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Index Rent vs Stepped Rent: A Landlord Guide for 2026

Updated: 25 August 2026 · approx. 8 min read

Landlords in Germany who want the rent to rise predictably from the start of a tenancy have two statutory tools: the stepped rent (Staffelmiete, § 557a BGB) and the index-linked rent (Indexmiete, § 557b BGB). Both replace the cumbersome consent procedure – but they behave very differently once inflation picks up or you want to renovate the building. This article compares them, with a worked example built on the Federal Statistical Office's actual index figures.

The default route – and why many landlords avoid it

Without a special agreement, a rent increase runs through § 558 BGB: the landlord requests consent to an increase up to the local reference rent (ortsübliche Vergleichsmiete). The rent must have been unchanged for 15 months, and within three years it may not rise by more than 20% – only 15% in areas designated by state regulation (§ 558 para. 3 BGB). How that cap is calculated in detail is covered in the article on rent increases and the Kappungsgrenze.

The procedure is laborious, depends on a local rent index and, in case of doubt, ends in court. Stepped and index rents bypass it – each in its own way, and each at a price.

Stepped rent (§ 557a BGB): fixed amount, fixed date

With a stepped rent the parties agree in writing that the rent applies at different levels for defined periods. The form matters: the agreement must state "the respective rent or the respective increase as a monetary amount" (§ 557a para. 1 BGB). A step expressed merely as a percentage is therefore not validly agreed.

The expensive side effect: "While a stepped rent is running, an increase under §§ 558 to 559b is excluded" (§ 557a para. 2 sentence 2 BGB). That hits not only the reference-rent increase but also the modernisation surcharge under § 559 BGB. Agree a ten-year ladder of steps and replace the heating system in year five, and not a single cent of it can be passed on to the rent.

Index rent (§ 557b BGB): the rent follows the consumer price index

With an index rent the parties agree in writing "that the rent is determined by the price index for the cost of living of all private households in Germany as established by the Federal Statistical Office" (§ 557b para. 1 BGB). The benchmark is therefore the official consumer price index, currently on the 2020 = 100 base.

The most common mistake in practice: an index rent does not rise by itself. Without a declaration in text form the old rent stands, and nothing can be collected retroactively. A landlord who never diarises the annual review gives the increase away year after year.

The index rent also blocks § 558 BGB entirely. An increase under § 559 BGB, by contrast, remains possible in a narrow band – namely in so far as the landlord carried out structural works "on the basis of circumstances for which he is not responsible", or where a modernisation measure under § 555b no. 1a BGB was carried out, that is the installation of a heating system within the meaning of the Gebäudemodernisierungsgesetz (§ 557b para. 2 BGB).

The differences at a glance

FeatureStepped rent (§ 557a BGB)Index rent (§ 557b BGB)
Form of the agreementin writing, amount per stepin writing
Increase takes effectautomatically on the due dateonly after a declaration in text form
Minimum intervalone yearone year
Size of the increasefixed in advanceopen, follows the index
Increase under § 558 BGBexcludedexcluded
Modernisation surchargeexcludedpossible in a narrow band
Rent brakeon every steponly on the initial rent
Exclusion of terminationup to four years possiblenot provided for by statute
Cash-flow predictabilityhighlow

Worked example: five years, the same flat

Assume a 60 m² flat is let in July 2021 at a net cold rent of €900. Variant A is a stepped rent rising by €18 a year, variant B an index rent. For variant B we use the actual consumer price index figures (overall index, 2020 = 100) for the month of July in each case. The formula: new rent = old rent × new index ÷ old index.

DateIndex (2020 = 100)Index stepIndex rentStepped rent
July 2021103.4start€900.00€900.00
July 2022110.3+6.67%€960.06€918.00
July 2023117.1+6.17%€1,019.25€936.00
July 2024119.8+2.31%€1,042.75€954.00
July 2025122.2+2.00%€1,063.64€972.00
July 2026125.6+2.78%€1,093.23€990.00

Across the five years the index rose from 103.4 to 125.6, that is by 21.47%. The index rent ends at €1,093.23, the stepped rent at €990.00. The difference is €103.23 a month, or €1,238.76 a year – for an identical flat with an identical start date. Arithmetically it makes no difference whether you adjust every year or only once after five: €900 × 125.6 ÷ 103.4 yields the same figure. In practice the annual adjustment is still better, because the money arrives sooner.

Beware of hindsight: this example contains, in 2022 and 2023, the sharpest inflation phase in decades. Had prices instead risen by a steady 2% or so, the index rent would have reached roughly €994 after five years – practically level with the stepped rent. An index rent is a bet on inflation, not guaranteed extra income. What that means for underwriting a property is covered in the article on calculating a property's cash flow.

What a stepped rent costs you if you renovate

The exclusion of §§ 558 to 559b BGB is not a footnote to the stepped rent – it is often the most expensive part of the whole decision. An example: the 60 m² flat incurs €24,000 of apportionable modernisation costs. Under § 559 para. 1 BGB the landlord could raise the annual rent by 8% of those costs – that is €1,920 a year, or €160 a month, equal to €2.67 per square metre. The cap in § 559 para. 3a BGB of €3 per square metre within six years would be respected (for a starting rent below €7 per square metre it would be €2, and for a heating replacement under § 555b no. 1 or 1a BGB only €0.50).

Under a running stepped rent, none of that – €0 – can be passed on. Over a remaining term of five years the landlord thus forgoes some €9,600, considerably more than the stepped rent gains in planning certainty against a moderate index path. How the surcharge is calculated in detail is set out in the article on the modernisation surcharge.

Which model, and when?

  1. Renovation on the horizon? No stepped rent. It locks out the modernisation surcharge for the entire term.
  2. Existing property, fully renovated, financed at a fixed rate? The stepped rent fits: predictable income, no administrative effort, no argument.
  3. Property in a rent-brake area? The index rent has the structural advantage – only the initial rent is capped, not each later step.
  4. Long holding period and worried about inflation? The index rent ties income to price developments and thus protects the real yield.
  5. No appetite for annual administration? Stepped rent. An index rent nobody asserts is worthless.

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What the courts have decided

Both models live or die by a valid clause – and the Federal Court of Justice (Bundesgerichtshof, BGH) has ruled, for each in turn, what a sloppy wording actually costs.

BGH, judgment of 15 February 2012 – VIII ZR 197/11

Where a stepped-rent agreement states the rent for the first ten years as a fixed amount and only the following years as a percentage, it is not invalid as a whole – it remains effective for the years stated as a fixed amount, and only the percentage-based part falls away. For you that means: a schedule that switches to percentages at some point does not lose the whole agreement, but from that point on it falls back to the normal procedure under § 558 BGB – check every step of your template for a fixed amount.

BGH, judgment of 26 May 2021 – VIII ZR 42/20

A standard-form index-rent clause is not intransparent and invalid merely because it does not expressly name a base year or the start of the one-year waiting period – if both can be determined unambiguously by interpretation (in the case decided: the start of the tenancy), that satisfies the transparency requirement. The increase may then be based on the change in the index over the entire period since the tenancy began, not only the years since the last declaration. For you that means: a lean standard clause need not be a legal risk as long as it can be interpreted unambiguously – but only a clause that names the base year and the start of the waiting period itself gives you certainty.

Frequently asked questions

May I agree a stepped rent as a percentage?

No. § 557a para. 1 BGB expressly requires the respective rent or the respective increase to be stated as a monetary amount. A bare percentage does not satisfy that requirement.

Can I combine an index rent and a stepped rent?

No, the two models are mutually exclusive – the rent cannot be determined by fixed steps and by the index at the same time. You choose one of them when the contract is concluded.

Can I still adjust the service charges?

Yes. Adjusting the advance payments for operating costs under § 560 BGB remains possible under both models; § 557b para. 2 BGB expressly exempts increases under §§ 559 to 560 BGB from the one-year rule. Only the cold rent is affected.

What happens after the last step?

Once the agreed sequence of steps has run out, the ordinary procedure under § 558 BGB applies again – the exclusion holds only "while a stepped rent is running".

Sources

This article offers general orientation and does not replace individual tax or legal advice within the meaning of § 3 StBerG. Whether a stepped-rent or index-rent agreement is valid in a particular case depends on the actual contract and the location – the statutory wording and advice from a qualified professional are what count.