Against the backdrop of population growth and the corresponding demand for housing space, residential rents in large German cities have consistently increased. In 2020, the Berlin government (a coalition of the Social Democrats with the Green Party and the Socialist Party) initiated a legal cap for residential rents. The law (MietenWoG Bln) curbed rent increases, defined maximum rent limits and made existing rents exceeding these limits unlawful.
Today, the Federal Constitutional Court has ruled that the MietenWoG Bln is incompatible with the constitution (Basic Law) because the State of Berlin does not possess the legislative competence to decide on a rent cap. According to the Basic Law, federal states have the responsibility for legislation in certain areas only if the federal government (Federation) does not make use of its primary legislative competence. In case of the Berlin rent cap, however, the issue of rent limits is, according to the Federal Constitutional Court, conclusively settled in the German Civil Code (BGB). In the interest of the unity of the legal order, the German legal system does not allow for any overlapping between the responsibilities of the Federation and the federal states.
With today’s decision, the most pressing question will be if and how landlords may claim re-payments of lost rents. The reasoning of the Federal Constitutional Court indicates that reduced rents can be reclaimed. Another open issue is whether tenants will be entitled to damages against Berlin. Finally, the issue of affordable housing will remain prominent and – depending on the outcome of the German elections in the fall – we might see further legislation in this area on a federal level.
For more information about this topic please contact:
Dr. Nina Jarass Cohen, LL.M. (UCLA)
Lawyer, Head of Israel Desk
T +49 69 95957-323