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 |  Dennis Wiegard

Index leases - How landlords can deal with inflation and rising energy prices

Rental Agreement - Lawyer Düsseldorf

Money is worth less and less. The same applies to rental income generated. The Federal Statistical Office published the new figures on April 12, 2022. The inflation rate in Germany in March 2022 - measured as the year-on-year change in the consumer price index (CPI) - was +7.3%. Prices for energy products rose particularly sharply, up 39.5% year-on-year in March 2022 (February 2022: +22.5%). At +144.0%, prices for light heating oil more than doubled. Fuels (+47.4%) and natural gas (+41.8%) also became noticeably more expensive. Price increases for other energy products were also significantly higher than overall inflation, for example for solid fuels (+19.3%) and electricity (+17.7%).

How can landlords react?

The figures presented are the reason why residential rental agreements with an index clause (value protection clause) are becoming increasingly popular (in the past, these clauses were only known for commercial rents). Whereas in the case of a graduated rent the future increase has already been agreed on in advance, index rents are determined by the price index for the cost of living of all private households (CPI), which is determined by the Federal Statistical Office (Section 557b BGB). A graduated rent does not sufficiently reflect current inflation rates. Here, the increase is usually 2 percent per year and not 7-8 percent.

However, the index rent offers landlords even more advantages. The official index (CPI) is transparent for both landlords and tenants via the Federal Statistical Office. Therefore, neither party has to deal with the otherwise very complicated local rent index. The cap on rent increases also does not apply to index-linked rents (according to the Tenant Protection Ordinance of North Rhine-Westphalia, this currently still applies in 37 municipalities in NRW). Finally, no declaration of consent from the tenants is required for the rent increase.

Are you planning a new rental? Please contact us; we will help you with the implementation!

Düsseldorf, the 19th of April 2022

Lawyer Dennis Wiegard

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