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Decision on the Berlin rent cap made - everything you need to know now

No topic has polarised the Berlin property market as much recently as the rent cap. The uncertainty about the legal validity and the outcome of the proceedings before the Federal Constitutional Court provided material for numerous discussions. Now the wait is over. On April 15, 2021, the Federal Constitutional Court in Karlsruhe declared the "Berliner Mietendeckel" null and void.

Appropriately, we have once again invited the well-known Berlin lawyer Mr Tobias Scheidacker as an expert. He will comment for you on the decision of the Federal Supreme Court and inform you about what it means for you and how you can best act now. You can find more information about Tobias Scheidacker on the → website and on his blog under → Real estate and law.

Does this mean we have a final decision on the rent cap?

Yes, the decision is final. The Federal Constitutional Court is the first and last instance in this context. However, it did not rule on the content, but only on whether or not the state of Berlin is formally allowed to draft such a law. The comments from politicians, especially from the left-wing spectrum, indicate that attempts will now be made at the federal level to enforce the rent cap.

Can I now increase the rent again up to the rent index?

Here it depends on what the initial situation is. First of all, it is important what kind of tenancy agreement is in place. Is it a net cold contract, are surcharges included, is it a graduated rental contract, etc.? It is also important to know how the rent cap situation was communicated with the tenant.

This is what you should do as a tenant:

Have you been informed by your property management/landlord in connection with the rent cap that the rent will be temporarily reduced and that you should please put aside the difference between the rent cap rent and the contractual rent ("shadow rent")?

Then you could proactively ask your management/landlord how much the rent arrears are or calculate the arrears yourself and proactively transfer them to the property management/landlord.

If you have not been told by your landlord that it is okay to pay less, you must be aware that you are currently in arrears, which may be relevant for termination. Arrears are relevant for termination as soon as they are higher than one month's rent.

At this point, we recommend both sides, tenants and landlords, to focus on de-escalation, to talk to each other and to be as accommodating as possible.

How long does the tenant have to pay the rent arrears?

Until termination, a request is not necessary here, unless it was communicated in advance that the tenant would be explicitly informed in the event of a change in the rent because of the rent cap.

Obligations of the landlord

The landlord is not obliged to inform the tenant about the court decision.

What happens now with new leases?

Until the end of April, the rent index of 2019 is currently still valid, the rent index for 2021 will be published in May, but this is not a qualified rent index. If you need more information about this, please contact Mr Scheidacker directly.

Who will reimburse me for the additional costs due to the rent cap?

This is the point at which one could ask whether the state of Berlin should not be liable at this point. We have a large sum of useless additional expenditure here that cannot be repaired. A number of well-known lawyers have already spoken on this subject, with the tenor that none of them currently sees a starting point for such liability.

Problems with Senate subsidies for tenants in hardship cases

Regarding the subsidy, it is important to note how long it can take to pay out. Larger housing associations may have the option to wait longer for the outstanding rent payments, but especially for private landlords this patience is limited. Many of them depend on the payments on which their financing is built. Consequently, they will not be able to wait long for the money and are more likely to give notice to tenants in order not to get into financial problem situations themselves.

What to do if tenants cannot make up the arrears?

The final consequence is that the tenancy agreements are terminated and the tenants lose their flats.

Effects for investors

Achim Amann: Investors' confidence in the Berlin real estate market has been severely disturbed by the rent cap situation. Many fear that the rent cap could be enforced at the federal level and are therefore waiting for the federal elections this year before making further investments. But even beyond that, there is restraint, as real estate is a long-term investment and the rent cap could be an issue again in Germany after the next legislative period.

Expected reactions from the Berlin Senate

With regard to the rent cap, the Berlin government said that if the rent cap were to be declared invalid, they would try to regulate the rental housing market by law in other ways. There are different possibilities, some of which have already been hinted at recently. On the one hand, we have the expansion of the milieu protection areas with a preparation based on expert opinions, which is considered dubious by renowned lawyers. We also have the problem of Berlin's building code with a possible tightening of energy regulations for buildings. We have the discussion about a possible apportionment of the CO2 tax to tenants and limiting the possibilities of apportioning costs in this context. I think that the state of Berlin definitely has possibilities, also in the area of rent regulation, to make investing in the city's real estate market unattractive.

Achim Amann: That is also a problem from my point of view. At the end of the day, our job is to help investors invest in Berlin's real estate market. And what do these investors do? They create new living space. From my point of view, the solution here is new construction. It would be nice if the Senate made building land available to the cooperatives and housing could be created there without political influence. I can only emphasize again in this context: Make yourself independent of such political influences by acquiring housing as property, inform yourself about the possibilities of acquiring your rental flat.

Which experts should you contact annually for information as an investor?

Contact your tax advisor annually, have your tenancy agreements checked by a lawyer if necessary and contact estate agents regarding a regular valuation (https://blacklabel-properties.com/selling-property/property-valuation/) of your property. And most importantly, look for a good property management company (https://blacklabel-properties.com/black-label-management-letting/) that represents your interests and communicates with you.