Tenancy law reform 2026 sets tighter framework conditions for landlords

The planned 2026 tenancy law reform limits furnishing surcharges, caps index-linked rents, cuts short-term rental models and tightens the obligations for landlords. The aim is to close loopholes to circumvent the rent cap.

On February 8, 2026, the Federal Ministry of Justice (BMJV) presented the draft bill to amend the law on residential and commercial leases. This is clearly aimed at further strengthening tenant protection in tight housing markets – with noticeable consequences for frequently used rental models.

Landlords must disclose furnishing surcharge

In future, landlords will have to disclose a furnishing surcharge for furnished apartments. This applies not only to the amount of the surcharge, but also to the calculation basis, which must take into account the current value of the furniture. For fully furnished units, a five percent flat rate of the net cold rent is envisaged. The surcharge may only be higher in justified exceptional cases. If this information is not provided, the apartment is considered unfurnished for the purposes of the rent cap. Previously, landlords were allowed to charge a furnishing surcharge without having to disclose it separately.

Restrictions on short-term rentals

According to the draft bill, the letting of apartments “for temporary use” is to be limited to a maximum of six months. Successive short-term rental agreements are to be added together and only possible if the tenant only has a temporary need for the rental property. This is intended to prevent chain models for circumventing rent regulations.

Index rents to be capped in tight markets

Index-linked rents should also no longer be possible indefinitely when renting out residential space. Previously, only the initial rent had to be based on the rent index. Adjustments are then based solely on the consumer price index. In future, index-linked rents are to be capped at 3.5 percent per year in markets designated as tight by the federal states by statutory order. This also applies to existing index-linked tenancies, insofar as the tenant only receives a corresponding notification of change after such an ordinance comes into force.

Grace period also planned for ordinary terminations

A far-reaching restriction for landlords concerns the possibility of termination in the event of payment arrears. Previously, tenants had a grace period after an extraordinary termination due to late payment. If payment was made within the grace period, the extraordinary termination became invalid. However, ordinary termination of the tenancy agreement remained possible. The BMJV would now like to change this: If the tenant pays in full within the grace period, both termination without notice and ordinary termination are to become ineffective in future. However, this only applies once per tenancy.

Modernization and rent index

One change is intended to benefit landlords: The value limit for calculating modernization rent increases under the simplified procedure is to be raised from EUR 10,000 to EUR 20,000 per apartment. This is intended to take account of price increases and ensure that the simplified procedure can continue to be used for smaller modernization measures.

At the same time, tenants should not be able to reduce their rent for a limited period of time, even if they are affected by the construction work. This is intended to give landlords planning security and prevent necessary modernizations from being made more difficult by immediate rent reductions. However, the regulation only applies to certain measures and is limited in time. Landlords must also inform tenants correctly and comply with the existing legal requirements.

In addition, authorities that compile rent indices will in future be allowed to access additional data such as property tax data and property addresses. This should make rent indices more accurate and meaningful. For landlords and tenants, this means that the local comparative rent can be determined better and more objectively. However, this will reduce the scope for individual deviations.

Finally, Section 566 BGB is also to apply in future to the transfer of tenancies between co-owners and to inheritance disputes.

Additions to commercial tenancy law

The draft bill also brings innovations for commercial leases. In future, landlords of commercial properties will be allowed to provide their tenants with the receipts on which the statement of operating costs is based in digital form. This means that the obligation to submit original receipts in paper form no longer applies, which offers considerable organizational advantages, particularly for larger portfolios and cross-location structures. At the same time, the right to inspect receipts for commercial tenants is clarified by law and raised to a level comparable to that of residential tenancy law.

The selective transfer of individual residential-specific provisions to commercial leases is to remain limited to certain areas; complete harmonization with residential tenancy law is not planned.

For landlords, the reform of tenancy law means a restriction of their creative freedom

According to the draft law, the scope for structuring will become narrower and formal obligations and documentation requirements will increase. Risks lie in particular in formal errors in furnishing information. These can lead to loss of revenue and claims for repayment. Short-term and chain rental models over six months will become legally contestable and index-linked rent increases in metropolitan areas will be limited. In cases of repeated payment arrears, terminations will become more difficult.

Rent increases as a result of modernization measures will continue to require careful planning and proper cost documentation – despite the reduction in costs below EUR 20,000. More precise rent index data should also further strengthen the probative value of qualified rent indices and reduce the scope for rents above the ranges.

A structured adaptation process at an early stage is recommended

Landlords should prepare for the reform at an early stage, even if the draft law may still undergo changes. They should revise sample contracts, especially if they rent out furnished apartments or make use of index, graduated and traditional rent increases. At the same time, portfolio screening and the adaptation of ERP and billing systems make sense in order to map furnishing surcharges, index caps and transitional periods in a legally compliant manner. In addition, dunning and receivables management should be tightened up, the use of the one-off grace period cure should be made documentable and modernization projects should be aligned with the new value limit including reduction exclusion. Processes and IT systems should be prepared for the legally compliant digital provision of billing documents and the efficient organization of inspection rights. For larger portfolio holders and professional commercial landlords in particular, it is therefore advisable to review and adapt internal processes in good time in order to smoothly implement the new requirements for the digital provision of receipts and the extended inspection rights.

Those who set the course now can limit legal risks and make targeted use of the few remaining opportunities – such as the simplified modernization procedure.