Katsche Platz already suspected it, he knew that the clause was in his rental agreement. But when the letter came – “you’re not happy about it,” he says. Platz lives in a rented apartment in Hamburg. The owner wants six to seven percent more rent, which amounts to around 70 to 80 euros a month, says the digital designer. He is thus the vanguard for many tenants who are now expecting something similar: a higher rent because general inflation has increased. You have a contract that provides for an index rent and thus allows increases parallel to the official price increase. In March it was a whopping 7.3 percent, as the Federal Statistical Office announced on Tuesday.
For years, things have been going well for people with an index lease. Since 2012, the increase in consumer prices has always ranged below two percent, while many tenants in Germany’s major cities in particular have moaned about painful increases or astonishing surcharges for new leases. In 2020, consumer prices rose by just 0.5 percent. That changed in 2021, especially since the fall when prices for fuels like oil and gas shot up.
Meanwhile, leases with an index clause have become increasingly popular. The Hamburg Tenants’ Association has identified a “significant increase in index rents”. It is estimated that half of the new contracts contained such a clause or a graduated rent, with the exception of cooperatives and the municipal housing group Saga. In the case of graduated rents, future increases are recorded in advance in the contract, for example two percent per year. Index rents, on the other hand, are flexible and follow inflation.
The Bonn/Rhein-Sieg/Ahr Tenants’ Association says they are “quite often examining index rent increases” or contracts with such clauses. About ten to 15 years ago, this was only common for rental contracts for companies and other trades. The Munich Tenants’ Association also speaks of an increase. This is confirmed by the owners’ association Haus und Grund Munich. “60 to 70 percent of new contracts in the Munich area contain an index regulation,” said the chairman of Haus und Grund Munich, Rudolf Stürzer. According to its own statements, the association represents landlords of 400,000 apartments. About 40 percent of them are now assigned via index contracts, says Stürzer. “Storage rents, on the other hand, are pretty outdated at the moment because they only increase according to rigid numbers.”
Index rents are uncomplicated – even for tenants
The index rent is a good thing because it avoids disputes, says the lawyer Stürzer. The otherwise possible increase according to the rent index, on the other hand, is very complicated. “The rent index in Munich is 24 pages long, so tenants and landlords argue about whether the bathroom is tiled 1.80 meters or 1.90 high,” says Stürzer, because that could have an impact on the rent. In the case of index rent, on the other hand, the matter is clear. There is an official index, you can even follow the course understand on a page of the Federal Statistical Office.
The owners’ association is also currently receiving more and more inquiries about index rents, just from a different perspective: Can I pass the general price increase on to my tenants? “Yes, the landlord can,” says Stürzer. “We continue to recommend the index rent combined with the advice not necessarily to fully exploit the range.” Many landlords do not do this anyway because they want a good relationship with their tenants.
The German Tenants’ Association (DMB) in Berlin sounds less euphoric. It’s true, says tenants’ association spokeswoman Jutta Hartmann, that the index rent is comparatively simple and easy to understand using the Federal Statistical Office’s calculator. In addition, an increase to the local comparative rent – the horror of many tenants – is ruled out with the index model.
“A great thing for landlords”
On the other hand, people don’t have a handle if the price increase is as high as it is at the moment. “There’s nothing you can do as a tenant,” says Hartmann. The capping limit, an instrument for limiting rent increases, does not apply to index rents either. “That’s a good thing for landlords.”
However, the owner must comply with some formal rules, emphasizes the tenants’ association. According to the law, the index rent must remain unchanged for at least one year. An increase must be announced in text form and may not take effect until the month after next.
If the tenant is unlucky, he will also be charged twice, says Hartmann. Firstly through the index rent, secondly through the costs of a renovation, which the landlord can apportion. This is the case if he is legally obliged to modernize, for example to replace the heating system. That comes on top of the increase in the index rent.
Katsche Platz, the Hamburg tenant, is already preparing for further increases. He will not take action against this, says Platz, he is actually happy about the “very accommodating homeowner”.