Real estate: Rental law reform hits landlords hard – hundreds of euros less

Kai Warnecke makes no secret of his annoyance. The proposals are "a vote of no confidence in the millions of private individuals who rent out" and a "further attack on the functioning of the rental housing market", the president of the property owners' association Haus & Grund explained angrily.

In fact, the new draft law on the reform of rental law, which Federal Minister of Justice Stefanie Hubig (SPD) presented in February and which has since been approved by the cabinet, provides for far-reaching changes for the approximately 5.5 million private landlords in Germany.

More regulation, new deadlines, stricter rules: the package of laws contains a bundle of new measures to protect tenants.

Here is an overview of what the changes mean in concrete terms - and how deep the cuts go in terms of rent increases, contract design and terminations.

1. New price cap for furnished apartments

Landlords in tense housing markets will have to disclose, without being asked, the surcharge they charge for furnishings.

This should already be done before a rental agreement is made.

If this information is not provided, tenants should only have to pay the rent that would be permissible without furnishings.

However, landlords will have the option of subsequently specifying the surcharge for furnishings.

This was not originally planned, as the apartment would have been permanently classified as "unfurnished".

According to the new regulation, however, the apartment is now considered unfurnished for two years from the date of subsequent provision.

The rent for furnished apartments is subject to the rent price brake.

However, since the amount of the surcharge for furnishings did not have to be disclosed previously, the rental price was previously only difficult to check.

In the future, landlords will only have the option of setting a flat rate of 10 percent instead of, as initially planned in the reform, 5 percent of the net cold rent for fully furnished apartments.

Concretely, this means that if an apartment is allowed to cost €600 according to the rent index, a maximum of €60 can be charged as a surcharge for furniture in the future.

Previously, landlords collected up to €180 per month for such a rent.

In the future, the surcharge for furnishings may only be based on the purchase value and the degree of wear and tear of the furnishings.

It is planned that landlords can charge a maximum of one percent of the time value of all furnishings per month.

When renting furnished apartments in tense housing markets, the law will also provide a calculation method for the surcharge for furnishings that is based on the time value of the furniture.

Originally, the draft only provided that landlords had to specify the surcharge for furniture separately.

The president of the property owners' association, Warnecke, called the new regulation a "bad joke".

The German Tenants' Association, on the other hand, expressly welcomed the planned obligation to separately specify surcharges for furnishings in the future.

Impact: Such an extended regulation would strongly change the rental market in parts of Germany.

According to a study, the proportion of furnished and temporarily rented apartments in large cities with more than 500,000 inhabitants was more than 30 percent of all rental advertisements at the end of 2024.

However, the strong increase is partly statistically distorted because classic advertisements decreased, according to the Institute of the German Economy.

2. New grace period for rent arrears

The planned change in the protection against termination for landlords is particularly far-reaching.

Tenants who fall behind with their rent payments are a recurring problem for many landlords.

Previously, landlords could ultimately enforce an eviction lawsuit if the residents did not pay their rent for several months.

This is supposed to become more difficult in the future.

If a tenant receives a regular termination due to payment arrears, this will again become ineffective if they or a public body such as the job center pays off the entire rent arrears within a two-month period after the eviction lawsuit is served.

This is provided for in the draft.

However, a prerequisite is that there has not already been such a grace period payment within the past two years.

Landlords often also connect extraordinary terminations with a regular termination in order to terminate the tenancy relationship despite payment.

This termination remained effective under previous law even if the debts were later fully paid off.

If landlords therefore terminated extraordinarily and, as a precaution, also regularly, the protection of the grace period was in vain.

This would be over now.

For the regular termination, the same grace period regulation is supposed to apply in the future as for the extraordinary termination.

"Everyone deserves a second chance," Hubig finds.

Tenants who fall behind with rent payments therefore have a new loophole to avert an eviction lawsuit.

Impact: The risk in the event of payment arrears will in future be shifted much more strongly to the side of the landlords.

"The initiative would not change anything about homelessness," said association president Warnecke in the Handelsblatt.

"The amendment helps those who are unwilling to pay, but not those who are unable to pay."

3. New price limits for index rent

The possibilities of landlords will also be restricted in the future when it comes to index rents.

However, the Federal government has revised the original draft law once again.

Originally, it was provided for in the reform that index rent increases in tense housing markets would be capped at 3.5 percent per year.

However, everything will remain as it is up to an inflation rate of three percent.

Only above a 3 percent increase will the increase in consumer prices be able to be asserted as a rent increase in the future, but only to half.

The German Tenants' Association warns that even 3 percent per year will be a significant burden for many households - especially in expensive markets.