1. Background and current legislation
As already pointed out in our previous article dated 5 May 2023, the German Civil Code (BGB) recognizes various exceptions to the rent brake (Mietpreisbremse). Furnished apartments, however, are – at least in theory – restricted by the rent brake. Nevertheless, in practice, the rent brake is often circumvented by levying of furnishing surcharges, which are currently not get regulated by law. The Federal Council would like to counter this practice with the draft legislation. Furthermore, the Federal Council fears that the exemption of housing provided for “temporary use” from the restrictions of the rent brake may lead to short-term housing concepts for temporary use displacing ordinary, long-term housing. Pursuant to the draft legislative this development can also be blamed on the vague definition of “temporary use”.
2. Essential regulatory contents
a) Temporary use
By the draft legislative the term of “temporary use” – at least in areas with a tight housing market – shall be given contour through the addition of a regulatory presumption: In principle, temporary use shall not apply if the lease has a fixed term of six months or more. When calculating the lease term, previous leases of the same contracting parties for the “same housing“ must also be taken into account – it may well be asked what “the same housing” might be – provided that there are less than three months between the individual lease terms. In exceptional cases, a lease term of more than six months may still be classified as temporary use if, for example, the tenant’s stay is limited from the outset – e.g., for professional reasons – to a period of more than six months. However, the landlord is responsible for providing appropriate proof for the exception.
b) Furnished housing
In addition, the rent for furnished housing shall be broken down and the furnishing surcharge shall be shown separately in the lease, insofar as the regulations of the rent brake (Section 556d ff. BGB) apply and the relevant rent index (Mietspiegel) does not already take into account the rental of furnishings. If the furnishing surcharge is not shown separately, the apartment shall be considered rented unfurnished. In addition, the draft legislation provides that the furnishing surcharge may not exceed 1 % per month of the current value of the furniture at the time it is first given to the respective tenant. The current value shall be equal to the purchase price of the furniture less an amount of 5 % for each year. During the lease, however, the furnishing surcharge shall remain unchanged and only be updated once a new lease is concluded. Furthermore, the furnishing surcharge is not accessible to a rent increase.
According to the draft legislation, the tenant will be entitled to information and possibly repayment claims against the landlord in the event of a breach of the above provisions.
3. Will all temporary housing concepts be captured?
No, the draft only aims to regulate furnished housing, which is subject to the rent brake as defined in Section 556d BGB (and which could potentially therefore be circumvented). Thus, the provisions of the draft legislation on renting furnished housing do not apply if the rent brake does not apply and, thus, cannot be circumvented (e.g., new construction, housing for temporary use).
Furthermore, the regulations on temporary use already apply according to the wording of the draft legislative if the premises are located in an area with a tight housing market. According to the wording, it does not matter whether the rent brake actually applies or not. In our view, it should also be decisive for the regulations on temporary use to apply whether the rent brake within the meaning of Section 556d BGB applies and could, thus, be circumvented.
Whether the draft legislation will be enacted in this or another form is an open question. While the SPD-led construction ministry welcomes the draft, the FDP-led justice ministry rejects it for lack of necessity.
If the draft is enacted, renting furnished housing is likely to become less lucrative in the future. It can be assumed that current rents for furnished housing often surpass the sum of the rent permitted under the rent brake and the furnishing surcharge then permitted. The impact of the draft, if enacted, on the provision of housing for temporary use – in particular, serviced apartments – essentially remains to be seen. Even if the business model of serviced apartments would not be completely eliminated, the draft is likely to lead to an increased administrative and documentation effort if operators do not strictly limit the maximum permissible lease term to less than six months.
Dr. Stefanie Fuerst
+49 (0)40 696 39 15-20
Dr. Nikolaus Dickstein
+49 (0)40 696 39 15-31