Sunday 16 February 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

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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