Rent adjustment

A rent adjustment refers to a change in the rent amount permitted by contract or law during an ongoing tenancy. It may be implemented by the landlord based on the rent index (comparative rent increase pursuant to § 558 BGB), through graduated or index-linked rent, or through modernization surcharges. The tenant’s rights-in particular the cap on rent increases and consent requirements-significantly limit the landlord’s options in residential tenancies.

Rent Increase to the Local Comparative Rent

The most common rent adjustment in the residential sector is an increase to the local comparative rent (Section 558 of the German Civil Code). Requirements: The rent must have remained unchanged for at least 15 months; the request for an increase must be made in writing with justification (rent index, comparable apartments, or expert opinions); and the cap of 20%-15% in many cities with tight housing markets-may not be exceeded within a three-year period. The tenant has two months to consider the offer.

Important: The request for an increase must be formally correct to be valid. Common errors include missing or incorrect justifications, citing comparable apartments that are not comparable, or failing to meet deadlines. A formally defective request for an increase does not have to take effect-the tenant can reject it by citing the formal error without the deadlines for their consent beginning to run.

Graduated and Indexed Rent

With graduated rent, rent increases are contractually agreed upon at fixed points in time; no further increases are possible during the term. The steps in the rent schedule must be clearly defined in the lease agreement either as a specific amount or as a percentage; a minimum term of twelve months between each step is required by law. During the term of the graduated rent, no rent increase may be demanded under § 558 BGB-unless the graduated rent agreement expressly permits this, which is rare in practice.

With index-linked rent, the rent is tied to the Consumer Price Index (CPI) of the Federal Statistical Office-if inflation rises, so does the rent, without the need for a separate justification. Index-linked rents have become much more common due to the high inflation in 2022/2023 because they allowed landlords to make automatic adjustments. However, the landlord must give written notice of the increase and specify the index as well as the new rent amount.

Rent Increase Due to Modernization

Following a modernization measure (Section 559 of the German Civil Code), the landlord may pass on 8% of the costs incurred annually to the rent. Maintenance expenses (repairs) are excluded. The cap here is 3 euros per square meter over a six-year period (for initial rents below 7 euros per square meter: 2 euros). The landlord’s duty to provide notice and the tenant’s right to object on grounds of hardship must be observed.

Notice of the modernization must be given in writing at least three months before the work begins and must describe the nature, scope, start date, and expected duration of the work. If the notice is missing or contains errors, the tenant may refuse to accept the increase. Strict formal requirements also apply to the subsequent notification of the rent increase: The costs incurred must be presented in a transparent manner, and non-pass-through maintenance costs must be excluded from the calculation.

Practical Tip for Landlords in Nuremberg and Franconia

For years, Nuremberg has had a qualified rent index that is recognized as the basis for rent increases. The city is considered an area with a tight housing market, which is why the stricter cap of 15% applies. We recommend that landlords in Nuremberg prepare every rent adjustment in a formally correct manner: justification based on the current rent index, written notice with the correct notice period, and documentation of modernization costs. A formal error can render the entire request for an increase invalid.

For districts around Nuremberg without a qualified rent index-such as parts of the Ansbach or Neumarkt i.d.OPf. districts-the rent increase must be justified in other ways: through comparable apartments (at least three comparable properties with rent information) or through an expert appraisal. We advise landlords in the region on the correct preparation and implementation of rent adjustments.

Frequently Asked Questions

How often can I, as a landlord, increase the rent?

For rent increases based on comparable rents, no more than once every 15 months; within a three-year period, the 15% limit (in tight markets such as Nuremberg) must not be exceeded. For graduated and index-linked rents, the contractually agreed intervals apply.

Does the tenant have to agree to a rent increase?

For a comparative rent increase, yes-the tenant must either agree or file a lawsuit within the reflection period. If they do not agree, the landlord may file a lawsuit to obtain consent within three additional months. For graduated and index-linked rents, no separate consent is required, as this is already agreed upon in the lease agreement.

Does the rent cap also apply to rent adjustments during an existing tenancy?

No. The rent cap (§ 556d BGB) applies only to new leases-that is, when a new tenancy is established. For existing tenancies, the adjustment rules described above apply.

What happens if the tenant does not agree to the rent increase and does not pay?

If the tenant does not agree to the comparative rent increase but also does not pay the increased rent, the landlord must file a lawsuit to obtain consent. Legal action costs time and money, but it is the only legal way to enforce the increase. Unilateral withholding of the security deposit or offsetting is not permitted. We recommend seeking legal advice early on in such situations.

How does index-linked rent work in practice during high inflation?

With index-linked rent, the rent increases automatically in proportion to the Consumer Price Index (CPI) published by the Federal Statistical Office. If the index rises by 5%, the landlord may increase the rent by 5%-but only after providing written notice stating the new index, the percentage change, and the new rent amount. This notice is not a request for an increase that the tenant must agree to, but rather an announcement. The increased rent becomes due at the start of the second month following the notice. In Nuremberg, index-linked lease agreements triggered significant rent increases during the 2022-2024 inflation period-landlords benefited from automatically rising rents, while tenants faced additional costs, in some cases substantial ones. Anyone signing a new lease today should carefully calculate the long-term consequences of an index-linked rent for both parties, as future inflation trends are uncertain.

Back to the Real Estate Glossary.