'Completely new': What the first fine for excessive rent in Berlin means for tenants

Earlier this month, for the first time in Berlin’s history, a landlord was fined for charging excessive rent. 

As The Local reported, a landlady in Friedrichshain-Kreuzberg was ordered to pay over €26,000 in fines and refund more than €22,000 in overpaid rent to the tenant.

But why is this happening now, and what does it mean for tenants and landlords alike?

The Local spoke with Felix Freist, a Berlin-based lawyer and partner at Wilms Rechtsanwälte who specialises in tenancy and residential property law.

Freist, who deals with rental disputes on a daily basis, explained why an old law has suddenly come to life, and what it could mean for Berlin’s rental market.

The state of Berlin generally leaves tenants and landlords to settle disputes over rent between themselves. Now, for the first time, a district council has taken the lead.

The main driver behind this change is the Mietpreisprüfstelle (Rent Review Office), which was established by the Berlin Senate in March of this year specifically to enforce existing rent control laws that had, until now, largely been ignored.

Freist told The Local that the review office is a valuable resource for renters who think they're being charged illegally high rent: “Citizens and tenants can now go there and say, ‘Look, I have this contract, please check it.’ And no one ever did that before.”

Usually, tenants in Berlin are obliged to bring a civil claim if they believe they're paying excessive rent.

If the tenant and landlord fail to reach an agreement on their own or with their lawyers, the case then moves to a local court where a judge decides whether future rent should be reduced and, in some cases, whether the tenant is owed a refund on excessive rent paid in the past.

But in these civil cases, the judge has no authority to issue fines or other penalties.

READ ALSO: Almost all rents in Berlin found to be illegally high

“This recent case is such a big deal because the Friedrichshain-Kreuzberg district office got involved directly and issued a penalty on the basis that an offence had been committed – something which has never happened in Berlin before,” explained Freist.

Civil, administrative, criminal

In theory, the German legal system offers three avenues for challenging excessive rents: civil, administrative and criminal.

The recent case in Berlin involved the second of these; an administrative charge issued by a district council against a landlady who was letting a 38-square-metre flat at a rate approximately 190 percent above the local average (as recorded in the rent price index, or Mietspiegel) – far beyond the legal threshold of 20 percent.

The district housing office imposed a fine of €26,253.50 on the landlady and ordered her to refund €22,264.08 in overpaid rent to the tenant.

READ ALSO: How foreign residents in Germany are winning rent reductions

In fact, the authorities have the power to issue a fine of up to €50,000. Fines are paid to the state. Overpaid rent is also returned to the tenant, providing they have filed an official request to this effect.

“In civil law, it’s always citizen against citizen,” said Freist. “But administrative offence proceedings are the state against the citizen. In this case, the tenant does not need to hire a lawyer or bear the risk of legal fees if the claim is unsuccessful – the state investigates and enforces the law."

If rent exceeds the local average by more than 50 percent, the prosecutors' office also has the option to bring criminal charges under §291 of the Penal Code. Rent set this high is sometimes called 'exorbitant' or 'usurious' (Wuchermiete), and penalties for over-charging to this degree can include a fine or a prison sentence up to three years.

A higher burden of proof

Initially, the landlady at the centre of the Friedrichshain-Kreuzberg case lodged an appeal against the penalty. She then withdrew her challenge just one day before the court hearing was due to start.

Freist emphasised that he doesn’t know the details of this particular case, but suggested there are several possible explanations for the landlady’s sudden change of heart.

“Perhaps she wanted to prevent her name from appearing in the press, which could have happened once the appeal proceedings began,” he said.

“Another reason may have been that this case was so clear-cut – maybe her lawyers told her she couldn’t win. Or perhaps she was worried the judge would increase the fine.”

READ ALSO: In Numbers - Rents soar in Germany's big cities despite the rent brake

There has also been speculation in the press that the landlady may have withdrawn her appeal in order to avoid setting a precedent, which Freist agrees is plausible.

The difference between civil claims and administrative charges

In 2015, the state of Berlin made it significantly easier for tenants to successfully bring civil claims against their landlords.

“For obvious reasons, contracts are usually legally binding. But when Berlin introduced the Mietpreisbremse (Rent brake) in 2015, the legislators deliberately set this aside.

"This means that in this one instance a tenant is not actually bound by the contract they sign, if they can show that the rent they're being charged is illegally high."

The other fact to bear in mind is that tenants who bring civil claims only have to demonstrate that the rent is more than ten percent higher than the comparative local rent (Mietspiegel), and that the apartment or house isn’t covered by one of the exceptions written into the ordinance.

These exceptions include new apartments (rented for the first time after October 1st, 2014), apartments that have been modernised, apartments rented for temporary use (less than one year), rental contracts signed before the law came into effect and apartments where the previous rental price had already been set too high.

The burden of proof for an administrative or criminal charge is higher.

In addition to demonstrating that the rent is more than 20 percent higher than the index price (for an administrative charge) or 50 percent higher (for a criminal charge), the state also has to demonstrate that the landlord knowingly exploited the tenant’s desperate need to find accommodation.

“In other words,” explained Freist, “there is a subjective element as well as an objective element.”

And since fines have never been issued to landlords before in Berlin, and because the landlady in this case withdrew her appeal, there is still no legal precedent in place.

As Freist put it, “We don’t know what the court’s decision would have been.”

What next for Berlin’s tenants and landlords?

On its own this case is unlikely to have a significant impact on Berlin’s housing market.

Freist suggested there is only so much the law can do. Ultimately the city needs more new housing, which is one reason why he can sympathise with the senate’s decision to exempt new-build apartments from the rent brake.

But he regards it as a positive step that the city is finally beginning to enforce the laws at its disposal.

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Berlin authorities don’t proactively search for violations. Investigations are launched when tenants report suspected cases, which they can do by contacting their district office by email or post and providing copies of rental agreements and documents that show rent increases.

Alternatively, reports can be made through the Senate's Mietpreisprüfstelle or digitally with this calculator created by The Left party.

Landlords are also advised to compare their rents with the Mietspiegel to ensure they don’t invoke an administrative, or possibly even a criminal charge.