Questionable sublease agreements: How landlords circumvent tenant rights

Landlords are increasingly using questionable contractual structures and thus circumventing protection against dismissal. A Federal Council initiative calls for a reform. Justice Minister Buschmann, however, has concerns.

It’s been three years since Julia and Ben moved into their dream apartment in Berlin’s trendy district of Kreuzberg. Actually, the two have different names, but they want to remain anonymous. Finding an apartment was not easy in the tense housing market, so they are happy that it finally worked out, even if they only sign a sublease contract.

However, they soon suspect that the main tenant is working together with the landlord and is acting as a straw man – because they are not the only ones in the old building in Kreuzberg who have subleases.

Termination instead of rent reduction

A few months after moving in, Julia and Ben want to exercise their right to adjust their monthly rent to what is legally permissible. Depending on the calculations, they would have to pay between 500 and 700 euros less. When they reduce the rent, the main tenant writes to the landlord that he wants to terminate his contract.

Since Julia and Ben are legally bound to the main tenant, their contract would also be terminated. They immediately have the landlord’s notice of eviction in their mailbox. In order to stay in the apartment, they have to prove that their sublease contract is part of a construct. Not easy – and expensive: You hire a lawyer and a private detective.

The scam with the bogus subleases

research of ARD lunchtime magazine and conversations with a number of those affected show that such bogus sublease agreements are widespread. Especially in the capital: the Berlin Tenants’ Association has observed that apartments are being offered for subletting more frequently than they were a few years ago. “Some are in a legal gray area and offer the opportunity to circumvent tenant protection, since a legal situation is being played that does not exist in this way,” according to the tenant protection groups. “This is all the more worrying because such contract constellations ultimately serve only one goal: to demand a completely excessive rent.”

The German Tenants’ Association assumes that constructs to circumvent tenant protection – for example by renting furnished apartments – are widespread throughout Germany: “Enormously high rents can be achieved in sought-after areas in particular We have been observing this for some time.”

Lucrative scam in a tight market

The tight housing market makes it possible. Rental prices in metropolitan areas and cities are rising. In the past 20 years by 159 percent in Berlin, by 73 percent in Hamburg and by 58 percent in Munich. According to a study by the Eduard Pestel Institute and the building research institute ARGE, there will be a shortage of more than 700,000 apartments nationwide in 2023. This is the largest housing deficit in more than 20 years.

Some landlords take advantage of this plight and charge unacceptably high prices. There are laws designed to prevent this, but they’re easy to circumvent. In addition, the tenants must provide the evidence both in the case of illegal subleases and excessive rents. This is complex and expensive. And very few tenants go through the courts like Julia and Ben to claim their rights. In addition, the landlords have little to fear because there are hardly any sanctions.

Countries see a need for reform

There is a law designed to effectively control excessive rents and discourage brazen landlords. It is laid down in the so-called rental price increase paragraph, paragraph 5 of the Economic Criminal Code.

It stipulates that the rent may not exceed the local comparative rent by more than 20 percent. Landlords who do this anyway face a fine of up to 50,000 euros. This would allow tenants to report a violation to the housing office without going to court – a great advantage, especially for tenants who do not have legal protection insurance.

very difficult to prove

But the law does not apply, because the tenants have the burden of proof here too. On the one hand, they have to prove that they have not found a cheaper apartment and, on the other hand, that their landlord is taking advantage of this emergency situation. In practice this is hardly possible.

For this reason, in February 2022, the Bundesrat, on the initiative of Bavaria and supported by Berlin, Hamburg, Brandenburg and North Rhine-Westphalia, called for Section 5 of the Economic Criminal Code to be tightened, the burden of proof to be abolished and the fine to be doubled to EUR 100,000.

“Don’t hope for miracles”

But the Federal Minister of Justice responsible for this, Marco Buschmann, rejects the initiative. Compared to the ARD lunchtime magazine he expresses concerns because the draft raises fundamental questions with regard to the principle of culpability. Buschmann announces a bill in tenancy law that implements the remaining tenancy law projects in the coalition agreement. However, he sees the problem elsewhere: “The high rents in our cities are primarily the result of a shortage of apartments.

With regard to the questionable sublease constructs, the Minister of Justice has no knowledge of an increase in subleases. “There is also no reliable evidence as to whether and in what form this contract constellation is increasingly being used to cheat tenants,” explains Buschmann. “The Federal Ministry of Justice takes indications of this seriously; the ministry will keep an eye on further developments.”

Successful lawsuits – but no sanctions

Julia and Ben collect numerous clues over a whole year. It comes to the process, their chances are not bad. But shortly before the verdict, the landlord offers them more than 50,000 euros so that they can move out. At first they still want to keep fighting, but in the end they accept the severance pay.

They agree on an out-of-court settlement, the verdict does not apply, and the landlord can re-let the apartment – on terms that he sees fit. Other lodgers who do that ARD lunchtime magazine identified in the course of this research were able to prove in court that their contracts were fake. Nevertheless, the landlords were not sanctioned.