A tenant may not earn a profit from subletting their rented apartment that exceeds their own housing costs, such as rent or utilities. Such profit does not constitute a legitimate interest, the Federal Court of Justice (BGH) in Karlsruhe ruled on Wednesday. The case concerned a tenant in Berlin who paid under €500 in rent but sublet the apartment for roughly twice that amount. (Case No. VIII ZR 228/23)
In principle, tenants are allowed to sublet the apartments they rent. They must obtain the landlord’s permission and may claim a right to such permission if they have a legitimate interest in subletting. Until now, it had not been clearly defined what qualifies as a legitimate interest. The BGH has now ruled that the concept refers solely to maintaining one’s housing. If a tenant’s circumstances change significantly, such as after a separation, they may sublet in order to keep their home.
The court left open whether an additional charge may be added for a furnished apartment, as that was not part of the ruling. Federal Justice Minister Stefanie Hubig (SPD) has already announced new regulations on the matter. The BGH also did not address the role of rent control rules. In the Berlin case, the sublet rent was well above what the capital’s rent cap would have allowed.
The tenant had rented a two-room apartment since 2009 for €460 in base rent, later raised to nearly €500. After several years, he went abroad for a period and asked the landlord for approval to sublet the apartment temporarily. He received permission until the end of January 2020.
However, he remained abroad longer than planned and continued subletting. He charged the subtenants €962 in base rent. He kept a key to the apartment and stored some personal belongings there; the furniture also remained in the flat. The landlord, having appointed a new property management firm, inspected the apartment and encountered the subtenants. She subsequently terminated the tenant’s lease.
She went to court to have both the tenant and the subtenants vacate the apartment. The subtenants have since moved out, but the main tenant sought to keep the apartment. Following the BGH ruling, he must now give it up. The decision also takes into account the protection of subtenants, presiding judge Ralph Bünger said. It is intended to shield them from excessive rents.
Both tenant and landlord associations expressed approval of the ruling. “The Federal Court of Justice has made it unmistakably clear: subletting serves to preserve housing, not to generate profit,” said Melanie Weber-Moritz, president of the German Tenants’ Association. Many people depend on subletting because they have no chance on the regular housing market, she noted. “This hardship must not be exploited, neither by landlords nor by primary tenants,” she added.
The property owners’ association Haus & Grund also welcomed the decision. “Subletting is not a business model,” its president Kai Warnecke said. It is also a matter of fairness. “Private landlords have obligations, bear responsibility and costs, they cannot be expected to watch silently as third parties misuse rental agreements for fraudulent gain,” he stressed.
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