Rent control in Leipzig and Dresden

The tightening of the so-called rental price brake was one of the election promises made by the Greens, SPD and the Left Party. On May 31, 2022, the Saxon government passed a corresponding ordinance, which was published in the Saxon Law and Ordinance Gazette on July 12, 2022 and came into force on July 13, 2022. Leipzig and Dresden are the first cities to be affected by these changes.

What does the new regulation say?

In Leipzig and Dresden, rents for newly concluded rental contracts have been subject to a restriction since July 13, 2022. At the beginning of the rental period, the rent may not be more than 10% above the local comparative rent, which is defined by the current rent index. Therefore, as a precautionary measure, the rent requested by the landlord has to be reflected in the qualified rent index for new rentals since July 13, 2022.

Only apartments that were rented for the first time after October 1, 2014 and those that are rented again for the first time after extensive modernization are exempt from the rental price brake. The formulation of a comprehensive modernization is an indefinite legal concept, the definition of which has not yet been adequately developed by case law. For the time being, the Federal Court of Justice assumes that modernization is comprehensive if it requires significant construction work and is of such an extent that it appears to be on an equal footing with new buildings. Both test criteria are fundamentally of equal importance. Numerically, a significant construction effort can be assumed if it reaches at least 1/3 of the effort required for a new apartment in the region. With average new construction costs of around €2,000 per square meter, this means that modernization costs of around €700 per square meter have to be spent. We caution that the data is from 2021 and does not include recent price increases.

Likewise, the lessor is at liberty to re-agree the last agreed rent unchanged (so-called pre-rent). When determining this previous rent, however, such rent increases that were agreed between the landlord and the previous tenant within the last year before the end of the tenancy are not taken into account.

The coming months will show to what extent these changes will serve the aim of the traffic light parties, namely to promote social housing. Even if there are still unanswered questions regarding the definition of specific terms, it can be said with certainty that tenants in Leipzig and Dresden will be able to sleep a little more easily in the future.