Rent increases are covered in §§ 557 to 561. The BGB provides that rent increases are only possible under two circumstances:

• 1. When agreed upon
• 2. In accordance with the law

However, there are cases when the landlord may increase the rent without prior consent in order to bring the rent in line with local rents or to implement measures to modernize the apartment.

In addition, rent increases can be contractually agreed to in two ways:

• 1) Graduated Rent: The increase may only take place after 12 months from the conclusion of the rental agreement, § 557 a BGB. For this, two conditions must be met: The exact date of the rent increase (this applies only to new leases) and the rent may only be changed after one year. Additionally, the amount of the increase must already be specified in the contract. If a rent increase is decided by the graduated rent, the rent may not be changed for other reasons. However, justification of the rent increase is not required under this clause. The tenant has to agree to this clause.
• 2) Index Rent: The rent is adjusted by an index and may only change after one year from the conclusion of the contract, § 557 b BGB. In this case, the agreement must also be recorded in the lease. Changes to the rent are made according to the change in the consumer price index, and the landlord must specify the amount of the change and how it is calculated. The amount of the rent increase cannot be questioned because it has been agreed upon. However, the tenant can always demand for the rent to be adjusted to the value of regional rents, despite the contractual agreement. For this, the value determined by the index needs to be higher than usual in the region.

If neither of the two aforementioned agreements exists, the amount of the rent increase is determined by comparison with the comparable rent customary in the locality, Section 558 of the German Civil Code (BGB). This is done by comparing rents for similar apartments in the area over the last four years. In this case, information from the local authority can be used. Here, too, there are requirements that must be met:

• 1) Rent may not increase by more than 20% over a 3-year period - in some cases, you can limit the increase to 15%.
• 2) The increase must be formally communicated in writing, which can be done by email, letter or fax.
• 3) The rent increase must be justified. For example, the rent of three apartments in the same region can be used.
• 4) After receiving the notice of the increase, 2 months should pass before the increase takes place. The tenant must accept the increase only every 15 months. If the increase takes place in a shorter period, the tenant can reject it.

In the latter case, the tenant has two months to check whether the increase is in line with local rents.

Modernization

In case of modernization of the apartment, a request for rent increase may be submitted. In this case, the tenant's consent is not required. However, the rent can only be increased if the renovation is an improvement in the living conditions of the tenant in relation to the renovation costs. If the state provides funds for the renovation, this is reflected in the rent increase, i.e. the rent increase can be reduced in proportion to the funds. In order to be able to carry out the renovation, the tenant must be given a notice 3 months prior.

This notification must contain:

• 1) The start date for the work
• 2) The type of restoration to be carried out;
• 3) The amount of the rent increase
• 4) The amount of the cost of the condominium;
• 5) The possibility of refusing the renovation due to exceptional circumstances.