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Letting Yield & Cash Flow

Mietpreisbremse on a new letting: 10% and the four exceptions

Last reviewed: 3 September 2026 · Reading time approx. 9 minutes

The flat is empty, the market would pay €12/m² — and the local reference rent sits at €10. If you let in an area with a strained housing market, the first figure you put in the tenancy agreement binds you for years. This article explains where Germany's rent cap (Mietpreisbremse) applies at all, how the ceiling is calculated, which four exceptions lift it — and why most landlords do not fail on the ceiling itself but on a piece of disclosure they forgot to hand over before signing.

First question: does the cap apply to this property at all?

The Mietpreisbremse is not a nationwide rule that bites everywhere automatically. § 556d(1) BGB attaches to an area designated „durch Rechtsverordnung nach Absatz 2" — by a statutory instrument of the relevant Land government. That instrument names municipalities, or parts of them, in which the adequate supply of rental housing on reasonable terms is particularly at risk (§ 556d(2) sentence 2 BGB).

Two practical consequences. First, the question cannot be answered for Germany as a whole, only for the specific address against the relevant Land instrument; two neighbouring municipalities can be treated differently. Second, those instruments are time-limited. § 556d(2) sentence 4 BGB requires that such an instrument „spätestens mit Ablauf des 31. Dezember 2029 außer Kraft treten" muss — it must cease to have effect no later than the end of 31 December 2029. That is the outer deadline; an individual Land instrument may expire earlier.

Check the date, not just the location. What matters is whether the area is covered when the tenancy agreement is concluded. If the instrument lapses between the old tenant's notice and the new tenant's signature, no cap applies to the new contract. Conversely, an instrument issued later changes nothing about a contract already signed.

The rule: local reference rent plus 10%

If the property is inside a designated area, one sentence governs everything: at the start of the tenancy the rent may exceed the local reference rent (ortsübliche Vergleichsmiete) by „höchstens um 10 Prozent" — at most 10% (§ 556d(1) BGB). The provision does not define that reference figure itself; it points to § 558(2) BGB.

The dispute is never about multiplying by 1.1, it is about that reference figure. Under § 558(2) BGB the local reference rent is formed from the usual rents paid for accommodation of comparable „Art, Größe, Ausstattung, Beschaffenheit und Lage einschließlich der energetischen Ausstattung und Beschaffenheit in den letzten sechs Jahren" — comparable type, size, fittings, condition and location including energy performance, over the last six years. It is the same figure a rent increase up to the capping limit works with during a running tenancy — except that the capping limit restrains the step, while the Mietpreisbremse restrains the level at the start.

In practice a qualified rent index (qualifizierter Mietspiegel), a simple rent index or an expert valuation supplies the starting number. Setting the reference rent too optimistically only postpones the problem by up to 30 months — that is how far back a tenant can reclaim (see below).

The four exceptions — and what each of them requires

The statute names four situations in which more than reference rent plus 10% may be agreed. They sit in §§ 556e and 556f BGB and are the real lever for owners.

ExceptionProvisionWhat is permitted
Higher previous rent (Vormiete) § 556e(1) BGB If the rent the previous tenant last owed was higher than the permitted rent, a rent up to that previous rent may be agreed. Rent reductions, and increases agreed with the previous tenant „innerhalb des letzten Jahres vor Beendigung des Mietverhältnisses" — within the last year before that tenancy ended — are left out of account.
Modernisation in the last three years § 556e(2) BGB The permitted rent may be exceeded by the amount that a rent increase under § 559 BGB would produce. The starting point is the reference rent without the modernisation.
New build from 1 October 2014 § 556f sentence 1 BGB § 556d does not apply to a dwelling „die nach dem 1. Oktober 2014 erstmals genutzt und vermietet wird" — first used and let after 1 October 2014. Such a dwelling stays outside the cap permanently, not only on its first letting.
First letting after comprehensive modernisation § 556f sentence 2 BGB §§ 556d and 556e do not apply to „die erste Vermietung nach umfassender Modernisierung". Unlike the new-build exception, this works for that one letting only.

What counts as „comprehensive" is not defined in the statute. The wording names neither a cost threshold nor a catalogue of works — so the line against ordinary modernisation under § 556e(2) BGB is an assessment of the individual case, and in a dispute it is the landlord who has to make it out. Anyone intending to rely on it should document costs, scope and the condition before and after while the site is still open.

Worked example: 68 m², modernised the year before

A 68 m² flat sits in an area with a rent cap. The local reference rent — calculated without the modernisation — is €10.00/m². In the previous year €40,000 was spent, of which €10,000 would have been ordinary maintenance anyway; § 559(2) BGB takes that share out of the apportionable costs.

StepCalculationResult
Reference rent (without modernisation)68 m² × €10.00€680.00
Ceiling under § 556d(1) BGB€680.00 × 1.10€748.00
Apportionable modernisation costs€40,000 − €10,000€30,000
Annual increase (§ 559(1) BGB)€30,000 × 8%€2,400.00
Monthly supplement€2,400.00 ÷ 12€200.00
Cap under § 559(3a) BGB68 m² × €3.00€204.00 — not exceeded
Maximum rent on a new letting€748.00 + €200.00€948.00

Without the modernisation the ceiling would have been €748.00 — the difference of €200.00 a month is €2,400 a year and, over eight years, €19,200 of rental income. The cap in § 559(3a) BGB deserves attention: it stands at €3.00/m² within six years and drops to €2.00/m² where the monthly rent before the increase is „weniger als 7 Euro pro Quadratmeter Wohnfläche" — less than €7 per square metre. How the apportionment works during a running tenancy is set out in our article on the modernisation rent increase.

These figures are an illustration. Reference rent, building costs and the maintenance share are freely chosen to show the mechanics. Neither the €10.00/m² nor the 25% maintenance share is a statutory figure — both have to be evidenced in the individual case.

The most expensive mistake: the disclosure you forgot

This is where landlords lose the most money, with nothing wrong in the arithmetic. § 556g(1a) sentence 1 BGB obliges the landlord to disclose unprompted and before the tenant makes their contractual declaration what the exception rests on: for the previous rent, how high it was; for modernisation, that works were carried out in the last three years; for a new build, that the dwelling was first used and let after 1 October 2014; and for § 556f sentence 2, that this is the first letting after comprehensive modernisation. All these declarations require text form (§ 556g(4) BGB) — a conversation at the viewing is not enough.

The sanction sits right next to it: where the landlord has not given the information, he „kann sich nicht auf eine nach § 556e oder § 556f zulässige Miete berufen" — he cannot rely on a rent permitted by those provisions (§ 556g(1a) sentence 2 BGB). The exception then exists in substance but is worthless in court. Nor does catching up cure it at once: a landlord who supplies the information late may rely on the exception only „zwei Jahre nach Nachholung der Auskunft" — two years after doing so (§ 556g(1a) sentence 3 BGB). In the example above that would be €200.00 a month for two years, €4,800, for one missing sheet of paper.

What happens if the rent agreed is too high

  1. The contract survives. The agreement on the rent is void only „soweit die zulässige Miete überschritten wird" — to the extent that the permitted rent is exceeded (§ 556g(1) sentence 2 BGB). The excess falls away, not the tenancy.
  2. Overpayments must be returned under the rules on unjust enrichment (§ 556g(1) sentence 3 BGB). The usual defences do not apply: „Die §§ 814 und 817 Satz 2 sind nicht anzuwenden." The fact that the tenant paid for years without objection therefore does not help the landlord.
  3. No reclaim without a formal objection. The tenant can only reclaim if he has raised an objection (Rüge) to the breach (§ 556g(2) sentence 1 BGB).
  4. 30 months is the pain threshold. If the tenant objects more than 30 months after the start of the tenancy — or if the tenancy has already ended when the objection arrives — he can reclaim only the rent falling due after the objection was received (§ 556g(2) sentence 3 BGB). The reclaim for the past is cut off, but the rent drops going forward.

For the underwriting of a property this means: a rent set above the ceiling is not extra income but a provision with an unknown due date. Anyone calculating the cash flow of a property should, in case of doubt, model the defensible rent rather than the agreed one.

What the courts have decided

§§ 556d ff. BGB are tersely drafted and litigated in bulk, often by legal-tech assignees acting on tenants' claims. Three recent decisions of the VIII. Civil Senate of the Federal Court of Justice (Bundesgerichtshof, BGH) go to exactly the points where landlords lose or keep money.

BGH, judgment of 1 July 2026 – VIII ZR 50/23

The new-build exception in § 556f sentence 1 BGB also covers existing rooms that were no longer usable as living space because of damage and were made permanently usable again „unter wesentlichem Bauaufwand" — with substantial construction work — provided they were first used and let as a dwelling again after 1 October 2014. For investors reactivating derelict fabric this is the practically most important statement: it need not be a new building to fall under § 556f sentence 1 BGB. Document the construction effort — it is the condition the exception turns on.

BGH, judgment of 17 December 2025 – VIII ZR 56/25

§§ 556d ff. BGB do not apply to the agreement of a reduced rent during a running tenancy. A landlord who accommodates a tenant temporarily — during refurbishment, say, or in financial hardship — is therefore not concluding a new contract for the purposes of the rent cap and does not trigger a fresh review of the starting rent.

BGH, judgment of 1 July 2026 – VIII ZR 125/23

Where a landlord relies on the previous rent under § 556e(1) BGB, what matters for its level is solely whether the exception then in play existed „der Sache nach" — in substance — even if, because of a breached disclosure duty under § 556g(1a) BGB towards the previous tenant, the landlord could not have relied on that exception during the earlier tenancy. A formal defect in the old tenancy therefore does not push the transferable previous rent down. That relief looks backwards only: for the new contract the disclosure duty applies in full.

Frequently asked questions

Does the Mietpreisbremse apply throughout Germany?

No. It only bites in areas designated by a Land government through a statutory instrument under § 556d(2) BGB. Whether your address is covered is a question for that Land's instrument — and each of them must cease to have effect no later than the end of 31 December 2029 (§ 556d(2) sentence 4 BGB).

Must I disclose the previous rent unprompted?

Yes, if you want to rely on it. § 556g(1a) sentence 1 BGB requires the information unprompted and before the tenant's contractual declaration, and § 556g(4) BGB requires text form. Without it you cannot rely on the exception and the rent falls back to reference rent plus 10%.

Can I supply a forgotten disclosure later?

Yes, but with a delay. Under § 556g(1a) sentence 3 BGB you may rely on the exception only two years after supplying it. Until then the ceiling in § 556d(1) BGB governs.

Is the whole tenancy agreement void if the rent is too high?

No. Under § 556g(1) sentence 2 BGB the rent agreement is void only to the extent that the permitted rent is exceeded. The contract continues at the permitted rent.

How far back can a tenant reclaim?

Only from the objection onwards (§ 556g(2) sentence 1 BGB). If he objects within 30 months of the start of the tenancy, the reclaim reaches back to the beginning of the contract; if he objects later, he only gets back the rent falling due after the objection was received (§ 556g(2) sentence 3 BGB).

May I agree a stepped or index-linked rent?

Yes, but the cap keeps working. How the two models differ inside an area with a rent cap is set out in index-linked rent or stepped rent.

Reference rent, modernisation costs, invoices — in one place

RenoDiary keeps per property what you need in a dispute: rent history, tradespeople's invoices, the maintenance share and the effect on cash flow and the Anlage V tax return.

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Sources

This article offers general orientation and does not replace individual tax or legal advice within the meaning of § 3 StBerG. Whether a property lies in an area with a strained housing market, and which exception applies, depends on the individual case and on the relevant Land instrument — the example figures are calculation illustrations, not empirical values.