On 23 February 2020, the Berlin state law known as the “Berliner Mietendeckel” (Berlin rent price cap) came into force (State Law on Limiting Rent Levels in the Housing Sector in Berlin, MietenWoG) (see our Newsalert from February 2020). Following intensive political and legal discussions during the legislative process, now the phase of legal disputes has started. As expected, legal proceedings have been initiated at various court levels to review the constitutionality of the Berlin rent price cap. This Newsalert provides an update on the current status:

Last week, on 3 June 2020, 12 constitutional complaints were filed with the Federal Supreme Court (Bundesverfassungsgericht) in Karlsruhe. We are conducting the proceedings together with colleagues from the law firm Redeker who are specialized in lawsuits before the Federal Supreme Court. The plaintiffs are a representative selection of private owners of single (also furnished) apartments, multi-family apartment buildings as well as portfolios with several hundred apartments in various locations and market segments in Berlin. They represent small and medium-sized private landlords that hold around 1 million of the total of 1.5 million tenancies in private residential portfolios in Berlin.

The 12 constitutional complaints are combined in a single court submission, a kind of “collective constitutional complaint”, and serve as a model proceeding for many thousands of comparable cases. The plaintiffs seek the annulment of the rent price cap law, based on the lack of legislative competence of the State of Berlin, the disproportionate infringement of the landlords' property rights and the violation of the constitutional prohibition of arbitrary rules.

Already on 6 May 2020, 284 members of the CDU/CSU and FDP parliamentary groups in the Federal Parliament filed a petition with the Federal Supreme Court in Karlsruhe requesting an abstract judicial review of the rent price cap law. The focus of this petition is on the annulment of the law due to the lack of legislative competence of the State of Berlin and its contradiction of the federal rent control rules under the German Civil Code. The members of the Federal Parliament also suggest that the Federal Supreme Court issue a temporary injunction suspending the Berlin rent price cap until rendering a decision on the main issue. However, it remains uncertain whether the court will go this route since similar petitions by individual private landlords were rejected at the beginning of March 2020. Since then, two constitutional complaints by private landlords have also been pending in Karlsruhe which the Federal Supreme Court has already taken as a basis for a written hearing involving some 10 landlord and tenant associations. In addition, the first local and regional courts, namely a chamber of the Berlin Regional Civil Court and a department of one of the local civil courts in Berlin, have filed with the Federal Supreme Court a request to review the constitutionality of the rent price cap law (so-called “concrete judicial review”).

Furthermore, on 25 May 2020 the parliamentary groups of the CDU and the FDP in the Berlin State Parliament filed a petition with the Berlin Constitutional Court requesting an abstract judicial review. The members of the state parliament request the annulment of the rent price cap law not only due to the lack of legislative competence of the State of Berlin, but also because of the infringement of fundamental constitutional rights under the State of Berlin Constitution which provides for fundamental rights guarantees comparable to those stipulated under the Federal Constitution.

Finally, local civil courts in different Berlin districts as well as a chamber of the Berlin Regional Civil Court have rendered first decisions on the rent price cap law which are quite contradictory. Some judges accept the rent price cap and even apply it to rent increase requests made prior to the entering into force of the new law. Other judges suspend the proceedings and refer the issue to the Federal Supreme Court for constitutional review. In context of administrative proceedings, there is also a mixed picture: first administrative orders threatening the imposition of penalty payments have been issued by district housing departments prohibiting property managers from reaching agreements for rent increase under the German Civil Code (BGB). This provides a first taste of the nature of procedures that may be expected at district administration level and administrative court level.

Against this background, everyone hopes for a timely decision by the Federal Supreme Court to eliminate the inconsistent application of the law and to restore the predictability of legal decisions. Historically, the Federal Supreme Court has applied a great deal of discretion in the selection of procedures and the determination of procedural steps. Forecasts as to when a court decision will be rendered would therefore be rather speculative. However, we are confident that the Berlin rent price cap will not survive constitutional court scrutiny.

For almost one and a half years now, our experts in constitutional and rent price law have been continuously examining the rent price cap law, have published the first and numerous subsequent critical articles arguing the lack of constitutionality and have participated as experts in parliamentary hearings and expert discussions. For many months we have been accompanying clients on constitutional and compliance law issues. With this expertise we continue to be at your disposal.