German parliament approves new landlord/tenant laws

Investment

Germany’s Bundestag (Lower House) finally approved a series of controversial measures designed to reform the residential tenancy laws, in what has long been described by its proponents as an attempt to re-balance the power relationship between landlord and tenant, and encourage the adequate provision of affordable housing.

The CDU and FDP coalition partners passed the bill on 13th December, and after receiving rubber-stamp approval from the Bundesrat (Upper House) in February next year, will come into effect in April 2013.

Some of the key changes of the new reform include:

  • Landlords can invest in energy efficiency measures, even against the will of the tenants. In turn the tenant will have a special lease termination right. Any disturbances arising from construction work must be accepted for up to three months without any reduction in rent.
  • For a limited period of five years, the federal Länder are empowered to lower the maximum permissible rental increase for tenants over a three-year period from its current 20% to 15%
  • The rent increase remains at 11% of the renovation costs per year, and examining the question of whether this represents an economic hardship for the tenant can no longer delay the start of work.
  • If a switch to energy contracting is made to improve the property performance, the cost can be distributed to the tenants if it is not higher than the previous operating costs.
  • Owners will now be able to more easily enforce the eviction of tenants in default.
  • In case of disputes, the courts may order the tenant to deposit the disputed amount until the end of the procedure.
  • Finally, the new law is to prevent the circumvention of protection against eviction (protection for three years against eviction due to future owner usage) in cases of apartment buildings’ being converted into condominiums.