Residential lets in Germany are not for the faint hearted investor. Germany is very pro-tenant
German residential lets are governed by a legal system that strongly favours the tenants. Buying a buy-to-let in Germany should not be taken lightly. 60% of all German households rent. “Despite rent control regimes and notice protection, private investment in the housing market still seems to pay off and, therefore, many investors offer housing for rent
Rents and rent increases can be freely negotiated and agreed upon. However the landlord can be fined if, in a time of limited housing accommodation, he demands rent in excess of 20% above the rent charged for comparable premises. The rent must remain at that level for at least a year. Any increase must be stated in the contract as either
- Graduated increase clauses,
- Indexation linked
A rent increase if not index linked must be related to the rent in that area. An increase in rent to that new level can occur as long as that increased rent takes place not less than 15 months from when this higher rent in the area was achieved. As a general rule, this type of rent increase is limited to 20% over three years.
The landlord must state reasons for the rate increase. He must present, expert opinion, three ‘sample’ rents charged for comparable properties, or show a so-called ‘qualified rent table’ (qualifizierter Mietenspiegel) or rental database – a statistical measure of rents issued by the local authorities and approved by landlord and tenant associations.
The tenant has two months to accede to the demand; if he refuses, the landlord can sue.
- Utilities-If responsibility for payment of utilities is not specifically passed by contract to the tenant, the landlord pays.
- Content insurance is the responsibility of the landlord as a result of fire, storms, flood, burglary and vandalism. Tenants can take out additional insurance for there own processions
The security deposit must not exceed three monthly rental payments. It must be paid directly into a savings account with interest common for such savings accounts, and with a three-month termination period.
With German residential lets, what rights do landlords and tenants have especially with regard to duration of contract, and evictions?
A tenancy agreement may be concluded for a ‘limited’ or ‘unlimited’ period – Unlimited is the the most popular contract.
Limited – Contracts can only be limited for very good reason e.g. that the landlord will, at the end of the contract, need his property for himself or his family or renovations will be done at expiration. There is no maximum period for ‘limited’ agreements, but they are in theory not renewable (a proviso intended to protect tenants). Any contract that lasts more than a year must be in writing.
Germany has two forms of notice:
- ‘Ordinary’ notice, only applicable to unlimited contracts;
- ‘Immediate notice’ which must be based on a specific reason, normally the breach of an important contractual duty by the other party, e.g., non-grant of use, or default of payment of rent. In this case the contract terminates with immediate effect.
The tenant can object to the notice, and demand continuation, if termination of the lease would give rise to hardship for himself or his family that would be unjustified, even in the light of the landlord’s legitimate interests.
The notice period for ‘ordinary notice’ can be between three to nine months (if the tenant has lived long in the premises).
The tenant does not need justification to give notice. He must generally give three months notice.
How effective is the German legal system with residential lets?
Tenancy law is enforced in the the courts; Tenants have access to legal aid and legal insurance policies.