The German Staffelmietvertrag - Step-by-step rent increases with a system

As a landlord you know that it can be quite difficult to increase the rent in an existing tenancy.

But what if it were possible to agree on a regular rent increase with your tenant right at the signing of the contract? 

This is exactly the goal of a graduated lease or a german "Staffelmietvertrag"!

What is a graduated lease?

A graduated lease is a lease that increases the rent at regular intervals. 

These increases are specified in the contract and cannot be done arbitrarily. 

Usually, the rent is increased annually, but other intervals are also possible. Graduated rental agreements are often concluded for commercially used properties, but you can also conclude a graduated rental agreement for normal residential properties.

The advantage of a graduated lease is that the rent increases are known in advance. 

This allows tenants to better plan their financial situation and prepare for higher rent payments if necessary. 

In addition, the graduated rental agreement is attractive for the landlord, as it ensures that the rent does not remain below market conditions.

In addition, there is no stress with the tenant in the event of rent increases, since you have already agreed on the scales with your tenant when you signed the contract.

The basics of a graduated rental agreement

A graduated rental agreement must be concluded in writing. 

It is usually for a period of three to five years, but other periods are also possible. 

The rent payments are increased at regular intervals, usually annually. 

If you conclude the graduated rental agreement, you must observe the applicable rent brake.

This means that you cannot set arbitrarily high increase rates and must adhere to the prescribed amount. 

If you do not, the "Mietpreisbremse" limits the maximum rent.

What role does the "Mietpreisbremse" play in a graduated rent?

The Mietpreisbremse is a legal regulation that has been repeatedly adapted and expanded in recent years. The rent brake is intended to prevent rents for apartments from increasing too much.

The amount of the increase for a graduated rent depends on the applicable rent brake in your federal state. 

With a graduated lease, you can set the amount of future rent payments, but you *cannot* go beyond the limits of the Mietpreisbremse.

For example, if your current rent is 1,000 €, you can fix a maximum rent of 1,100 € for the current year (10% above the local rent).

If you now fix a rent increase from 1,000 € to 1,200 € for the next year, while the local comparative rent does not change, your tenant still only has to pay 1,100 € rent.

Is a graduated rental agreement limited in time?

Effectively, a graduated rental agreement is always limited in time.

Theoretically, it can be unlimited in time, but you have to specify each increase explicitly.

Theoretically, you can include rent increases for the next 100 years in the lease, but in practice you are more likely to find graduated leases for maybe 5 years.

At the end of the last term, a graduated lease automatically converts into a normal standard lease.

What do I have to pay attention to with a graduated lease?

With a graduated rental agreement, you must pay particular attention to the fact that each graduation must be explicitly stated in the agreement (with an amount in euros).

Formulations such as "the rent increases every year by 3%" or "the rent increases annually by 1 € / m^2 living space" are invalid.

So you really have to formulate each scale concretely with the absolute euro amount, for example "on 01.01.2022 the net cold rent increases by 100 € from 1,000 € to 1,100 €", "on 01.01.2023 the net cold rent increases by 150€ from 1,100 € to 1,250 €", and so on.

Also, you must pay attention to the fact that once you have concluded a graduated rental agreement, you are bound to it.

You can no longer, e.g. because there is currently a high inflation, increase the rent in addition to the agreed scales.

So if you anticipate large modernization costs or a sharp increase in inflation, other types of lease may be better than a graduated lease.

Conclusion

Graduated leases can be a very good solution for automatically adjusting the rent in a property.

Since you have already agreed on the scales with the tenant when you sign the lease, there is no dispute later when the rent increases.

A graduated rental agreement also has advantages for the tenant, as it also gives the tenant security and the tenant also knows exactly how the rent will develop over the next few years.