- Rent Control under Scrutiny
- January 11, 2018
As announced this week, the Landgericht (LG, Regional Court) Berlin has submitted the German rent control regulation, the so-called “Mietpreisbremse”, to the Bundesverfassungsgericht (BVerfG, Federal Constitutional Court). This means that the constitutionality of this controversial regulation will now be reviewed. Currently, the Mietpreisbremse caps the permitted rent for the new leasing of housing space in more than 250 municipalities in Germany, including the seven largest cities, at a maximum of 10 percent above the average local rent (so-called “ortsübliche Vergleichsmiete”). There have been many concerns regarding the constitutionality of this rent control regulation. Now, for the first time, a court is addressing these concerns by obtaining clarification from the BVerfG.
In the opinion of the LG Berlin, the Mietpreisbremse violates the German Constitution (Grundgesetz) with regard to the principle of equality and the requirement of clarity. According to the court, the principle of equality is violated because the average local rent is not calculated based on the same criteria nationwide. Furthermore, before the Mietpreisbremse was enacted, some landlords had signed rental contracts with rent prices that exceeded the rent level permitted by the rent control regulation. According to the LG Berlin, the fact that these landlords are still allowed to charge these “old” rents also violates the principle of equality. Additionally, in the opinion of the court, the requirement of clarity is violated because the enactment of the rent control regulation by way of an ordinance is left at the discretion of the Federal States’ governments. Since the BVerfG is not limited to reviewing only the constitutional violations discussed by the LG, the BVerfG will conduct a comprehensive review of the compliance of the Mietpreisbremse with the provisions of the Grundgesetz. In particular, the compatibility of the rent control regulation with the constitutionally protected guarantee of property and the freedom of contract will be reviewed in this context.Due to the vast implications of the matter, it seems likely that the BVerfG will cast its ruling in 2018. Until this decision, the legal situation regarding both the practice of renting and the drafting of rental contracts remains unclear. For the time being, landlords remain bound by the stipulations of the Mietpreisbremse. Nevertheless, the decision of the BVerfG could have far-reaching consequences for the housing industry. If the BVerfG were to find the Mietpreisbremse to be in violation of the German Constitution, the rent control regulation would be void with retroactive effect. Depending on each individual case, landlords could then be entitled to adjust the rent for rental contracts that had been concluded under the Mietpreisbremse regime. Additionally, in new rental contracts the potential unconstitutionality of the Mietpreisbremse should be taken into account by inserting corresponding stipulations, for example, inserting alternative rent prices or subsequent payment obligations.