From 1 May 2021, the Maximum Rent Increases for Liberalised Rental Agreements Act was introduced. This law protects tenants of dwellings in the free sector from high annual rent increases by capping annual rent increases. As this law ends on 1 May 2024 and the need for capping is still present, a proposal to extend this law was submitted on 4 May this year.
Current law
The Maximum Rent Increases Liberalised Rental Agreements Act was introduced in 2021 for a period of 3 years with the aim of limiting rent increases in the free sector. The annual rent increase is limited to a maximum: inflation + 1% or the average of the CLA wage index figures + 1%. Whichever leads to the lowest increase should be chosen.
From 1 January 2024, the maximum rent increase is set at 5.5%: the inflation rate of 4.5% + 1%. The maximum rent increase applies to both existing and new contracts. As long as the law is in force, the maximum must therefore also be applied to existing contracts even if something else has been agreed.
Situation before 1 May 2021
Before May 2021, there was no limit on annual increases in the free sector. Due to the lack of this limit and the scarcity in the housing market, tenants faced hefty rent increases. Thus, without an extension of the law, rental contracts in the free sector will no longer be protected against excessive rent increases after 1 May 2024. As evaluation of the law has shown that the need to cap the permissible annual rent increase is still present and the government wants to give tenants in the free sector more certainty about their housing costs and their affordability for longer, the bill to extend the cap has been prepared. Besides the bill to extend the cap on annual increases, the Affordable Rent Act is also currently being debated by the Lower House. This law ensures that landlords charge a rent appropriate to the quality of the property. A larger part of the rental market will then get a maximum rent. The intention is that the Affordable Rent Act will enter into force on 1 July 2024.
Bill to extend
The proposal is to apply a maximum annual rent increase in the free sector for another three years. The extension would then take effect from 1 May 2024 and apply until 1 May 2027.
It is also planned to set the maximum permitted rent increase at the average CLA wage development plus 1%. The link to inflation will then be dropped.
It is also proposed to limit the limitation period of annual rent increases to one year for all leases relating to residential property. Under Article 3:308 of the Civil Code, landlords can still claim the (uncollected) rent increase up to five years after the rent increase date. In practice, this leads to undesirable situations. This bill aims to provide a solution for that too. It thus further limits landlords' rights.
Conclusion
So it remains to be seen whether the bill will be adopted or whether a capped percentage will no longer apply as of 1 May 2024.
Would you like to know more or do you have questions or need advice about your lease? If so, please feel free to contact one of our lawyers without any obligation. We will be happy to assist you and keep you informed of further developments!