Landlords can pass on expenses for apartment modernization to the tenants. Not only do they have to tolerate the construction work, they usually also have to accept the subsequent rent increase.
More economical heating, more economical showers, insulated facades: not only since the gas crisis have many landlords been trying to modernize their property in an energy-saving and climate-friendly manner. For tenants, this is usually associated with dirt, but often also with more rent. Because owners can pass on their investment to the rent. Questions and answers about the modernization rent increase for tenants and landlords.
What is modernization and what is not?
Everything that counts as a modernization measure is regulated by law. Basically, these are measures that either help to save energy and water in the long term, increase the practical value of the apartment or improve the living conditions. The latter are, for example, the installation of an elevator or the addition of balconies.
In addition, the installation of insulating windows and a more economical heating system as well as measures to reduce water consumption are among the classic modernizations. Burglary protection, the installation of intercom systems, heat-insulating facades and, of course, modern bathrooms also add value to rental apartments.
Such measures are to be distinguished from maintenance and repairs – i.e. when landlords repair damage, for example replacing a broken bathtub.
What is the difference between modernization and maintenance?
This classification decides whether the rent goes up or not. Landlords pay for maintenance and repairs entirely themselves. On the other hand, they are allowed to pass on many modernization costs to the tenants. Because modernization measures often involve a bit of maintenance and vice versa, it is difficult to differentiate between them.
Angela Lutz-Plank, Managing Director of the Munich Tenants’ Association, explains this using the installation of windows. “If ancient wooden windows are replaced by insulating windows, it is on the one hand a repair. On the other hand, the new windows save energy.” So the exchange is just modernization. “In case of doubt, maintenance is always included, which is to be deducted from the allocable modernization costs,” says Julia Wagner, head of civil law at the house owners’ association
But be careful: According to the Munich Tenants’ Association, indexed and graduated leases are the exception when it comes to modernization rent increases. Here, modernization costs can usually only be passed on to tenants if landlords have been obliged to carry out the structural measure – for example by authorities.
How do tenants find out about a modernization rent increase?
Landlords are obliged to inform residents three months in advance of the planned construction work and the subsequent rent increase. This is done in text form, which generally means letter, e-mail or fax. “The announcement must contain the individual work, its scope, the probable beginning and the probable end as well as the rent increase,” says Lutz-Plank. There are also potential savings in ancillary costs.
When does the modernization rent increase have to be paid?
After completion of the work, tenants receive information in which the owner specifies the rent increase and discloses the calculation. The new rent is due three months later. Tenants have the right to verify the increase.
Can tenants fight back?
Modernization can hardly be prevented. “Tenants have to tolerate them as a matter of principle,” Lutz-Plank clarifies. There are exceptions for hardship cases. Anyone who wants to object to the measures because of hardship must notify the owner within one month of the announcement of the modernization. The text form is sufficient. In Wagner’s experience, whether hardship actually exists depends on the individual case and is usually decided by the courts.
Although tenants can hardly prevent the additional rental costs, they can possibly reduce the payment. This works when a tenant realizes that he will not be able to afford the more expensive rent. This economic hardship must also be reported to the landlord within one month of receipt of the announcement of modernization and evidence must be provided. “The tenant has to explain what he earns, what expenses he has and that he cannot pay the higher rent with the rest of the money,” explains Lutz-Plank. Nevertheless, the same applies here: the courts usually have the last word.
What to do if the rent is no longer affordable after the increase?
Tenants really only have two options: either apply for housing benefit or move out. You have a special right of termination, which you can exercise up to the end of the second month after receipt of the rent increase.
How much is the rent increase?
According to the law, landlords are allowed to allocate eight percent of the modernization costs annually. In addition, the cap limit must be observed: the rent may increase by a maximum of three euros per square meter within six years, provided that the starting net rent was more than seven euros. Otherwise, a maximum of two euros more is allowed. When increasing, the rent can exceed the limits of the rent index.
How is the rent increase calculated?
The maintenance portion is deducted from the modernization expenses. In addition, expenses for financing and funding for the measure must be deducted. This lower amount forms the basis for calculating the rent plus that tenants can expect after the modernization.
So that tenants can understand the costs of the renovation, landlords are required to make their expenses transparent. However, it is not necessary to break down the individual trades. According to the Federal Court of Justice (Az.: VIII ZR 337/21), it is sufficient to inform tenants of the total amount and the quota or the amount that was attributable to repairs. In order to clearly separate the expenses for modernization and maintenance, owners should ask the executing craftsmen for a breakdown, recommends Wagner.
Can owners avoid the math?
“Yes, by using a flat rate. If the costs claimed for the modernization do not exceed 10,000 euros, a flat rate of 30 percent can be deducted for maintenance,” says Julia Wagner. With this procedure, tenants could not invoke a case of hardship. On the other hand, rent increases due to other modernizations are excluded for the following five years. Landlords should therefore consider whether the flat-rate solution or the classic modernization rent increase would be cheaper.
