Is your property up for modernization and you're wondering how to fairly and legally allocate the costs? A miscalculation could cost you thousands of euros. This article guides you step by step through the process and serves as your personal calculator for modernization apportionment.
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The topic briefly and concisely
You are allowed to allocate 8% of the apportionable modernization costs to the rent annually, but you must first deduct maintenance costs and grants.
The rent increase is capped at €3/m² over 6 years (or €2/m² if the rent is below €7/m²).
A formal and timely announcement of the modernisation at least 3 months in advance is a mandatory requirement for the apportionment.
As a property owner, you face the challenge of increasing the value of your property through modernisations without violating legal regulations. The allocation of these costs to tenants is a precise calculation clearly defined by § 559 BGB. Mistakes in calculation or procedure quickly lead to the invalidity of the rent increase. This guide shows you how to correctly identify allocable costs, clearly delineate the share for maintenance, and calculate the rent increase in compliance with all capping limits. This way, you maximise your return while maintaining the tenancy.
The Foundation: Understanding the 8 Percent Rule under § 559 BGB
The legal basis for apportioning modernisation costs is Section 559 of the German Civil Code (BGB). You may annually add 8 percent of the expenditure eligible for apportionment, incurred for the flat to the annual net cold rent. This regulation is intended to provide an incentive for value-enhancing and energy-efficient investments. The rent increase then permanently becomes part of the rent. It is important that apportionment can only occur after the complete completion of the work. Therefore, a precise calculation is crucial to ensure the profitability of your measure, which a rent yield calculator can transparently show. The correct application of this 8-percent rule is the first step towards a legally secure rent increase.
Step 1: Separate recoverable costs from non-recoverable costs
Not all costs of a construction measure can be passed on to the tenants. A precise distinction is essential for your modernization apportionment calculator. Only measures that sustainably increase the usable value of the property, permanently improve living conditions, or lead to energy and water savings are eligible for apportionment. Before you start the calculation, you must allocate the costs accurately.
The following costs are typically eligible for apportionment:
Measures for energy-efficient renovation, such as insulation or the installation of new windows.
Installation of a photovoltaic system for sustainable energy production.
Addition of a balcony or installation of a lift to enhance living value.
Measures to improve soundproofing or lighting.
Installation of water meters to reduce water consumption.
In contrast, certain expenses must not be included in the calculation:
Finance costs, such as interest on a modernization loan.
Administrative costs incurred during the modernization.
Public subsidies and grants must be deducted from the total costs.
Loss of rental income due to uninhabitability during the construction phase.
An energy-efficiently modernized old building often benefits from grants, whose deduction reduces the apportionment. This separation forms the basis for the next, crucial calculation step.
Step 2: Accurately deduct maintenance costs
One of the most common mistakes in calculating the modernisation levy is the insufficient separation of modernisation and maintenance costs. Pure maintenance or repair actions, such as the repair or replacement of defective parts, cannot be allocated. You must deduct these costs from the total costs. The Federal Court of Justice (BGH) requires landlords to specify the deduction as an exact amount or percentage. A flat-rate deduction is inadmissible and renders the entire rent increase ineffective.
A typical example is the replacement of old, but still functional, windows. If you replace 30-year-old wooden windows with modern, triple glazed plastic windows, this constitutes modernising maintenance. You must deduct the notional costs that would have arisen for merely replacing with windows of the same type and quality. Only the difference to the more expensive, better windows counts as modernisation costs. The landlord bears the burden of proof for the correct allocation of the costs. A detailed rehabilitation potential report can help clearly define these shares in advance. Only after this deduction do you have the correct basis for calculating the levy.
Step 3: Calculate the distribution amount per tenant (Calculation logic)
Once you have determined the purely apportionable modernisation costs, you can calculate the specific rent increase. If the measures affect the entire building, the costs are allocated to the individual flats, usually according to living space. The calculation follows a clear logic that you can apply like a calculator.
This is how you calculate the monthly rent increase step by step:
Determine total costs: Add up all apportionable costs (e.g. €100,000).
Calculate cost per m²: Divide the total costs by the total living area of the building (e.g. €100,000 / 1,000 m² = €100/m²).
Determine cost for the flat: Multiply the cost per m² by the living space of the respective rental flat (e.g. €100/m² * 70 m² = €7,000).
Calculate annual apportionment: Apply the 8% rule to the flat's cost share (€7,000 * 8% = €560 per year).
Determine monthly rent increase: Divide the annual apportionment by 12 months (€560 / 12 = €46.67).
This calculation must be transparent and understandable for the tenant. The question of the profitability of a rental depends significantly on the correct application of these steps. However, the calculation is not yet complete with this result.
Step 4: Check capping limits as the final corrective
Even if your calculation according to the 8 percent rule is correct, the legislature sets an absolute cap to protect tenants from excessive burdens. This cap under Section 559, Paragraph 3a of the German Civil Code (BGB) is a crucial adjustment factor for your modernization levy calculator. The monthly rent may not increase by more than 3 euros per square metre over six years due to the levy. If the rent before the increase was below 7 euros per square metre, this limit even drops to 2 euros. This regulation applies nationwide and is in addition to the 8 percent rule.
An example: Your calculated rent increase amounts to 4 €/m². The cap stands at 3 €/m². Therefore, you can initially only increase the rent by 3 €/m². Since January 2024, there is also a specific cap for heating replacement: Here, the levy is limited to 50 cents per square metre per month. Adhering to these limits is crucial as they determine what rent you can charge for your property. The cap protects tenants and forces property owners to calculate even more precisely.
Overcoming Formal Obstacles: The Legally Compliant Announcement
The best calculation is worthless if it is not communicated to the tenant in a formally correct manner. The law stipulates in § 555c BGB a notification obligation. You must announce the modernisation measures at least three months before the start of the work in text form. An email is sufficient, but it must clearly contain your name and address as the sender. A delayed or incorrect announcement can jeopardise the tenant's duty to tolerate and the subsequent rent increase.
Your modernisation announcement must necessarily contain the following information:
Type and exact scope of the planned measures.
The expected start and planned duration of the work.
The amount of the expected rent increase and the future operational costs.
A notice of the tenant's right to object in case of unreasonable hardship.
The decision between renting or selling can also depend on the effort involved in such formal processes. Transparent communication is the key to success.
modernisierungsumlagen-auf-mieter-umlegen-rechner
Passing on modernisation costs to tenants is not a matter of intuition, but a clearly structured process with set rules. A precise calculator for the modernisation surcharge is based on four pillars: correct identification of chargeable costs, accurate deduction of maintenance shares, application of the 8 percent rule, and final review against cap limits. Each of these steps requires diligence and data-driven decisions. Mistakes can not only lead to financial losses but also sustainably disrupt the trust relationship with your tenants. An objective, AI-supported real estate valuation from Auctoa can help you analyse the potential of your property in advance and evaluate the profitability of a modernisation in a sound manner. Act informed, calculate accurately, and communicate transparently – that is the surest way to a profitable investment.
Additional useful links
Bundestag offers information on rent control in its text archive.
The platform Gesetze im Internet provides the full text of § 559 BGB concerning rent increases following modernisation.
On Gesetze im Internet, you can find the exact wording of § 555c BGB, which regulates notification requirements for modernisation measures.
The Federal Statistical Office (Destatis) offers comprehensive data and analyses on housing in Germany.
The BUND provides a study on climate protection in rental housing, offering important insights into energy-saving measures.
The German Tenants' Association provides updates on social climate protection in rental properties and their impact.
FAQ
What is the difference between modernisation and maintenance?
Maintenance preserves the existing condition (e.g., repairing a broken window). Modernisation creates a real improvement, for example, by enhancing living value, saving energy, or creating new living space (e.g., installing double-glazed windows instead of single-glazed). Only modernisation costs can be passed on.
How far in advance do I need to announce a modernization?
You must announce modernization measures in writing (text form, e.g., email) at least three months before the start of work. The announcement must include the type, scope, duration, and the anticipated rent increase.
What happens if I receive public funding for modernization?
Any public subsidies or grants received (e.g., from KfW) must be fully deducted from the modernization costs before you calculate the 8% surcharge. This reduces the basis for calculation.
Does the modernization surcharge apply indefinitely?
Yes, the rent increase due to a modernization levy becomes a permanent part of the basic rent. It is not limited in time. Only the cap of 2 or 3 euros per square meter applies to a period of six years.
What can I do if I'm unsure about the calculation?
In cases of uncertainty, professional advice is essential. Tools like Auctoa ImmoGPT can help clarify initial questions. For a detailed analysis of economic viability and renovation potential, a data-supported assessment from Auctoa can help avoid costly mistakes.
Can a tenant object to a modernisation?
Yes, a tenant can object if the measure would constitute an unreasonable hardship for them. They must do this within a certain timeframe after the announcement. The financial burden of the rent increase alone is often not sufficient, unless it is extreme.
