Anyone who lets out a flat and uses gas or oil heating has been required to contribute towards CO₂ costs since 2023. This is governed by the CO₂ Cost Allocation Act (CO2KostAufG). How much landlords have to pay depends on the building’s energy performance. The poorer the energy performance, the higher the landlord’s contribution. There is now an important change.
What the Building Modernisation Act changes
On 10 July 2026, Parliament passed the Building Modernisation Act. It not only includes the much-discussed return to free choice of heating systems, but also a significant extension of the CO₂ Cost Act. This is expressly pointed out by Oliver Letzner, a solicitor specialising in tenancy and flat ownership law.
What is new is that, in future, the law will no longer cover only direct CO₂ costs. Costs associated with the statutory use of climate-neutral fuels, as well as any grid charges incurred, can no longer be passed on in full to tenants. Part of these costs will therefore be borne by the landlord. This represents a significant shift in the financial risk.
An overview of the tiered model
The current law operates on a ten-tier system. Depending on a building’s CO₂ emissions, tenants currently pay between five and 100 per cent of the CO₂ levy themselves. Landlords cover the remainder. In the case of very well-insulated buildings in efficiency class EH55, tenants bear the full cost themselves.
There are, however, exceptions: where government regulations effectively prevent energy-efficiency refurbishment – for example, due to listed building status or conservation areas – landlords are required to contribute less, or nothing at all, towards the CO₂ costs.
Criticism of the current system
In April 2026, the Federal Ministry for Economic Affairs presented an evaluation report. The findings are clear: the originally intended 50–50 cost-sharing arrangement between landlords and tenants is not being achieved in practice. On average, landlords bear a smaller share of the costs than tenants. Among other things, the experts recommend using consumption figures that are not weather-adjusted when classifying buildings, and taking greater account of the reductions in consumption that have already occurred as a result of the energy crisis.
Practical implications for landlords
For landlords, all this means a tangible increase in workload. The heating cost statement must include details of the building’s energy balance and CO₂ emissions. In the case of central heating systems, the landlord receives the fuel bill and uses this to work out how the costs are to be shared. In the case of flats with individual heating systems, the fuel contract is in the tenant’s name. The tenant must then send the landlord an invoice for the landlord’s share within twelve months. The landlord then has twelve months to reimburse this amount.
For non-residential buildings such as offices or shops, a flat-rate 50–50 split currently still applies. A tiered system is also to be introduced here.
The price of CO₂ is set to rise in the long term
In 2026, the price of CO₂ will fall within a legally regulated range of between 55 and 65 euros per tonne. From 2028, it is set to be determined by the market through the European Emissions Trading Scheme. Experts expect a significant rise at that point, with some scenarios predicting a price of up to 200 euros per tonne. This will place considerable financial pressure on landlords with fossil-fuel heating systems.
Landlords who are now considering investing in a new gas or oil heating system, or who wish to review existing tenancy agreements, should be fully aware of the changes to the law. It is advisable to seek legal or tax advice in order to correctly assess the specific implications in each individual case.
Source: Haufe: Property
This post and the accompanying image were created with the help of AI and have been editorially reviewed.
