Federal Tenancy Law Reform Tightens Rules on Furnished Rentals and Short-Term Leases
Germany's cabinet passed the Mietrechtspaket II (Tenancy Law Package II) on April 29, now in parliamentary debate. The reform closes rent-control loopholes by capping furnishing surcharges, limiting index-rent increases to 3.5% annually, and restricting short-term leases to six months in tight housing markets.
On April 29, 2026, the German Federal Cabinet adopted the Mietrechtspaket II draft bill, a major tenancy law reform intended to plug gaps in existing rent protections. The bill entered the Bundestag in early May and was in first reading as of July 2026, with passage expected later this year.
The Three Main Loopholes Being Closed
Landlords have exploited three legal strategies to circumvent the Mietpreisbremse (rent brake). The new law targets each:
- Furnished apartments with inflated surcharges: Under the reform, landlords must itemize and cap the furnishing surcharge at roughly 10% of net cold rent for fully furnished units. Furniture must be disclosed, and tenants can dispute outdated or cheap items.
- Index-linked rents (Indexmietverträge): Rent increases tied to the consumer price index will be capped at 3.5% annually in tight housing markets; any excess above 3.5% can only be passed on at 50%.
- Rolling short-term leases: Successive temporary contracts are now treated as a single tenancy. Only genuinely temporary needs (e.g., job relocation for six months) qualify for exemption; extensions beyond six months total mean full tenant protections apply.
Additional Protections
Landlords can't evict if you settle rent arrears, even after two months' delay. The reform also raises the simplification threshold for rent increases tied to modernization from €10,000 to €20,000, offering modest landlord relief.
What This Means for Expats
If you are renting a furnished flat or signed a contract with an index clause, the reform strengthens your hand. Furnished apartments—often the entry point for newly arrived expats—have been routinely priced at €1,800–€2,200/month in central Berlin with minimal furniture. Once the law passes, you can demand a breakdown and challenge excessive surcharges. For ongoing tenancies with index clauses, your rent increases will be capped at 3.5% per year in designated tight markets, protecting you from the 7% annual jumps some tenants faced during inflation spikes.
Sources
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