Federal Constitutional Court overturns "Berlin rent cap"

The Federal Constitutional Court (BVerfG) has declared the so-called "Berlin rent cap" unconstitutional a little earlier than expected, but - as we anticipated - on the basis of the lack of legislative competence of the Federal State of Berlin. 

In its decision published today, the BVerfG explained in detail that the Berlin Senate has no legislative competence for a "parallel rent law at the state level". As part of civil law, regulations on rent levels for unrestricted housing fall within the concurrent legislative competence (Article 74(1)(1) of the Basic Law (GG)). The federal legislature had finally made use of this competence with §§ 556 to 561 of the German Civil Code (BGB), since they provided for comprehensive and differentiated regulations on the amount of rent in general and the rent control in particular (Sections 556d et seq. BGB) and did not contain any opening clauses or enabling provisions for legislature on Federal State level. In particular, the authorisation of the Federal States to issue ordinances in Section 556d (2) BGB did not constitute such an opening clause, as it did not confer any independent regulatory power on the Federal States, but only authorised them to define areas with tight housing markets. As a result, the Federal States were excluded from regulating rent levels in this area ("blocking effect" of Article 72 (1) GG).

The BVerfG declared the “rent cap”, which had - accordingly - been enacted in violation of legislative powers, null and void as a whole and did not limit itself to a mere declaration of incompatibility. The BVerfG regularly resorts to such a declaration in order - as the court itself partly formulates in its case law - to prevent "chaos" by retroactively abolishing a norm. However, the court saw no reason for this.

What does this mean for landlords and tenants in the Berlin market? Can landlords demand the rent that has been capped or withheld in the meantime from the tenant? Is it necessary to set a deadline or stagger the payments? And: who has to pay for the interest damage?

Read more in our full client alert.