The decision of the highest court in Germany to overturn Berlin’s rent cap law has not just been a blow to renters – it has been several blows at once.
With around 1.5 million apartments subject to the now-defunct rent freeze, huge swathes of the city’s rental population have been caught up in the battle for the future of Berlin’s housing market. Now that the rent cap has been nullified, they have seen their rents hiked by hundreds of euros each month, while some have even been hit with bills for backdated rents – in many cases amounting to thousands of euros.
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While some may have saved the difference in rent for a proverbial rainy day, a poll conducted for regional paper Tagesspiegel found that 47 percent of affected renters said they hadn’t planned for the overturning of the rent cap. Some will have put their trust in the validity of the new law, while others may have been unable to find the money in the first place.
Senate calls for ‘social responsibility’ from landlords
Following the bombshell court ruling on April 15th, Michael Müller, governing mayor of Berlin, called on landlords to “be aware of their social responsibility in the still very difficult situation of the housing market”.
As the Berlin Senate scrambled to work out its next steps, Müller extended an olive branch to housing industry heavyweights, inviting them to a roundtable to discuss how to “jointly avoid social hardship caused by additional demands” and ensure that “rents no longer continue to climb uncontrollably”.
With landlords now legally entitled to claw back revenues lost since February 2020, when the rent cap first came into force, the Senate attempted to preclude further financial hardship for tenants by asking landlords not to request backdated rent.
Did housing providers listen?
In the aftermath of the court decision, several of Berlin’s biggest landlords issued statements saying that they would not attempt to reclaim the difference from the period of lowered rent.
European real estate firm Heimstaden said it welcomed the end of the rent cap, but reassured renters that they wouldn’t be asking for back payments. “We expect the Berlin housing market to develop positively without the rent cap and look forward to making a long-term and positive contribution to it,” said CEO Patrik Hall.
Vonovia, which owns around 42,000 properties in Berlin, has also committed to waive the backdated rent. Speaking to Spiegel, CEO Rolf Buch said he doubted many renters had set aside funds for a potential repayment – especially in the year of a pandemic.
“The well-being of the people who live in our properties is our first priority,” said Buch. “They should not have to suffer any financial disadvantages as a result of political decisions.”
- What the decision to get rid of Berlin’s rent cap means
- Berlin’s ‘Mietendeckel’ rent freeze ruled unlawful: What does it mean for tenants?
Berlin’s six state-owned housing firms, which rent out around 300,000 flats in the city, are also not asking for repayments.
In spite of the the government’s calls for “social responsibility”, however, some housing firms are taking a harder line.
Flats in Berlin. Photo: DPA
Speaking to the Berliner Zeitung ahead of the court decision, Swedish housing firm Akelius, which owns 14,000 properties in Berlin, said that they would definitely seek to reclaim the excess money from tenants. “The rent cap costs us around €20 million a year,” Jordan Milewicz, Akelius’ European head, told the newspaper.
Deutsche Wohnen, which owns around 110,000 flats in Berlin, has also confirmed that it will ask its tenants to repay the excess rent from the last 10 months.
“We are fully aware of the strained situation of the housing market in Berlin,” a spokesperson for the company told The Local.
“To completely forego the settlement of outstanding debts, however, would not meet our obligations to the company, its employees and owners.”
There may be differences in the ways that other housing firms and landlords handle the back payment issue.
According to government estimates, around 57,000 tenants entered into so-called “shadow contracts” while the rent cap was in place. These shadow contracts were designed to ensure that, should the rental cap be overturned, the renter would have to pay both the higher rent, and also repay the difference for the period in which the rent was lower.
The so-called shadow rents were in place despite some housing experts raising questions over the legality of including them in contracts.
Local Berlin broadcaster RBB24 revealed some of the shadow contracts signed by Berliners were as much as 100 percent higher than the rent-cap rent. One family interviewed by the radio station explained that, while the capped price for their four-bedroom flat was affordable, without the cap in place, the rent would be far too high.
So, what’s the government doing to help?
On April 20th, the Berlin Senate announced that it would be releasing emergency funds from the Berlin Investment Bank (IBB) in order to provide bridging loans for people affected by the sudden demand for repayments.
The government estimates that around 40,000 households would be unable to afford the lump sum requested by their landlord if asked for backdated rent. To ensure that nobody faces eviction, the IBB will provide interest-free loans to people who earn up to €33,600 a year, which could be converted – or partially converted – into grants for those who can’t afford to repay the full amount.
Meanwhile, people who rely on unemployment, social support or housing benefit should be able to have backdated rent paid by the state.
In a press release announcing the move, housing senator Sebastian Scheel repeated the state government’s call for landlords to waive the fees or offer manageable payment plans. “Some landlords have already announced that they will waive repayments or offer deferments,” he said, “I appeal to all landlords to follow this path.”
Can I fight the demand for back payments?
According to Wibke Werner, deputy CEO of the Berlin Tenants’ Association, landlords are legally entitled to claim their money back for the months of lowered rent.
When the court decided that the rent cap was unconstitutional, the decision applied retrospectively – meaning that landlords would have legally been allowed to charge higher rents the entire time the rent freeze was in place.
The upshot of this is that – if they choose to do so – they can potentially charge tenants for the months of lost income caused by an unconstitutional law.
While this may sound incredibly bleak for those on the receiving end of it, there are some things you can do if you are suddenly asked to foot an enormous bill.
The first is to look at the small print of your shadow rental contract – assuming you signed one. How long does it give you to pay back the sum, and does it have to be paid in full?
‘We want affordable apartments’ reads a sign at the Berlin rent cap defeat protest on April 15th. Photo: DPA
According to Werner, most agreements will have stipulated a 30-day period for the repayment of the rent, but if no deadline is mentioned, the normal two-week deadline for legal transactions will probably apply. If you’re unsure, the best step is to contact your landlord directly to agree on reasonable terms for the repayment – whether that’s an extension to the deadline, or some sort of ongoing repayment plan.
“In our opinion, landlords should not ignore an appropriate installment payment offer made in good faith or as a result of need, as there is a special situation here where tenants have relied on a valid law and did not have to expect that the law will be overturned,” Werner told The Local.
In the case of Deutsche Wohnen, the company has promised that none of its tenants will lose their home as the result of the court decision, adding that it would offer “multiple options for settling the outstanding sum”.
When pushed for more details, the company said its tenants could take advantage of both deferrals and payment plans. “We will offer our tenants installment payments, taking into account feedback from our tenants regarding the amount of the individual installments,” a spokesperson for the company told us.
“We also offer deferrals. This means that tenants do not have to start paying immediately, but can tell us when it would be a convenient time for them.”
In some cases where the tenant has “extreme difficulty” settling the balance, Deutsche Wohnen would find “individual solutions” – suggesting the possibility of waiving part of the debt in particularly dire situations.
“As for the maximum period of time to settle the additional claims, there is no fixed date,” the spokesperson added.
On the FAQ page for the Berlin Mietendeckel (rent cap), the government states that in the majority of cases, a shadow contract obliges the tenant to pay the backdated rent in full.
Nevertheless, since these agreements are all worded differently, it could be worth seeking advice on the specifics of your own agreement with a legal expert. Each of Berlin boroughs offers free rental advice sessions, which you can find details of on the Berlin state website.
What about eviction notices?
Though the decision of the constitutional court is in many ways uncharted terrain, the law generally states that landlords are entitled to serve a notice of termination if the tenant owes at least a full months’ rent.
If the amount exceeds two months’ rent, they could potentially be issued with an immediate notice of eviction, although in the view of the tenant’s association, the “extraordinary situation” of the rent cap means this is unlikely to happen.
If it does, Werner says, tenants can avoid being forced out by settling their balance in full – if they can afford it.
“Even with an ordinary termination there are good arguments with which one can deny a breach of duty necessary for the termination,” she added.
“This means that tenants should not simply accept dismissals without prior checking, but rather contact the landlord, fall back on the Senate’s financial assistance and, in any case, seek advice on tenancy law regarding the termination.