Tenant rights in Germany are well protected by law and
contain clauses that limit landlord rights. Here are some of the
main things to look out for:
Tenancy contract (excluding holiday rentals).
These contracts are generally established for an indefinite
period. However, the owner can limit the duration of the contract
if they plan to take it back for personal use upon expiration of
the agreement or if the home is going to be renovated.
Early termination of a contract.
A tenancy contract concluded for an indefinite term can
only be terminated by the owner on two grounds: either the landlord
wants it for personal use or the tenant has violated the terms of
agreement. Eviction must be presented three months prior to
contract termination. A tenant does not need a reason to
move out, they are simply required to give the landlord three
Unpaid rent. Landlords cannot evict tenants
even if they fail to pay their rent, meaning that they run the risk
of losing several rent payments if this situation arises.
Minimising default risks
The following measures can minimize the risk of income loss:
1. Choose reliable markets
The following criteria determines reliability of rental
unemployment rate below national average
standard of living above national average
active business in the area
good economic growth forecasts locally
Tip! Bonn, Hamburg, Munich, Oldenburg and Stuttgart are
among the best cities to invest in residential property
2. Formalise the tenancy contract
When leasing a property for more than a year, get the
contract notarised and add a clause that stipulates the
tenant's obligation to pay the utility bills. The agreement
usually contains passport and contact details of the tenant,
stipulates rent and payment terms. A properly executed tenancy
contract enables owners to defend their rights in court if the
tenant fails to pay rent.
Tip! If there is no clause regarding the payment of
utilities, the owner can be held liable for unpaid
3. Seek legal advice
It seems simple and yet many owners would rather avoid the extra
effort and expenses it takes. A lawyer can perform
a criminal and civil liability check — they also
draw up tenancy contracts. Full legal due diligence for real estate
costs about €2,500, depending on the scope of services.
A good real estate agent will refer buyers to
a trusted and reliable lawyer who can perform these
4. Require a deposit from each tenant
When concluding a tenancy contract in Germany,
property owners can require a deposit (Kaution), the
value of which cannot exceed three months of rental payments. So,
if the rent is €500 per month, the landlord can request
a deposit of €1,500. These funds can be used to cover
losses if the tenant stops paying rent.
Keep the Kaution is a separate account as
it will be reimbursed to the tenant when the contract is
5. Check the tenant's financial solvency
Property owners can check a tenant's financial solvency
by requesting a copy of their employment contract,
a credit reference (Schufa Auskunft) from credit
securing company (Schutzgemeinschaft für allgemeine
Kreditsicherung, Schufa) and a certificate proving the
absence of unpaid rent
Tip! Get all these documents before signing any lease
agreement to make sure the tenant is reliable.
6. Buy property that's already rented
Even when the owner changes, the tenants often remain, making it
a good way to test for reliability. Look for properties with
tenants that have been there for several years and have a good
managing partner at Tranio:
The main problem with long-term rentals is that you
can't increase rent in accordance with the market, so the
property value grows but the rent remains the same. However, there
is a "lifehack" we share with our clients: buy
one-bedroom apartments because they are usually for
single people. Sooner or later, they will get a family and
move to a bigger place. This approach allows the owner to get
a new tenant about every five years and adjust their rental
rate to that of the market.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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