Whether a rent increase may be followed by a modernization rent increase is clarified by a ruling (AZ VIII ZR 367/18) before the Federal Supreme Court (BGH). The landlady of an apartment in Berlin increased the rent by 37 euros per month to a total of 224 euros in 2010 in accordance with Section 558 of the German Civil Code (BGB). The reason for this was structural changes in the apartment, such as the conversion of the toilet into a bathroom. The construction measures had been announced beforehand, and the tenant agreed to the rent increase.
Only a few months later, the landlord announced another rent increase. This time it was a modernization rent increase in accordance with § 559 BGB. Accordingly, the tenant was to pay an additional 116 euros per month on top of the rent of 224 euros. Since the tenant refused to pay the new increase amount, the landlord minimized the payment amount to 79 euros per month. Subject to reservation, the tenant paid the increase amount monthly to the landlord, but subsequently demanded repayment of the modernization rent increase for the months of May 2012 to July 2014.
In its ruling, the Federal Court of Justice (BGH) declared that the rent increases were lawful. According to the ruling, the landlord was entitled to also claim a modernization rent increase pursuant to Section 559 (1) of the German Civil Code (BGB) after the first rent increase up to the local comparative rent. The proportion of the increase payment is fixed by law. Since 2019, eight percent of the modernization costs can be allocated to the annual rent. Before that, it was eleven percent. If the modernization rent increase was already preceded or followed by a rent increase, the total rent increase amount may not exceed the increase amount of the modernization measures. Thus, the landlord deducted the previously estimated rent increase of 37 euros from the actual 116 euros. This resulted in a monthly increase of 79 euros.
Source: BGH
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