Anyone renting a flat in an area with a tight housing market can invoke the so-called ‘rent cap’. This limits the permissible rent for new tenancies to a maximum of ten per cent above the local comparative rent. Exceptions apply, amongst other things, if the previous tenant was already paying a higher rent. But what applies if the landlord breached a statutory duty to provide information during the previous tenancy? The Federal Court of Justice has now provided a clear answer to this question.
What was the case about?
In Berlin, a debt collection agency that had taken over claims from tenants demanded that a landlady repay overpaid rent. The agreed net rent (excluding heating and other charges) of 11.39 euros per square metre exceeded the local comparative rent by more than ten per cent. The landlord argued that the previous tenant had already paid exactly this amount in rent, which is, in principle, permissible under the so-called ‘previous tenant rule’ in Section 556e(1) of the German Civil Code (BGB).
The catch: under the previous tenancy agreement, the landlord had not informed the tenant at the time that she had previously modernised the flat. Under Section 556g(1a) of the German Civil Code (BGB), she should have provided this information of her own accord before the tenancy agreement was concluded. The debt collection agency therefore argued that the higher rent was not validly owed to the previous tenant at all. Consequently, only the lower rent permitted under the rent control scheme should be regarded as the relevant previous rent.
The Federal Court of Justice’s ruling
The Federal Court of Justice did not accept this line of argument. The court made it clear that, when determining which rent is deemed to be due under the previous rent provision, the sole determining factor is whether the claimed exceptional circumstance actually existed – in other words, whether the modernisation works were in fact carried out. Whether the landlord has fulfilled his duty to provide information to the previous tenant is irrelevant to the new tenancy.
In its reasoning, the Federal Court of Justice (BGH) referred to the structure of the legislation. The law provides for a specific, time-limited sanction for a breach of the duty to provide information: the landlord may temporarily not invoke the exception in relation to the tenant concerned. The law does not provide for any further partial invalidity of the tenancy agreement. The rent originally agreed therefore remains valid, even if it could not be enforced for a time.
Furthermore, the court emphasised that the duty to provide information is intended solely to protect the tenant in question who enters into the tenancy agreement. Subsequent tenants are not affected by a breach of duty in a previous tenancy. If the breach were allowed to have an impact on the subsequent tenancy, the landlord would be obliged to reduce the rent permanently, even though the law expressly permits him to provide the omitted information retrospectively and thereby bring the penalty to an end.
What does this mean for those affected?
The ruling strengthens the position of landlords who cite a higher previous rent. New tenants cannot argue that the landlord failed to fulfil their duty to provide information during the previous tenancy. The decisive factor remains whether the modernisation work actually took place.
As the Regional Court had not yet reached any findings on this matter, the Federal Court of Justice referred the case back for further investigation. It therefore remains to be examined whether the agreed rent was ultimately permissible.
Tenants or landlords who have questions about rent control, previous rent or disclosure obligations should seek legal advice, as the legal issues involved are complex and always depend on the individual circumstances of each case.
Federal Court of Justice (BGH), judgement of 1 July 2026, case number VIII ZR 125/23
Source: Haufe: Property
This article was created with the help of AI and has been editorially reviewed.
