German Rent Law Reform 2026: What Landlords and Tenants Need to Know

Index-Linked Rents Would Be Capped in Tight Housing Markets

Why index-linked rents became a problem

Index-linked rental agreements (Indexmietverträge) tie rent adjustments directly to Germany's consumer price index (Verbraucherpreisindex), as published by the Federal Statistical Office. When the index rises or falls, the rent follows accordingly. In stable economic times, this model served as a fair mechanism for both parties. However, the situation changed dramatically following Russia's invasion of Ukraine: consumer prices surged by nearly 7 percent in 2022. For tenants on index-linked contracts, this translated into rent increases of 6 to 7 percent or more within a single year.

The proposed cap of 3.5 percent per year

The draft bill proposes capping index-linked rent increases at a maximum of 3.5 percent per year in areas officially designated as tight housing markets (angespannte Wohnungsmärkte). This cap would not eliminate the link to the consumer price index but would introduce an upper limit on annual adjustments. For landlords, the index-linked model would remain available as a tool for rent adjustment, but it would no longer pass on the full impact of high inflation to tenants.

Furnished Rentals Would Face Stricter Transparency Rules

The furnishing surcharge as a rent control loophole

Furnished apartments have become a widespread method of circumventing Germany's rent control rules (Mietpreisbremse) in many major cities. The mechanism is straightforward: landlords add a furnishing surcharge (Möblierungszuschlag) on top of the base rent, pushing the actual rent well above the legally permitted limit. Since no binding calculation standards have existed for this surcharge until now, its amount has been largely at the landlord's discretion.

A flat rate of 5 percent of net base rent as the proposed limit

The draft bill introduces clear guidelines. The furnishing surcharge must be based on the current market value of the furniture provided and must be proportionate. For fully furnished apartments, a flat rate of 5 percent of the net base rent (Nettokaltmiete) is to be considered appropriate. This regulation would have a particularly significant impact in cities like Munich, Berlin, and Hamburg, where the furnished rental market has grown substantially in recent years. Landlords would be required to itemize the surcharge transparently, giving tenants a clear picture of what they are actually paying for.

Short-Term Rental Contracts Would Lose Their Exemption

Rolling renewals circumvent rent control

Short-term rental agreements are currently exempt from Germany's rent control regulations. This exception was originally intended for genuinely temporary housing situations, such as professionals on short-term assignments, students spending a semester abroad, or transitional arrangements during a move. In practice, however, a model has emerged in which landlords continuously renew short-term contracts. This creates a de facto permanent tenancy that nonetheless remains exempt from rent control.

A maximum term of six months proposed

The draft bill aims to close this gap. Short-term contracts would only be exempt from rent control if they are concluded for a maximum period of six months. In addition, such contracts would only be permissible where the tenant has a specific personal reason for the short-term arrangement, such as a temporary work assignment or a study-related transitional period. For landlords, this would eliminate the option of systematically bypassing rent control through rolling short-term agreements.

Tenants Would Gain Expanded Rights to Cure Payment Defaults

Protective payments currently only cure extraordinary termination

Under current German rental law, if a tenant falls behind by two months' rent, the landlord may issue both an extraordinary termination without notice (fristlose Kündigung) and an ordinary termination with notice (fristgerechte Kündigung). The tenant can remedy the extraordinary termination by making a so-called protective payment (Schonfristzahlung) within two months of receiving the eviction lawsuit. However, the ordinary termination remains in effect. As a result, the tenant must vacate the apartment despite having paid all outstanding rent in full.

A one-time right to cure both terminations

This rule has been criticized in legal practice for years as disproportionate, since it burdens tenants in already difficult financial situations with the additional loss of their home. The draft bill responds to this criticism by granting tenants a one-time right to cure both the extraordinary and the ordinary termination by paying all outstanding rent in full. This one-time remedy is designed to prevent a temporary financial setback from automatically leading to the loss of housing.

The Outcome of the Reform Remains Uncertain

Whether the draft bill will be enacted in its current form is far from clear. Significant disagreements already exist within the governing coalition of CDU/CSU and SPD over the specifics of several provisions. The cap on index-linked rents and the tighter regulation of furnished rentals are expected to be particularly contentious during negotiations. Both landlords and tenants should monitor the legislative process closely to be prepared for any changes that may affect their rights and obligations.

Sources (german):

Pressemitteilung des BMJV zur Stärkung des Mieterschutzes

FAQ und Gesetzentwurf zur Änderung des Rechts der Wohn- und Geschäftsraummiete

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