The red-red-green rent cover project has been on our minds for a year and a half, and the law has been (predominantly) in force for six months. There are several judicial decisions in the context of rent increase proceedings, the specialist press has discussed the details in numerous articles, in countless client discussions we have illuminated the MietWoG Bln from all possible perspectives and with all conceivable ideas.
It is time to summarize the current situation.
Mainly political attitudes are communicated in the press and on Twitter. That is not what this is about. Rather, I am summarizing here what we are talking about legal salary of the law to be able to say about the current situation.
1. The rent cap does not lower the rent!
If you look for information on the website of the Senate Department for Urban Development or the Berlin tenants' associations, you get the impression that the rent cap leads to a rent reduction. This is wrong. The MietWoG Bln is a public law regulation that is limited to the area of the State of Berlin. Tenancy law is not a public law, but a civil law. The rent amount is agreed in the rental agreement, the legal framework for this can be found in Civil Code § 535. According to this regulation, the “agreed” rent is to be paid, not a different one and, in particular, no other rent. Neither the rental agreement nor the BGB are changed by the MietWoG Bln.
That is beyond dispute. In the justification for the law (amendments from January 21.01.2020, 5, page XNUMX) this is also stated frankly,
"Against this background, the MietWoG Bln does not intervene directly in existing contractual relationships or those to be concluded after the law comes into force, their creation and content is based solely on the provisions of the BGB. The rights resulting from such agreements can only be exercised during the period of validity of the law within the public law limits set by the MietWoG Bln. "
This means two things: firstly, all rental contract claims remain fully effective. A rent that has been effectively agreed to be 14 euros / sqm remains at 14 euros / sqm. Second, the landlord can make the payment though during the time of the law applies, and locally where the law applies, do not assert. So he is temporarily and restricted to the State of Berlin prevented from exercising his legitimate rights, nothing more.
The Berlin regional courts have ruled accordingly when it comes to rent increases. Either the MietWoG Bln was not considered unconstitutional anyway, or it was ignored because it does not regulate civil law. In a rent increase procedure, however, it is only about civil law, namely a right to consent to the rent increase Civil Code § 558. The MietWoG Bln does not play a role here.
Why has the Berlin state legislature only banned the fact of renting or the temporary exercise of rights, but not the legal agreement itself? Because the latter would undoubtedly be a civil law regulation and the state legislature has no legislative competence for such a regulation. The BGB is a federal law and cannot be changed by individual states. This is so clear and unquestionable that it was not even tried in the context of the MietWoG Bln.
Second consequence: the "lowering" leads to rent arrears
If the rent does not decrease, then every less payment means a rent arrears. If this has exceeded the threshold of one month's rent, the landlord can cancel due to arrears, Civil Code § 543.
Against this object the tenant representatives and the legal justification that this rent arrears because of Civil Code § 134 disappears. According to this provision, a contractual agreement that violates a law is void. The problem is that there are no such illegal contractual agreements here. The MietWoG Bln does not prohibit the conclusion of a rental agreement for a higher rent, see above. It just prohibits the higher rent as such. The rent as such is not a contractual agreement, but a simple fact, ie Civil Code § 134 is not applicable. It has been commented on in the legal press for a long time (e.g. Beck in real estate) and this is also how the courts see it when they continue to judge rent increases unaffected by the lid, although they lead to a rent that is above the lid provided by the MietWoG Bln " Due date rent 18.06.2019/XNUMX/XNUMX ", ie at a rent that is prohibited by law.
Nothing else can then apply to rents that are "prohibited" after November 23.11.2020, XNUMX because they are above the table limits.
3. Rent arrears lead to termination rights
Whether the MietWoG Bln is now unconstitutional or not does not change the fact that rent arrears accumulate if the tenant pays less because of the cap. Consequently, the landlord can terminate the contract if the arrears are high enough.
Something different only applies if the landlord temporarily allows the lessee to pay less. Even then, a residue arises. The tenant is not in default with this. Civil Code § 543 requires default with arrears for the termination, so that one of the two conditions does not apply if less payment is allowed.
Many landlords are currently writing to their tenants and explain that from December onwards they will temporarily pay less and put the difference aside. In this way, these landlords prevent their tenants from falling into arrears. This means that they protect their co-workers from the consequences of Berlin politics by temporarily suspending termination rights because of the arrears. There is no need for this, the law does not provide for communication about the "lowering". There seems to be an error in circulation that the tenants should be informed about the amount of the cap, many of our clients are approached by their tenants. There is no such obligation in MietWoG Bln.
If a landlord does not write anything, his tenant remains obliged to pay in full under civil law. If he pays less, there is also arrears with the arrears, ie the way to termination has been taken.
4. The MietWoG Bln does not apply in Hamburg.
Section 11 No. 4 MietWoG Bln declares it illegal to "accept" or "demand" excessive rent. Since it is a Berlin state law, it only applies in Berlin, not abroad.
That makes it convenient for outside owners. If the rent is accepted in Hamburg, for example, it cannot be illegal: in Hamburg there is no legal regulation that prohibits this, and nothing wrong is done in Berlin as long as you do not warn the arrears.
The result is that there is unequal treatment between those owners who live in Berlin and have their account here, and those who are away from home and receive rents on their accounts abroad. The local people are threatened with fines, the foreign ones are not.
In practice we see three groups of Berlin landlords in particular.
- The first is the group of owners of a single rental condominium, or two or three individual apartments. This is about retirement provision on a very small scale. The apartments are usually heavily burdened with loans, the apartments have been heavily invested and are accordingly equipped with high quality. Accordingly, the rents are often significantly higher than the lid allows. The rental income covers the costs and loans, nothing more. A cut leads to problems here.
- The second group is represented by the handicraft entrepreneur or freelancer or classic small business owner whose family has built one or two apartment houses over generations. The rental income helps the children or grandchildren to finance their studies and bridge bottlenecks, for example corona failures, in the company. The real estate is usually not so heavily burdened with loans, but the income is still required for the aforementioned purposes. Here, too, cuts lead directly to problems.
- The third group are large housing associations with portfolios that are wholly or partially located in Berlin. Here, liquidity reductions in the Berlin sector are something that is usually temporary. can bridge well.
Group 1 is currently leaving the market if at all possible. Empty apartments are sold if it is fiscally possible. A rental does not take place if it can be avoided. The statistics show us that the rental offers for apartments covered by the law have fallen by around 2020% since February 60, ie the entry into force of the law. That is also completely clear: if you have to pay extra every month, but you need the earned income to live, an investment makes no sense.
Group 2 is currently still holding out. According to what we hear, this only applies until the decision of the Federal Constitutional Court in June 2021. If something other than an annulment of the law comes out there, we will see massive reactions. Because here, too, the following applies: permanent loss-makers make no economic sense and have to be repelled at some point to protect themselves. To a large extent, Group 2 is currently in the process of dividing their houses into condominiums in order to be able to sell them at all if you want to at some point. Because who buys an undivided tenement house that is permanently in deficit and according to the current plans for § 250 BauGB new version (here p. 10) could never be split up again? The cheapest thing would then be to donate the house to the state. We've had that before in the GDR, at least nobody wants to buy something like that. Condominiums, on the other hand, are likely to retain their value over the long term, because people have to live somewhere, and if there are no more rental apartments because no one wants to rent at a loss, all that remains is the purchase. So there will still be a market here.
Group 3 is watching from outside. The losses caused by the reductions are compensated for by shutting down investments - in maintenance, modernization, new construction - and since the rent does not fall, only the cash flow, and since the differences have to be paid later, there are not even book losses. Only in those cases in which the tenants cannot put the differences aside and cannot pay them later, legal costs for the collection, the eviction claim and, if necessary, the eviction enforcement must be expected. Then the apartments can then be properly prepared and re-rented at a higher cost; on average, this should be able to be controlled without loss of income.
The MietWoG Bln essentially causes problems for the small to medium-sized Berlin economy (via the detour of Berlin's small investors and pension providers), but neither for the large rental companies nor for foreign investors. A side effect is that currently hardly anyone can find an apartment who is moving to the city or wants to move within the city. Because nobody moves out of their own free will, and if they do, the apartment is sold or remains empty.
5. Termination due to the loss of the business basis
In a post on real estate last year, before the legislative proposal was concluded, I warned that the MietWoG Bln would represent a loss of the business basis and that the landlord would have additional rights of termination Civil Code § 313 can lead. Well-known colleagues have meanwhile followed this view and published corresponding articles in the specialist press (e.g. real estate 2020, page 1168).
It seems to be agreed that such a right of termination arises in any case if the MietWoG Bln should actually be effective. However, we will only know that after the decision of the BVerfG next year. The question of whether the current legal uncertainty already represents a loss of the business basis is not fully discussed. This is not far off, as we can see from the rental figures in Berlin: most private landlords are currently deciding, due to the legal uncertainty surrounding the MietWoG Bln, not to re-rent apartments that are becoming vacant, but to sell them, to use them themselves or - despite the ban on misuse - to be left empty. The existing legal uncertainty is therefore a change in the business basis on the landlord's side (see here ).
The discussion does not go unnoticed. We are getting more and more inquiries as to whether one can terminate now because of the lowering or whether one has to wait until June, ie until the decision of the BVerfG.
6. Image in our mandate volume
The aforementioned circumstances are directly reflected in our mandate volume. We processed hundreds of rent increase proceedings in 2019, all based on the rent increases that were still sent in mid-June 2019, as a protection against the "deadline" 18.06.2019/XNUMX/XNUMX. At the same time, the number of redundancies increased by leaps and bounds, which continues to this day. We are currently declaring two or three self-service terminations per week. Renting out to third parties is no longer worthwhile, as you prefer to leave the apartment to your daughter at a discount or move in yourself.
The increased number of rent complaints due to the rent brake leads to the same trend. Conny GmbH, formerly Lexfox, has a strong acquisition base with its portal kleineermiete.de, and many tenants use this to try to lower their monthly rent retrospectively. On the owner's side, however, the rent is often calculated close to the loan and maintenance costs of the property, ie a reduction makes renting unprofitable. Then the obvious thing to do is to end the rental. This in turn contributes to the increased number of redundancies and subsequent owner-occupation of the apartment.
For the next year we expect an increased number of payment lawsuits, terminations due to arrears and eviction processes due to arrears of rent as a result of the lower payments due to the lid. Furthermore, the current rent index will lose its qualification in May 2021. Since there can be no new qualified rent index in Berlin for the next 8 years, as a database has to grow again, it is to be expected that a considerable rent increase potential will be raised through comparable apartments and expert reports. In the absence of a rent index, it is no longer possible to politically control its statistics, which have led to artificially lowered values in the last four rent indexes. What that means, we can use one suspect the current BGH ruling that is going through the press today.
From our internal point of view as tenancy lawyers in Berlin, the MietWoG Bln is a Trojan horse for the tenants: in return for a temporary lower payment, which has to be paid later regardless of the constitutional fate of the MietWoG Bln, the landlords have the right to terminate, a sensitization of the owners for the Necessity of constant rent increases in each case to the maximum extent as well as increased risks that personal use is claimed. At the same time, other rental apartments to which one could then move have largely disappeared from the market. New construction will no longer take place because the investor cannot rule out that the current new building will be treated as an existing building by Berlin politics in a few years' time and then also capped. Repairs and modernizations no longer take place if it can somehow be avoided. And of all things, the part of the Berlin economy that does not belong to the gastronomy and art sector, but could have survived Corona sensibly, namely the construction industry, experiences the loss of income most strongly due to the reluctance to order.
If the BVerfG does not declare the MietWoG Bln to be void - which, by the way, none of the colleagues in my environment who is currently involved with the law and its effects - the wave of layoffs and other market reactions that is currently building up will pull through Berlin . This is not a good prospect.
The result is therefore not positive in any conceivable outcome and for none of the parties involved, whether on the landlord or tenant side or with the tradesmen and service companies involved in the market. In view of this, one can doubt whether the self-praise that the Berlin ruling parties are currently writing on the rent cap flags is justified.
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