ARTICLE
24 February 2023

Real Estate Update: Changeover Of The Consumer Price Index To The New Base Year 2020

The Consumer Price Index for Germany (CPI) is both updated monthly in line with current price developments and, as a rule, subjected to a fundamental revision at five-year intervals...
Germany Real Estate and Construction
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The Consumer Price Index for Germany (CPI) is both updated monthly in line with current price developments and, as a rule, subjected to a fundamental revision at five-year intervals and switched to a new base year.

This changeover is intended to take account of changes in consumption and purchasing habits and to reflect new developments. Today (February 22, 2023) – with some delay due to technical problems – the final results for the reporting month January 2023 are published by the Federal Statistical Office. In this context, the previous base year 2015 will be changed to the new base year 2020. As a result, all indices will be recalculated as of the reporting month January 2020, which may lead to changes in inflation rates for the years 2020 to 2022.

What does the changeover to the 2020 base year mean for landlords and tenants?

  • Publication on the new 2020 base will not affect any adjustments that have already been made.
  • Insofar as the value adjustment clause agreed in the lease is based on the percentage change in the CPI, the changeover of the base year does not result in any need for action. In the case of future adjustments of the rent, the index levels of the current base year can always be directly reckoned with, even if an earlier base year is stated in the lease. Therefore, the rental agreement does not have to be adjusted.
  • If, on the other hand, a so-called points clause has been agreed between the parties, which is based on the change in the CPI by a certain number of points, in order to be able to adjust the rent, it must be rebased to the new base year 2020, as the data is no longer available on the old basis. The parties must now either convert the points change to be achieved to the current base year or the index levels of the current base year to the originally agreed base year. Only then can it be checked whether the agreed point change has been achieved and thus whether an adjustment is due. Furthermore, in the case of the points adjustment, the change must be determined as a percentage in the second step so that the specific increase in the amount of money to be paid can be determined.

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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