If modernization work is carried out on real estate, this is usually followed by a rent increase for tenants. Until the end of 2018, owners were allowed to pass on up to 11 percent of the modernization costs to the rent each year. To ease the burden on tenants and protect them from high rent increases, a new law came into force on January 1, 2019. According to a change in rental law and the new Rent Adjustment Act (MietAnpG), owners are allowed to pass on only eight percent of modernization costs to tenants.
In Munich, the real estate company of the Hohenzollernkarree announced modernization work to its tenants in a letter dated December 27, 2018. These were to begin in December 2019 and continue until 2023. The Mieterverein München (Munich Tenants' Association) filed a model action for a declaratory judgment before the Higher Regional Court (OLG) in Munich. According to the tenants' association, the period between the announcement of the work and the start of the modernization measures was too long. It would be reasonable to assume that by making the announcement in December 2018, shortly before the MietAnG came into force, the real estate company wanted to profit from passing on a higher amount of the costs to the tenants. 136 tenants joined the model action for a declaratory judgment.
The OLG Munich ruled in favor of the plaintiffs and confirmed that the period of time between the announcement of the modernization measures and the actual implementation was too long. The landlord filed an appeal. The Federal Court of Justice (BGH) ruled in favor of the defendant (Case No. VIII ZR 305/19). This is because, according to Section 555c (1) of the German Civil Code (BGB), the announcement and the planned execution of the modernization work fulfilled all legal conditions. The provisions of Section 555c (1) sentence 2 of the German Civil Code require notification of an expected start date and an expected duration for the modernization measures. However, there is no need to observe a maximum period between the announcement and the implementation.
Source: BGH
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