the federal level.

But even at this level there would be limits to a rent cap: the right of ownership regulated in Article 14, which guarantees the owner of a property a certain freedom of movement when setting the rent.

The Karlsruhe judges have not commented on the extent to which the Berlin rent cap has restricted this freedom beyond what is permitted.

Source: spiegel

All business articles on 2021-04-15

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