MYHOME REAL ESTATE - THE ORIGINAL SINCE 2014
Anyone who renovates an apartment in Erlangen-installing new windows, heating systems, insulation, or bathrooms-has the right under German tenancy law to pass on a portion of the costs to the current rent. The 8% rule sounds simple, but in practice it isn’t: caps, eligible costs, and formal requirements make this type of rent increase one of the most error-prone of all.
The modernization rent increase is regulated in Section 559 of the German Civil Code (BGB). The key point: After a modernization project, landlords may increase the annual rent by up to 8 percent of the modernization costs incurred that are attributable to the respective apartment. This percentage has been in effect since the 2019 Tenancy Law Amendment Act and replaced the previous 11 percent rule.
Calculation example: A landlord invests 18,000 euros in a new heating system for a three-family house. The apartment on the 2nd floor has 80 m² of a total of 240 m² of floor space, i.e., one-third of the total area. This means that 6,000 euros of the modernization costs are attributable to the apartment. The maximum possible annual rent increase: 8% × 6,000 euros = 480 euros/year = 40 euros/month.
For larger renovation projects involving multiple measures, the calculation is more complex. Landlords in Erlangen, for example, who invest in heating (20,000 euros), windows (€15,000), and roof insulation (€25,000) for the entire building-a total of €60,000-and spread this cost across three 80-square-meter apartments, can increase the rent per apartment by 8% × €20,000 = €1,600/year = €133/month. It must then be determined whether the 3-euro/m² cap applies: 3 euros/m² × 80 m² = 240 euros/month maximum increase over 6 years. The 133 euros/month is below this amount-in this case, the 3-euro cap is not an obstacle. However, the situation may differ in cases of very high investments.
Cap limit in areas with housing shortages: In Bavaria, the state government has designated Erlangen as an area with a tight housing market (Bavarian Rent Index Ordinance 2023). This means: Regardless of the 8 percent cap, rent may not be increased by more than 3 euros/m² of living space due to modernization-related rent increases within 6 consecutive years. For an 80-m² apartment, the absolute 6-year cap is therefore 240 euros/month.
| Characteristic | Value 2025/2026 |
|---|---|
| Average existing rent in Erlangen (apartment 60-100 m²) | 11.50-14.80 €/m² |
| Average new lease rent in Erlangen | 13.00-17.50 €/m² |
| Modernization cap (6 years) | €3.00/m² |
| Erlangen rent index valid until | 2026 (new survey planned) |
| Share of rental apartments in the housing market | approx. 58% |
| Vacancy rate in Erlangen | < 1.5% |
Source: Erlangen Expert Committee, Annual Report 2025; Erlangen Rent Index 2024; Bavarian State Office of Statistics, Housing Statistics 2024; IVD Middle Franconia Market Report 2025.
The extremely low vacancy rate in Erlangen highlights just how tight the market is. For landlords, this situation is a double-edged sword: On the one hand, modernization costs are easily financeable because rents remain stable; on the other hand, the €3/m² cap is a real obstacle for expensive renovations. A landlord who invests €60,000 in a comprehensive apartment renovation and wants to recoup the costs as quickly as possible will hit the cap sooner than expected.
The correct distinction between passable-on modernization costs and non-passable-on maintenance costs is the most common point of contention. The basic rule under Section 559(2) of the German Civil Code (BGB): Maintenance costs-that is, costs for repairing wear and tear or damage that would have occurred anyway-are not passable on. Only the portion of the modernization costs that goes beyond mere maintenance may be apportioned.
Example: Window Replacement: If a landlord replaces dilapidated, single-pane windows from the 1960s with modern triple-pane windows, they must deduct the maintenance portion. The costs for single-pane replacement windows (e.g., 40% of the total costs) are considered maintenance; only the additional costs for energy efficiency improvements (60%) are apportionable.
Apportionable (selection):
Not apportionable (selection):
The formal notice of rent increase pursuant to § 559b BGB must meet certain minimum requirements; otherwise, it is invalid. Key points: The notice must be in writing, describe the modernization measures, clearly outline the total costs and the portion attributable to the apartment, and specify the amount of the rent increase resulting from the calculation. A mere blanket statement such as “We have replaced your heating system and are increasing the rent by 50 euros” is not sufficient. If a dispute arises and the Erlangen Local Court reviews the notice, a rent increase that is not sufficiently justified may be declared invalid-even if the modernization itself was carried out properly.
Hardship clause for tenants. Section 559(4) of the German Civil Code (BGB) gives tenants the right to cite financial hardship in the event of a rent increase. If the modernization is unreasonable for the tenant (e.g., if the increased rent would amount to more than 40 percent of their net income), the tenant may demand that this hardship be taken into account when determining the rent increase. In practice, successfully invoking financial hardship in Erlangen is rare because most tenants have a good income situation. Nevertheless, it is advisable to clearly communicate the expected rent increase when announcing the modernization.
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Erlangen is an exceptional housing market: The combination of Friedrich-Alexander University (FAU) with over 40,000 students and the globally significant Siemens Campus with over 14,000 employees creates a sustained, high-paying demand for rental apartments. This situation means that landlords can easily finance modernizations because vacancies are rare.
At the same time, tenants in Erlangen are often well-educated, legally savvy, and well-connected-through the FAU’s AStA or local tenant associations. Errors in formal rent increase notices are more frequently challenged in court in Erlangen than in cities with lower educational levels. Careful, transparent documentation of modernization costs and the apportionment calculation is therefore particularly important in Erlangen.
The Wilhelminian-style and pre-war buildings in downtown Erlangen are in significant need of energy-efficient renovation. Owners who carry out roof insulation, window replacement, and heating system modernization as a comprehensive package can recoup a portion of the costs through the modernization rent increase under Section 559 of the German Civil Code (BGB)-provided they comply with the 3-euro/m² cap and the formal requirements.
For WEG owners (condominium owners’ associations) in Erlangen, the situation is more complex: Modernizations to common property (roof, facade, heating system) must be approved by a qualified majority at the owners’ meeting (Section 20 WEG). Individual apartment owners who wish to pass on the costs to their tenants via a modernization rent increase under Section 559 of the German Civil Code (BGB) must ensure that the WEG resolution and the allocation of costs among owners are documented in a transparent and comprehensible manner.
A common misunderstanding: The modernization rent increase under § 559 BGB is not the same as a rent increase to the local comparative rent under § 558 BGB. Both instruments can be applied simultaneously, but each has its own requirements and limitations. In Erlangen, with its current rent index (valid until 2026), both mechanisms offer landlords different levers depending on the initial situation.
The modernization rent increase under Section 559 of the German Civil Code (BGB) is a legitimate tool in Erlangen in 2026, but not an easy one. The 8% rule, the €3/m² cap, the distinction between modernization and maintenance costs, and the formal requirements for the rent increase notice all require careful preparation.
Landlords in Erlangen who wish to assess the economic viability of a modernization and its impact on the property’s return on investment will find the valuation tool from leadmarkt.ch to be a quick, data-driven starting point-available immediately and without the need to register.
Under § 559(4) BGB, tenants have the right to challenge a rent increase due to modernization on the grounds of undue hardship-if, after weighing the circumstances of the individual case, particularly the tenant’s age and income situation, the rent increase constitutes an unjustifiable burden.
The hardship defense is not a free pass for tenants: It requires a serious individual financial hardship. The Erlangen Local Court (and the competent chamber of the Nuremberg-Fürth Regional Court as the appellate court) review such defenses on a case-by-case basis. The mere fact that a rent increase is noticeable is not sufficient for the hardship defense.
For landlords in Erlangen, this means: The rent increase notice should already clearly explain how costs were allocated and what efficiency gains result for the tenant (e.g., savings on heating costs). Tenants who see that their total burden (rent + heating costs) does not increase or even decreases as a result of the modernization are less likely to raise the hardship defense.
The notice of modernization pursuant to § 555c BGB must be provided to the tenant in writing-at least 3 months before the planned start of construction work. It must include: the nature and scope of the work, the start date and expected duration, the amount of the expected rent increase (or at least an estimate), and any information regarding the tenant’s right to a rent reduction during the construction period.
The notice of rent increase pursuant to § 559b BGB may be served no earlier than upon completion of the work and takes effect only at the beginning of the third calendar month following service. This means: If the notice is given in January, construction begins in April, is completed in July, and the notice of rent increase is served in August, the increased rent takes effect only starting in October.
| Step | Deadline | Requirement |
|---|---|---|
| Modernization notice | ≥3 months before construction begins | In writing, § 555c BGB |
| Completion of the work | variable | Documentation required |
| Notice of rent increase | after completion | In writing, cost breakdown |
| Effective date | 3rd calendar month after delivery | automatic |
These deadlines are closely monitored in Erlangen by legally savvy tenants. A procedural error-e.g., an insufficient notice period or an incomplete cost breakdown in the rent increase notice-renders the entire rent increase invalid until a correct notice is delivered.
Prepared by the my-home.de editorial team in collaboration with regional real estate analysts. Data current as of May/June 2026.
Under Section 559 of the German Civil Code (BGB), landlords may increase the annual rent by up to 8 percent of the modernization costs attributable to the apartment following a renovation. In areas with a housing shortage (such as Erlangen), an additional cap applies: Rent may not increase by more than 3 euros per square meter as a result of renovations within a 6-year period.
Costs for structural alterations that permanently enhance the property’s value, permanently reduce energy consumption, increase its utility value, or improve general living conditions are apportionable (Section 555b of the German Civil Code). Maintenance and repair costs that would have been due in any case are not apportionable.
As a general rule, the tenant must tolerate renovations (Section 555d of the German Civil Code), unless they would impose an unreasonable hardship on the tenant. The landlord must give at least three months’ written notice of the renovation. The tenant then has one month to claim hardship.
In Erlangen, the Bavarian rent control law applies (a cap of 10% above the rent index for new leases). For existing leases and rent increases due to renovations, the rent control law does not apply directly-in these cases, only the § 559 limit and the €3/m² cap apply.
The notice of rent increase must be provided in writing and must clearly set forth the renovation measures, the costs incurred, the allocation formula based on living space, and the resulting rent increase (Section 559b of the German Civil Code). Errors in the formal presentation may render the increase invalid.
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Content researched and verified by the my-home.de expert network - specialized in real estate sales, valuation, and market analysis in Nuremberg, Fürth, Erlangen, Schwabach, and Roth.
Note on content
This guide article serves as general information about the real estate market in Nuremberg and the surrounding region. It does not replace individual tax advice, legal advice, or expert valuation in specific cases. For binding information, please contact a tax advisor, attorney, or certified appraiser.
Market data, prices, and statutory provisions may change at short notice. Despite careful research, we assume no liability for the accuracy, completeness, or timeliness of the content.
Article as of June 11, 2026
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