capping limit

Cap - The cap limits the permissible rent increase for existing leases to a maximum of 20% over a three-year period, up to the local market rent (Section 558(3) of the German Civil Code (BGB)). In areas with a tight housing market, the state government may lower the cap to 15%. The cap protects tenants from sudden rent hikes, even if the local comparative rent is higher.

How It Works and Calculation

The cap applies to the initial rent at the start of the three-year period-not to the current rent. Example: If the net rent excluding utilities is 8.00 euros/m² and the local comparative rent is 11.00 euros/m², the rent could theoretically be raised to 11.00 euros/m². However, the cap (20%) limits the increase to a maximum of 9.60 euros/m² over three years. Rent increases following modernization (Section 559 of the German Civil Code) and increases in operating costs are not counted toward the cap.

The three-year period begins on the date of the last rent increase. Important for landlords: Even if a new tenancy has begun, the cap limit applies with regard to rent development within that new tenancy. In cases where rents have remained unchanged for many years and are well below the market rent, the cap limit may necessitate a gradual adjustment over several three-year periods.

Lowered Cap in Bavaria

The Bavarian State Government has lowered the cap to 15% for numerous municipalities-including Nuremberg, Fürth, and Erlangen. This means that landlords in these areas may increase the rent by a maximum of 15% over a three-year period. This regulation is regularly reviewed and extended by ordinance. The current Tenant Protection Ordinance is temporary and must be renewed.

The lowered cap limit always applies only in conjunction with the criterion of a tight housing market, which the state government determines by ordinance for specific municipalities. You can inquire with the relevant district office or municipal administration to find out whether a municipality is listed in the ordinance.

Rent Cap and Rent Increase Strategy

The rent cap requires landlords to adopt a long-term rent increase strategy if the current rent is significantly below the local comparative rent. Specifically: With a rent of €7/m² and a comparable rent of €12/m² (not uncommon in Nuremberg for long-term leases), the gap cannot be closed in a single step:

• Three-year period 1: €7.00 → max. €8.05/m² (15% increase)
• Three-year period 2: 8.05 → max. 9.26 €/m² (15% increase)
• Three-year period 3: 9.26 → max. 10.64 €/m² (15% increase)
• Three-year period 4: 10.64 → max. 12.00 €/m² (comparable rent reached)

This calculation example shows: It can take up to 12 years to move from a significantly below-average rent level to the market rent-if the landlord consistently takes advantage of every opportunity to raise the rent.

Practical Tip for Landlords in Nuremberg

We recommend that landlords in Nuremberg strictly adhere to the reduced cap of 15% when raising rents. Check which rent increases have already taken place over the past three years-even if there has been a change in tenants. Anyone who exceeds the cap risks the rent increase being invalid, and the tenant may refuse to consent.

In cases of long-standing low rents, it may make more strategic sense to gradually bring the rent up to the comparable rent in several stages over 6-9 years-while consistently utilizing every permissible three-year period. At my-home.de, we assist you in drafting legally compliant rent increase notices and calculating the permissible increase amounts.

Frequently Asked Questions

Does the cap also apply to new leases?

No. The cap applies only to rent increases in existing tenancies. For new leases, the rent cap (§ 556d BGB) applies instead, which limits rent in tight housing markets to a maximum of 10% above the local comparative rent.

Do modernization surcharges count toward the cap?

No. Rent increases due to modernization (Section 559 BGB) are calculated separately and are not counted toward the cap. However, since 2019, a separate cap has applied to modernization surcharges: a maximum of 3 euros/m² over six years (for rents under 7 euros/m²: a maximum of 2 euros/m²).

What happens if the landlord exceeds the cap?

The portion of the rent increase that exceeds the cap is invalid. The tenant is only required to agree to the permissible portion. If the tenant refuses to agree at all, the landlord can sue for consent-the court will then reduce the increase to the permissible amount.

Does the cap also apply to index-linked rent?

No. For index-linked lease agreements (§ 557b BGB), adjustments to the consumer price index apply regardless of the cap. However, with index-linked rent, a separate rent increase based on the local comparative rent is no longer possible-in this case, the landlord has already waived the traditional rent increase.

How do I draft a legally sound rent increase notice?

A request for a rent increase under § 558a BGB must be made in writing and contain the following minimum information: the current net rent excluding utilities, the requested new amount, the justification (local comparative rent with reference to the rent index, an expert opinion, or three comparable apartments), and a statement that the increase complies with the cap. The tenant has a period of consideration until the end of the month following the month after the request is received. If the tenant does not agree, the landlord may file a lawsuit to obtain consent within three months. We recommend that landlords in Nuremberg use the current Nuremberg Rent Index for the rent increase notice, which is regularly published jointly by the Nuremberg City Council and the tenant and landlord associations. An incorrect rent increase request-such as an incorrect reference to the rent index or an incorrect calculation of the cap limit-is invalid and must be resubmitted, which resets the deadline.

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