In Germany the BGB law regulates how, when and under which circumstances the landlord can increase the rent. The law allows rent increases up to the amount of the local comparative rent (§ 558 BGB). In addition to the local comparative rent there is a rental cap. The rental cap is defined in § 558 BGB III. The rental cap states that the rent may not increase by more than 20 percent within three years from the start of the rental period.
A rent increase needs to be sent in writing to the tenant and meets certain dates and deadlines After receiving the rent increase the tenant usually has 2 months to approve or reject the rent increase letter. With the third month the increased rent can become effective.
If the tenant refuses to agree to the rent increase or does not react, he can be sued by the landlord
If the tenant does not agree to the rent increase, he usually can terminate the contact with a three month notice.
In the case of modernization increases, the tenant can even cancel after one month.
The most common is probably the rent increase based on the local comparative rent or according to the rent index.
Local comparative rent:
The apartments compared must be in a similar location, condition, equipment, size and type. As a rule, you need three to four comparable apartments
An overview of the local comparative rent and is created by local tenant and landlord associations.
Other reasons by law are: rent increases after modernization, graduated rents, index rents and increases.
Increase after modernization:
up to 11 percent of the modernization costs can be passed on to the tenant annually. The rent increase after renovation can exceed the rent cap.
The graduated rent is a rent that has already defined the rent increases in the rental agreement. The increase must be shown as a monetary amount. A percentage is not enough. In addition, the exact date for each rent increase must be defined as well.
The index rent is a variable rent and linked to an official index released by the "Bundesamt für Statistik".
The most important paragraphs are:
557 BGB - rent increases by agreement or law
557a BGB - graduated rent
557b BGB - index rent
558 BGB - rent increase up to the local comparative rent
560 BGB - changes in operating costs
556d BGB - Permissible rent at the beginning of the rental period
The "Mietpreisgrenze" is a tightening of the cap limit, but only in certain regions. The "Mietpreisgrenze" ensures that instead of the maximum increase of 20%, only an increase of 10% is allowed.