Tenant Glossary

The term signifies minor damages to the leased property that can be repaired for a comparatively small amount of money and that affect parts of the leased property that are subject to direct and frequent use by the tenant. Good cases in point are water taps, locks, window shutters and window handles. Lease agreements often allocate the costs for minor repairs to the tenant. However, this practice is subject to a legal cost cap.

Operating costs are often called “service charges” as well. Unless subject to a different arrangement specified in the lease agreement, these are borne by the landlord. Operating cost items include, for instance, garbage collection, water, natural gas, wastewater, heating, hallway lighting and cable outlet.

Lease agreements survive a change of ownership: The effectiveness of an unexpired lease is not affected if the owner or landlord changes. Rather, the incoming landlord inherits all the rights and duties arising from the effective lease agreement.

This includes the remediation of defects of the leased property, of its fixtures and associated utilities. The landlord is principally responsible for all of these. That said, the landlord may stipulate in the lease agreement that the tenant bear the costs of minor repairs (see the entry for “Minor damages”).

The term refers to the basic rent before service charges (see entry for “Operating costs”). Another term for net rent is “monthly net rent.” The alternative would be the all-in rent or rent inclusive of heating, meaning the total rent paid to the landlord.

Another term for security deposit is “rental deposit.” It represents a provision set aside by the landlord against the event of a rent default or the tenant’s failure to meet other obligations under the lease agreement. In Germany, landlords may demand the equivalent of up to three monthly basic rents as security deposit. Landlords are obliged to keep the security deposit in an account separate from their own assets. At the end of the lease term, the landlord must return the security deposit plus accrued interest to the tenant.

Landlords in Germany may raise the rent up to the level of the local reference rent. However, they may do so only if the rent level at the time of the rent review has been unchanged for the past 15 months. Rent may be raised by no more than 20 percent within a three-year period (the so-called rent increase cap).

The term refers to any structural measure that enhances the amenity of the rented premises and the associated auxiliary rooms, creates additional accommodation or helps to save energy or water. A modernisation will normally trigger an appropriate rent increase. Under German law, up to 11 percent of the modernisation costs may be added to the annual rent. Modernisation measures that upgrade a given flat to a much higher fit-out level and that consequently lead to a disproportionate rent hike are referred to as “luxury refurbishments.”

This benchmark is not a fixed amount, but represents a rent bracket. This bracket is used to determine the average rent for residential accommodation of comparable type in a given region. Many German cities publish a rent index (“Mietspiegel”) listing the local rental tones.

The term is used for refurbishment work to remedy the wear and tear caused by the normal use of the leased property in accordance with the lease agreement. This includes, for instance, repapering the walls and ceiling and repainting radiators, interior doors and windows as well as the interior side of the rental flat’s exterior windows and doors. Unless stipulated otherwise in the lease agreement, the landlord will commission and pay for these works.

Tenants are legally granted the right of first refusal if the flats they occupy are put on the market. Especially if rental flats are converted into condominiums for the purpose of retailing them, the owner is obliged to offer them for sale to the incumbent tenant first. Moreover, the tenant has the right to enter into a sale and purchase agreement concluded with a third party.

The pre-handover inspection should take place—in the best interest of the tenant—at the time the tenancy is terminated. A handover checklist should be signed off to confirm that the tenant returned the flat to the landlord in the condition specified in the lease agreement.