Rent increase in Germany: the cap, the reference rent and the chain of deadlines

A rent increase in an ongoing German tenancy rarely fails because of the amount – it fails because of the sequence. Two ceilings apply side by side, three deadlines run one after another, and the figure you calculate only reaches your account months later. This article shows how to work out both ceilings properly, which justification the statute accepts, and when § 558 BGB does not apply at all.

Two ceilings that always apply together

The claim itself sits in § 558 (1) sentence 1 BGB: the landlord may demand consent to a rent increase up to the local reference rent, the ortsübliche Vergleichsmiete. That is the first and absolute ceiling; along this route nothing goes above it.

The second ceiling limits not the level but the pace. Under § 558 (3) sentence 1 BGB the rent may not rise by more than 20% within three years – the Kappungsgrenze, or capping limit. Sentence 2 lowers that figure to 15% where the adequate supply of rental housing on reasonable terms in a municipality or part of a municipality is particularly at risk; sentence 3 authorises the state governments (Länder) to designate such areas by statutory instrument, each time for a maximum of five years.

The lower of the two values always governs. Because the reduced cap comes from a time-limited state instrument, it is not a nationwide constant: which percentage applies to your property is decided by the current instrument of your Bundesland – that check belongs before the calculation, not after it.

The capping limit in a worked example

A flat of 68 m², net cold rent unchanged for three years at 780.00 euros. The local rent index (Mietspiegel) shows 13.40 euros per square metre for this flat, i.e. 911.20 euros. The area has to be the actual one: for a rent increase, a diverging figure in the lease has no legal significance — see our article on floor area discrepancy in a German lease.

In the 20% area it is therefore the reference rent that binds, in the 15% area the capping limit. Anyone who calculates only one of the two figures asks for too much in one case and leaves money on the table in the other.

The chain of deadlines: 15 months, 12 months, three months

Three deadlines apply in sequence, and they are regularly confused.

The first two deadlines are not the same thing and do not substitute for one another: one is measured backwards from the intended effective date, the other forwards from the last increase. And § 558 (1) sentence 3 BGB makes clear that increases for modernisation and operating costs are not taken into account for that waiting period.

For cash flow it is the last row that matters. If the notice is received on 12 March, the consent period ends on 31 May and the higher rent is first owed for June. Of the 131.20 euros of additional monthly rent, only seven months arrive in the current year: 918.40 euros instead of 1,574.40 euros over twelve months. Send the notice a quarter too late and that amount is gone for good – it cannot be claimed retrospectively.

What the statute accepts as justification

§ 558a (1) BGB requires text form and a justification. Subsection 2 lists the permissible means of justification precisely enough to be worth following:

1. a rent index – Mietspiegel (§§ 558c, 558d BGB),
2. information from a rent database (§ 558e BGB),
3. a reasoned expert opinion from a publicly appointed and sworn surveyor,
4. corresponding rents for individual comparable flats – naming three flats is sufficient.

Two details decide whether the notice is effective. First: if a qualified rent index contains figures for the flat, the landlord must state them under § 558a (3) BGB even where the increase is based on a different means of justification – using three comparable flats to sidestep the rent index produces exactly that kind of formal defect. Second: where a rent index contains ranges, it is enough that the rent demanded lies within the range (§ 558a (4) sentence 1 BGB).

How current does the rent index have to be?

Under § 558c (1) BGB a Mietspiegel is an overview of the local reference rent drawn up or recognised by the competent authority under state law, or jointly by representatives of landlords and tenants; municipalities with more than 50,000 inhabitants are required to produce one. A qualified rent index must be adjusted to market developments every two years under § 558d (2) BGB and redrawn after four years; where that is observed, subsection 3 presumes that its figures reflect the local reference rent. Where no such index exists, § 558a (4) sentence 2 BGB expressly permits the use of an outdated rent index or that of a comparable municipality.

The reference frame itself is narrower than many calculations assume: § 558 (2) sentence 1 BGB looks to the rents agreed or altered within the last six years, and expressly names the energy specification and condition as a comparison feature. An energy retrofit therefore works twice: immediately via § 559 BGB and permanently via the reference rent.

When § 558 BGB does not apply at all

§ 557 (3) BGB sets out the routes: otherwise the landlord may demand rent increases only as provided by §§ 558 to 560 BGB, unless an increase is excluded by agreement. Two widespread contract forms exclude it:

• Stepped rent (Staffelmiete). Under § 557a (2) BGB the rent must remain unchanged for at least one year at a time, and during the term of a stepped rent an increase under §§ 558 to 559b BGB is excluded – including the modernisation surcharge.
• Index-linked rent (Indexmiete). Under § 557b (2) BGB an increase under § 558 BGB is excluded; the rent follows the consumer price index determined by the Federal Statistical Office, and under subsection 3 the change must be declared in text form, stating the change in the index and the resulting rent or increase as a monetary amount.

A portfolio should therefore record, per unit, which increase route is actually open – otherwise rent growth is modelled into a calculation that the contract can never deliver. Which of the two models pays off when letting anew is set out in the comparison of index rent and stepped rent, using the actual index path of the past five years.

The reverse can be expensive too: if the rent drifts too far below the local level, tax law cuts back the deduction for expenses. Where those thresholds sit is set out in the article on renting below market to relatives and the 66 % rule.

Not to be confused: capping limit and Mietpreisbremse

Both instruments work from the local reference rent, but they bite at different points. The capping limit applies in the ongoing tenancy. The Mietpreisbremse, the rent brake, applies on a new letting: under § 556d (1) BGB, in an area with a strained housing market designated by statutory instrument, the rent at the start of the tenancy may exceed the local reference rent by no more than 10%. Those instruments are time-limited too – § 556d (2) sentence 4 BGB requires such an instrument to expire by the end of 31 December 2029 at the latest.

The modernisation surcharge follows its own system with its own cap; how it is calculated and why it runs alongside § 558 BGB is covered in our article on the modernisation surcharge.

What the increase does to the portfolio

The 131.20 euros from the example are 1,574.40 euros of extra cold rent over twelve months – with costs unchanged, that amount flows through to cash flow almost in full, because interest, principal and non-recoverable running costs stay where they are. How that line fits into the ongoing calculation is shown in our article on calculating property cash flow. For tax, the additional rent is income from letting and lands in the same field as the existing cold rent – the allocation is set out in our guide to Anlage V, the German rental income tax schedule.

One line does not grow with it: the rental deposit is not topped up automatically after a rent increase – § 551 BGB names an upper limit, but no right to exhaust it later.

The real lever, though, is not the individual notice but the diary entry: the waiting period runs independently for each unit, so in a portfolio one flat is almost always due. Anyone who does not track that date gives away, per quarter missed, exactly the three monthly amounts missing from the example above.

What the courts have decided

A capping limit lowered by a state ordinance is not just a claim by the authorities – its validity can be checked in court, and the Federal Court of Justice (Bundesgerichtshof, BGH) has already done exactly that for the most common dispute.

Frequently asked questions

Does a modernisation surcharge count towards the capping limit?

No. § 558 (3) sentence 1 BGB expressly disregards increases under §§ 559 to 560 BGB, and § 558 (1) sentence 3 BGB also removes them from the waiting period. A modernisation surcharge therefore does not consume your headroom under § 558 BGB.

What happens if the tenant does not consent?

Only the court route remains, and it is tightly timed. If the tenant does not consent by the end of the second calendar month after receipt, the landlord may sue for consent under § 558b (2) BGB, and the action must be brought within three further months. Miss that deadline and the whole procedure has to start again.

Can I agree a higher capping limit in the tenancy agreement?

No. § 558 (6) BGB declares any agreement deviating to the tenant's detriment to be void; § 558a (5) and § 558b (4) BGB contain the same bar for form and the consent procedure. Agreements in the tenant's favour do remain possible.

Does the capping limit apply to commercial space?

No. §§ 558 ff. BGB sit in the subtitle on tenancies over residential space. For commercial space what the parties agreed governs – usually an index or step clause.

Sources

• § 556d BGB (permitted rent at the start of the tenancy, Mietpreisbremse) — Gesetze im Internet (retrieved on 9 August 2026)
• § 557 BGB (rent increases by agreement or by statute) — Gesetze im Internet (retrieved on 9 August 2026)
• § 557a BGB (stepped rent) — Gesetze im Internet (retrieved on 9 August 2026)
• § 557b BGB (index-linked rent) — Gesetze im Internet (retrieved on 9 August 2026)
• § 558 BGB (rent increase up to the local reference rent, capping limit) — Gesetze im Internet (retrieved on 9 August 2026)
• § 558a BGB (form and justification of the rent increase notice) — Gesetze im Internet (retrieved on 9 August 2026)
• § 558b BGB (consent, effective date, time limit for the action) — Gesetze im Internet (retrieved on 9 August 2026)
• § 558c BGB (rent index) — Gesetze im Internet (retrieved on 9 August 2026)
• § 558d BGB (qualified rent index, adjustment and presumption) — Gesetze im Internet (retrieved on 9 August 2026)
• § 558e BGB (rent database) — Gesetze im Internet (retrieved on 9 August 2026)
• § 559 BGB (rent increase after modernisation measures) — Gesetze im Internet (retrieved on 9 August 2026)
• BGH, judgment of 4 November 2015 – VIII ZR 217/14 (validity of a lowered capping-limit ordinance) — Federal Court of Justice (retrieved on 25 August 2026)

This article provides general orientation and does not replace individual tax or legal advice within the meaning of § 3 StBerG. What governs is the wording of the law as applicable at the time, the relevant state instrument, the circumstances of the individual case and advice from a qualified professional.