Rent increaseswhat landlords may do and how to do it right

The three routes to a higher rent

1. Increase to the comparable local rent (ortsübliche Vergleichsmiete) (§ 558 BGB, German Civil Code) – the standard case.
2. Modernisation rent increase (Modernisierungsmieterhöhung) (§ 559 BGB) – after measures that improve the living standard or save energy.
3. Contractually agreed increases – graduated rent (Staffelmiete, § 557a) or index-linked rent (Indexmiete, § 557b).

Increase to the comparable local rent

Requirements:

• The rent has been unchanged for at least 15 months (the increase can be requested after twelve months at the earliest and takes effect three months later).
• The new rent does not exceed the comparable local rent.
• The cap (Kappungsgrenze) is respected: no more than 20% in three years. In municipalities with a tight housing market, as designated by the Bavarian Tenant Protection Ordinance (Mieterschutzverordnung), a cap of 15% applies. Check the current list of areas, as it is updated regularly.

Justification: The increase must be requested and justified in text form – with a rent index (Mietspiegel), at least three comparable flats or an expert report. Many municipalities in Upper Franconia have no qualified rent index; in that case, justification with comparable flats is usual. Find out more under Upper Franconia rent index.

Tenant's consent: The tenant has until the end of the second month after receipt to consent. If they do not consent, the landlord can sue for consent within a further three months.

Modernisation rent increase

After a modernisation – such as thermal insulation, new windows, a lift or a balcony – landlords may add 8% of the costs incurred to the annual rent. Maintenance shares (e.g. the share that would have been spent anyway on repairing old windows) and subsidies are deducted.

Cap: Within six years, modernisations may raise the rent by no more than €3/m², or by no more than €2/m² for rents below €7/m². Special rules and an additional cap apply to installing a new heating system under the Buildings Energy Act (Gebäudeenergiegesetz).

The modernisation must be announced at least three months in advance.

Graduated and index-linked rent

• Graduated rent: The increases are set out as amounts in the contract; there must be at least one year between two steps.
• Index-linked rent: The rent follows the consumer price index; an adjustment can be requested no more than once a year.

During a graduated or index-linked tenancy, increases to the comparable rent are excluded, and modernisation increases are only possible to a limited extent.

Typical mistakes

• Increasing before the waiting period has expired
• Missing or inadequate justification
• Ignoring the cap
• Incorrect living area (deviations of more than 10% cause problems)
• Not addressing the request to all tenants

Worked example: cap and comparable rent

An 80 m² flat in Kulmbach, rent unchanged for three years at €520 (€6.50/m²). Comparable flats are let for €7.40 to €8.00/m².

If the comparable rent were much higher – say €8.50/m² – the cap would apply: no more than €624 would then be possible within three years, and the rest only after the three-year period.

Timeline of a rent increase

Example: The letter is received on 20 March. The consideration period runs until 31 May. The increased rent applies from 1 June.

What belongs in a rent increase letter

A valid request for an increase contains:

1. The names of all landlords and all tenants as stated in the tenancy agreement
2. The previous and the new net rent excluding heating (Nettokaltmiete) in euros
3. The justification – rent index with classification, three comparable flats with address, size and rent, or an expert report
4. The date from which the new rent is to apply
5. A request for consent by the end of the consideration period

Service charge advance payments are not adjusted under § 558 BGB, but through the annual statement – see Service charge statement.

Modernisation: an example

A landlord in Coburg has new triple-glazed windows fitted in a 70 m² flat. Cost: €12,000. The old windows were 35 years old and would have needed repairing anyway.

For smaller modernisations of up to €10,000 per flat there is a simplified procedure: the landlord deducts a flat 30% as the maintenance share and does not have to prove it item by item. The increase is then limited to €2/m² over five years.

Special rule for replacing the heating

If a new heating system is installed that meets the requirements of the Buildings Energy Act, a separate surcharge applies (§ 559e BGB): 10% of the costs after deducting subsidies, capped at €0.50/m² per month within six years. If the landlord does not claim any subsidy, a flat-rate deduction is assumed. More on the heating requirements under Heating Act (GEG) and on grants under Funding programmes for property.

Graduated and index-linked rent compared

Index-linked rent example: Rent €600, index at the start of the contract 118.0, one year later 121.5. New rent: €600 × 121.5 ÷ 118.0 = €617.80. The adjustment must be declared in text form and applies from the month after next.

Raising the rent with a sense of proportion

Legally possible does not always mean economically wise. A reliable tenant who pays on time and looks after the flat is worth a lot. A change of tenant often costs two to three months' rent in vacancy, renovation and marketing. Many of our landlords in Upper Franconia therefore raise the rent regularly but moderately – and talk to their tenants beforehand. How the rent affects your return is shown in Calculating rental yield. The basics of the tenancy relationship are covered in our guide to Tenancy law.

Naming comparable flats correctly

Many municipalities in Upper Franconia have no qualified rent index. Landlords then usually justify the increase with three comparable flats. For the justification to hold:

1. Comparability: The flats should be similar in type, size, fittings, condition and location – for example the same municipality, a similar year of construction and a similar size.
2. Specific details: Address with floor or position in the building, living area, rent per square metre.
3. Level: The comparable flats must have at least the rent being requested.
4. Your own flats count: Comparable flats may also come from your own portfolio, even from the same building.

An expert report takes more effort, but is often the better basis for larger portfolios or in a dispute. Current rent levels can be found in the Upper Franconia rent index.

Rent cap on new lettings (Mietpreisbremse)

When re-letting in municipalities with a rent cap (Mietpreisbremse): the rent may be no more than 10% above the comparable local rent. Exceptions apply to flats first used and let after October 2014, to the first letting after a comprehensive modernisation, and where the previous rent was already higher. Whether your municipality is affected is set out in the Bavarian Tenant Protection Ordinance. The rent cap does not apply in many municipalities in Upper Franconia – but check the current position before every new letting.

Rent increase and return: an example

An investor owns a 65 m² flat in Bamberg, let for six years at €7.20/m². The comparable rent is now €9.00/m².

The increase improves not only the ongoing return but also the value when selling to investors later. Proceeding moderately and regularly also preserves a good relationship with the tenant. → Calculating rental yield