Housing Market Report Berlin 2020

Berlin polarises like no other city. Nevertheless - or precisely because of this - it is still a magnet for many people from  all over the world. The influx into the metropolis is unbroken and there is a lot going on in Berlin’s economy: Tesla is coming, the BER Airport will (hopefully) soon start operating, and Siemensstadt 2.0 will open up new possibilities. Also, relocation for the entire federal government from Bonn to Berlin is repeatedly being discussed. All this affects the Berlin housing market that has been tense for years.

Housing Market Report Berlin 2020

An outcry swept across the country when Berlin announced the implementation of a rent cap. According to the tenor of the real estate industry, the rent cap is expropriation, investments are on hold, and there will be a hail of bankruptcies in the real estate industry. That being said, many tenants and people looking for accommodation, who perceive the increasing housing prices as a threat, welcomed the initiative. In order to shed some light in the effects of the rent cap announcement in the Berlin housing market, we have postponed the publication date of the Housing Markt Report. Articles on the rent cap and other recent topics regarding the Berlin housing market can be found, in the familiar way, in our small-scale analyses.

The report is available directly from the site of BerlinHyp:

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Housing Market Report Berlin 2020

Unofficial Free English Translation of the Rent Cap / Rent Freeze "Mietendeckel" Law as Published

This document is an unofficial translation of the Berlin Rent Cap / Rent Freeze Law known by the name “Mietendeckel” and it’s official title

Gesetz zur Neuregelung gesetzlicher Vorschriften zur Mietenbegrenzung 

It was published on the Journal of Laws and Ordinances for the State of Berlin on 22 February 2020 and came into force on the following day 23 February 2019.

This date is important to keep in mind when reading the text because it makes it much easier to understand when exchanging the phrase “date of entry into force” by the actual date.

Another phrase is “the effective date” which is the date the Berlin Senate announced the plan of the “Mietendeckel” law, it is 18 June 2019. Replacing the phrase by the date again makes it easier to understand.

I wanted to stay as close to the original text as possible to not obstruct the comparison of the language versions.

This translation has no official character and is free for personal use only. It does not constitute by any means legal advice in any form. The purpose is for non-German speakers to get an understanding of the content of the law and draw conclusions regarding actions to be taken and questions to be asked.

There is a tight timeline and most of the actions have to be taken as an initiative by the landlord. The first action is due by 23 April and the next one 23 November 2020.x

You're welcome to try Google-Translate ...,

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Unofficial Free English Translation of the Rent Cap / Rent Freeze "Mietendeckel" Law as Published

The Berlin Rent Cap, Rent Freeze, Mietendeckel Will Come Into Force On 23.02.2020

The Berlin City Government has worked over-time to ensure that there will be no rentals next weekend under the old legal conditions. The office for Urban Development has announce that the Rent Act "Mietendeckel" will be published in the Journal of Laws and Ordinances for the State of Berlin on 22.02.2020 and thus will come into force on the next day,

23. February 2020.

It will apply retroactively to the status quo as of 18. June 2019 when the Berlin Senate approved the key elements of a new Berlin law on residential rents, including the so-called "Mietendeckel", a combination of rent freeze and rent cap as its main features.

via GIPHY
There is a line of dates to keep in mind and take action upon:

31.12.2013

01.01.2014

18.06.2019

23.02.2020

23.04.2020 Your next action date.

23.11.2020

22.02.2025 

If you are a landlord in Berlin, owning a rental apartment older than 01.01.2014 you should be setting up your timeline, project plan and checklist to avoid trouble. In many cases you could actually get fined accepting a rent at more than 120 % of the table applicable to your property. The maximum is set at Euro 500,000.

We have installed a Newsletter for landlords affected by the "Mietendeckel" for support with these tools for their apartments.

Here is the opportunity for signing up to this "Mietendeckel" Newsletter.

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The Berlin Rent Cap, Rent Freeze, Mietendeckel Will Come Into Force On 23.02.2020

Mietendeckel: Should There Be A Reserve Clause In Rental Contracts After The Rent Cap - Rent Freeze Goes Into Effect?

The Mietendeckel Rent Act was challenged since the vote in the Berlin City Parliament (Abgeordnetenhaus) on January 30, 2020. On one side for formal constitutional grounds, the federal government is stating that the act passed is not within the competence of any state but a federal domaine and therefore will challenge it at the federal constitutional court in Karlsruhe. On the other side, it is challenged on its content supposedly being unconstitutional. This could also be filed at the Berlin constitutional court. Various property owners and associations are lined up.
The first attempt for an injunction has already been rejected by the federal constitutional court because it was too early out of the stable as the parliamentary process is not completed yet and in theory, changes could still be made in a third reading – which is not planned.
But I don’t want to bore you with the legal discussion.

The main issue at this point:

What should I write into my rental contracts, until there is clarity on the constitutionality of the Rent Act?

Bild von Andreas Breitling pixabay.com

The Rent Act will enter into force in the near future and any landlord will have to stick to the limits set in its various clauses otherwise risking a lawsuit with the new tenant and fines from the authorities.
As an example let’s say that going by the old rules you could rent your apartment for 1,600 EURO and going by the new rules you have to rent it for 1,300. Should the Rent Act be deemed unconstitutional, you have a valid contract at 1.300 and there is no way the Berlin Senate is going to pass a law stating that this is unfair and the tenant has to accept the contract to be raised to 1,600 – right? So what can be done? You don’t know how long the legal clarification is going to take, at best the case will be heard at the beginning of next year. You don’t really want to leave the apartment empty without rent and it would be unlawful as well.
Should there be a reserve clause in new rental contracts in case the "Mietendeckel" Rent Act is deemed unconstitutional in all or in part?
By no means, the following constitutes legal advice and replaces a discussion with a solicitor which would consider all the aspects of the specific situation. That said here are some thoughts for that discussion.
For such a clause there are two differentiation:

1. An adjustment clause which becomes effective for the moment the Rent Act is ruled unconstitutional;
2. A retroactive clause which takes effect from the day the contract is signed and entitles the landlord to demand payments going back to the first day of the contract.

• For both, there is the question of the calculation of the security deposit (Kaution), should that be adjusted as well as it is limited to there months’ net rent?

Option one seems to be legally the safer choice as it does not stretch the interpretation of the Civil Code as much. (For a discussion with your solicitor: 558b I BGB, 558b IV BGB, 560 II 2 BGB)
Reminder: For any contracts that are signed between now and the day of the publication of the Rent Act, the rent freeze of 18 June 2019 does not apply, just keep in mind the ren cap table and the 20% it can be exceeded when signing a contract now.

As the discussion and information all around the "Mietendeckel" Rent Act will certainly continue over the next months we will provide updates and insights in the handling of the situation from the point of view of a landlord.

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Mietendeckel: Should There Be A Reserve Clause In Rental Contracts After The Rent Cap - Rent Freeze Goes Into Effect?

Berlin "Mietendeckel" Is A Rent Freeze And A Rent Cap - What Happens When?

The now worldwide infamous "Mietendeckel" under observation by many big cities with housing issues has various aspects to it coming into effect at different times. There is also a differentiation between re-letting and existing contracts. I will give the collection of regulations some structure, later on adding a timeline to it.

	Rent Freeze	Rent Cap
Re-Renting	Rent on 18 June 2019 maximum but possibly restricted by the rent cap table	Rent Cap Table for any contract after the publication date of the law in the Journal of Laws and Ordinances for the State of Berlin Amtsblatt 1)
Existing Contracts	Rent on 18 June 2019 maximum but possibly restricted by the rent cap table. The landlord must actively inform the tenant about the “correct” rent defined by either the date above of the rent cap, whichever is lower. 2)	The rent cap requires a rent reduction by the landlord if the current rent exceeds the rent derived from the cap table by >20%. This action has to happen 9 months after the publication. 3)

1) Before the publication, there is no actual restriction except that rents exceeding the cap table by more than 20% will have to be reduced later.
2) As of 1 January 2022, the rent cap table will be subject to an annual review based on the percentage inflation determined by the Federal Statistics Office as of 31 December of the previous year but limited to 1.3%. The Senate department responsible for housing must define the relevant percentage by way of a legal order.
3) For more details about the cap table see https://germanproperties.blogspot.com/2020/01/the-berlin-rent-cap-mietendeckel-is.html

Applying the cap table and assuming the highest possible value of 9,80 €/m²/month with 0,74 € for a good location and 1,00 € bonus for top equipment and being completed between 2003 and 2013  your top rent is 11,54. Add 20% before it is deemed excessive by the "Mietendeckel" you end up at

13,85 €/m²/month. This is the Maximum!

It does not matter, whether the apartment is furnished or not, if it is older than 2014 this is the maximum rent you can possibly have. There is a time-line to be observed. I will publish a separate post on this subject. One very short time-line applies to current vacancies. For details on this matter please see https://germanproperties.blogspot.com/2020/02/action-required-you-can-optimize-your.html urgently.

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Berlin "Mietendeckel" Is A Rent Freeze And A Rent Cap - What Happens When?

Action Required - You Can Optimize Your Freeze Rent in the "Mietendeckel"

If you own in apartment building or apartment in Berlin completed before 2014 and currently have a vacancy, Swift action is advisable. The difference is 20% of the prospective net rent.

If residential space is or was re-let after the effective date 18 June 2019 and the lease continues to apply upon the Rent Act taking effect, the newly agreed rent will be relevant for the rent freeze. Thus, in such cases too, a market rent may be agreed before the Rent Act takes effect without the risk of the agreement being retroactively deemed invalid and the landlord being required to return any excess rent. At the same time, the tenant may, within nine months of the law taking effect, demand that the rent be reduced to the permitted cap (see The Berlin Rent Cap - "Mietendeckel" is here. What Do You Have To Do?)

In short: You can rent your currently vacant apartment at 19% above the cap table and that will be your freeze rent going forward, unless you re rent again within the next five years.

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To recap the latest main events:

The Berlin city parliament voted on Thursday, January 30, 2020, to pass the rent cap “Mietendeckel” draft into law. It will most likely come into effect at the beginning of March, possibly as early as the end of February when officially published.
This will trigger numerous deadlines for actions required to be taken by the landlord.
The answer to a much asked question:
Yes it does apply to furnished apartments completed before 2014.
We are offering a newsletter, starting with a summary and interpretation of the law as it went into the parliamentary hearing. going forward, we will be providing hands-on tips on the communication and the timeline that needs to be met starting with the information needed.
Here is the opportunity for you to sign up to this free newsletter:

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Action Required - You Can Optimize Your Freeze Rent in the "Mietendeckel"

A Flood of Updates and Interpretations on The "Mietendeckel" Rent Cap To Be Expected

You are the proud owner of a residential rental property, a buy-to-let plan?

If you have not heard about it yet, you will soon from your property manager or tenant. There are already various interpretations going around and none less than the German Federal Government is planning to take the regulation to the Constitutional Court in Karlsruhe.

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To recap the latest main events:

The Berlin city parliament voted on Thursday, January 30, 2020, to pass the rent cap “Mietendeckel” draft into law. It will most likely come into effect at the beginning of March, possibly as early as the end of February when officially published.
This will trigger numerous deadlines for actions required to be taken by the landlord.
The answer to a much asked question:
Yes it does apply to furnished apartments completed before 2014.
We are offering a newsletter, starting with a summary and interpretation of the law as it went into the parliamentary hearing. going forward, we will be providing hands-on tips on the communication and the timeline that needs to be met starting with the information needed.
Here is the opportunity for you to sign up to this free newsletter:

Don't miss the opportunity.

A Flood of Updates and Interpretations on The "Mietendeckel" Rent Cap To Be Expected

Berlin Extends the Restriction on Title Splits, Division into Condos, For Another Five Years

The Berlin city government (Senat) has extended the limitations on title splits in social conservation areas by another five years. The regulation would have expired in March.

This is a map of the areas as of 30.06.2019

Soziale Erhaltungsgebiete Berlin, Stand 30.06.2019

More details about the individual areas are in our blog https://propertylocations.blogspot.com/

Legal Background

The German Building Code, Section 172, provides the option for cities like Berlin to define social conservation areas “Soziale Erhaltungsgebiete”, also known as “Milieuschutz” Gebiete. One of the measures within this regulation is the option to stop owners of apartment buildings in these areas from dividing them up into condos (“Eigentumswohnungen”) through a title split. For the other aspects see https://germanproperties.blogspot.com/2018/03/the-can-do-and-cant-do-renovating.html on this blog.

The Good News

However, there are 6 exceptions where the district office cannot deny the permit for the title split. They are listed in Section 172 (4) of the Building Code. Statistics on this matter show, that amongst the reasons, that were listed by the owner in the application for a conversion permit between March 14th, 2015 and June 30th, 2019, 92.7% of the 15,773 apartments an application for a conversion was made was based on the “voluntary commitment of the owner - sale only to tenants for a period of seven years” (sentence 3 No. 6).

Depending on the intentions of the owner or buyer, this can be an acceptable limitation.

Looking for help in your case? Please contact us, using the email address on the right.

Berlin Extends the Restriction on Title Splits, Division into Condos, For Another Five Years

Berlin Rent Cap - Mietendeckel - Actions Required Before The End of February

The Berlin city parliament voted on Thursday to pass the rent cap “Mietendeckel” draft into law. It will most likely come into effect at the beginning of March, possibly as early as the end of February when officially published.

It applies only to apartments completed before 2014! New property developments are not touched by this law.

There are three major aspects:

• A rent freeze 
• A rent reduction, where applicable
• A tenant rent refund

This article will focus on the rent freeze, the expected impact on the owner and the preparations to be made as the law applies with regard to landlords.

We assume that most of the discussions will initially be with tenants who received a rent increase after the cut-off date of June 18, 2019. Once the law comes into force, it can be checked whether there are any claims for recovery of the increased rent. Incidentally, this also applies to graduated rents (Staffelmiete) that have increased during this period.

The law stipulates that tenants can only request a reduction in rent nine months after the law comes into force. Any claims must be made by the tenants directly, the district offices (Bezirksamt) however may continue to take all measures necessary to enforce the law. This includes, for example, providing tenants with information about the legally permissible rent for their apartment.

However, landlords who have signed a new lease after the cut-off date and before the law comes into effect (end of February or beginning of March) can rest easy. According to a recent clarification in the draft law, this new contract rent will stand. Simple reimbursement of rent that has been paid too much is not owed.
Any rental contract signed between now and the date the law goes into effect is your “freeze rent”. However, the following also applies here: If the rent is inadmissibly high (more the 20% above the rent cap "Mietendeckel" table), a reduction can be requested under the terms of the new legislation.

Actions to take:

Get as many rentals of vacant apartments done by the end of February as possible, but keep in mind the 20% rent cap. More on this specific aspect coming up. 

This is a time critical issue, we can provide support in setting up your action plan and its execution. Contact us via the email address on the right.

Berlin Rent Cap - Mietendeckel - Actions Required Before The End of February

The Berlin Rent Cap - "Mietendeckel" is here. What Do You Have To Do?

Immediately after the law is published, probably in mid-February, a rent freeze applies as the first stage. The key date for this was June 18, 2019. Landlords are then no longer allowed to charge a rent that is above the value at that time. This rent freeze applies at least until January 2022.

Then, nine months later stage two, the most controversial section of the law follows with a rule that has never existed before: The Senate has established a rent table with prices that are based on the age group and fit out standard.

There are also surcharges: one euro for "modern equipment", for example with a fitted kitchen and high-quality flooring, and "location surcharges", a maximum of 0.74 euros per square meter in good locations. Including these surcharges, the absolute maximum price of a net rent in Berlin for a period of five years will be 11.54 euros - in this case for houses built between 2003 and 2013.

When the rent is 20% or more above the applicable table value the landlord has to take the initiative to reduce it.

What to do next?

If your property was completed 2014 or later - have a cup of tea and watch.

If your property is older, there are several things you have to comply with and they all require the landlord to become active or risk fines.

18 June 2019

This is the magic date of the rent freeze. When you are renting now, you are not allowed to exceed the rent of your property on that day. You are not even allowed to accept more if the tenant offers it (which is not unlikely in the current market situation). You would ave a long term legal risk because it is illegal.

Most likely in October 2020 you have to actively adjust your rent according to the table above with bonuses and reductions based on standard (e.g. fitted kitchen) or location, much like the rent table process already applied.

In a new post coming up we will explain in detail which steps a landlord in Berlin with residential apartments older than 2014 will have to take.

If you don't want to miss the updates, subscribe to this blog here on the right of the page.

The Berlin Rent Cap - "Mietendeckel" is here. What Do You Have To Do?

Co-living - Currently One of the Most Promising Ways to Invest in Property

There are obviously many ways to invest in Real Estate. The Forbes Real Estate Council has looked at the current market situation and identified four trends that can be taken advantage of: Invest in a digital REIT, build a tiny home in your backyard, Angel invest in a Proptech startup or purchase a property for co-living.

Purchase a Property for Co-living.

I would like to dig into this option:

The Co-living movement is very much a reaction to the intensifying urbanisation and workplace nomads who can perform their job almost anywhere with internet access. Another driver is the ongoing price increase in urban areas around the world. Bigger units are hardly affordable, even for tenants with relatively high income.

Photo by Aw Creative on Unsplash

Investors are buying larger units with more than two or three bedrooms and rent the single rooms individually with shared, well equipped kitchen, bathrooms and lounge/living room. To meet the needs of the mobile generation most likely attracted to this form of living, certain standards have to be met: Fast WiFi, comfortable beds, security. A smart solution for laundry and responsive service in case of problems are a MUST.

On the financial side all utilities including e.g. electricity and TV-license have to be factored into the rent as they are key factors for mobility.

A set-up like this will command a much higher rent and, despite the inclusion of ancillary costs, a much better result than renting the entire unit to one household.

There are companies trying to offer just the shell room and will have some initial success in very tight markets but they will lose the tenants to more convenient set-ups as the competition is growing.

"It’s uncertain how large of a renter audience will be interested in this dorm-like life, but it’s gaining traction. Similar to the tiny homes, be sure to look into local zoning rules before purchasing a property." (Forbes Real Estate Council)

Co-living - Currently One of the Most Promising Ways to Invest in Property