New Ruling in Germany: Property Owners Required to Disclose Government Funding When Increasing Rents
On Tuesday, the Federal Republic Court in Karlsruhe ruled that property owners have a duty to disclose third-party financing sources, such as government funding for energy efficiency improvements, when raising rent prices.
Tenants must have the ability to verify the reasonableness of rent increases.
Property owners are required to disclose third-party financing sources, such as government funding for energy efficiency improvements, after raising rent prices due to improvement works.
This ruling was issued by the German Federal Court of Justice (Bundesgerichtshof – BGH) in Karlsruhe on Tuesday. This information aims to enable tenants to verify the reason and extent of the rent increase and decide whether they need to consult legal or technical experts in the field of construction, for example (docket number VIII ZR 416/21).
Third-party financing can be deducted from the rent increase.
According to the ruling issued by the German Federal Court of Justice, the rent increase will be reduced if the landlord has received subsidized loans, interest-free loans, tenant advances, or contributions from third parties benefiting the tenant, or through funding sources provided by federal and state-level government financial institutions.
This aims to ensure that property owners do not achieve greater gains compared to individuals who fund improvement works from their own resources.
In the specific case in Berlin, the landlord did not provide information about accountable third-party financing in the rent increase notification.
However, in the notification, the landlord referred to an announcement letter regarding the improvement, indicating an intention to apply for funding from the Kreditanstalt für Wiederaufbau (KfW) for energy efficiency enhancement measures. The plaintiff argues that the rent increase notification is ineffective due to formal reasons.
After the Rent Court in Berlin-Wedding ruled in favor of the tenant and the landlord’s appeal was unsuccessful at the Berlin Rent Court, the German Federal Court of Justice (BGH) in Karlsruhe rejected the appeal filed by the landlord against the ruling.
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