When rents suddenly become more expensive, the base rate is often to blame. But what does this term mean and how does inflation affect everyday housing? Alain Dubuis is an expert at Fortuna Legal Protection Insurance. In this interview, he reveals the best tips for successfully protecting yourself against a rent increase.
What you need to know about the base rate
Alain, what is the base rate?
In a nutshell, the average interest rate that is reset four times a year. It is used to determine mortgage interest rates. The base rate therefore plays an important role for most of us. Since 1 December 2023, it has been 1.75%. It is set by the Federal Office for Housing (Bundesamt für Wohnungswesen, BWO). This is the second increase this year.
How does the base rate affect our everyday lives?
It is linked to rents. This means that net rents generally rise when the base rate increases, and vice versa. Over the past 15 years, the base rate has fallen consistently.
Will the base rate increase again next year?
Experts believe that the base rate may rise again next year. But a higher base rate isn’t the only reason for an increase in the rent. Inflation or general cost rises are other reasons for this. Cost rises are when home owners have to spend more on running their properties – on tax, insurance premiums and maintenance costs, for example.
Inflation is a hot topic. What exactly does it mean?
In very simple terms, inflation is when you can buy fewer of the same goods for the same outlay as you could prior to inflation. Money therefore loses value – and this is what’s currently happening.
How much can landlords pass on to tenants in the event of inflation?
A maximum of 40% of inflation can be incorporated into rents. The general assumption is that around 60% of a property is financed by bank loans and 40% by equity. For example: if prices increase by 10% due to inflation, rents can only rise by 4%.
Tips: how to protect yourself against a rent increase
Check whether the formal prerequisites have been met
A rent increase must be communicated and justified using the official form. The important thing is that everyone who signed the tenancy agreement as a landlord must also sign this form. Otherwise, the increase is not valid. Nevertheless, your landlord can still apply a rent increase as of your next notice date – using the correct procedure this time.
If you are affected by a rent increase, you must be notified of the increase at least ten days before the start of your notice period. This ten days is a cooling-off period, giving you the opportunity to terminate your tenancy agreement in good time. More details are available in your tenancy agreement.
Use a rent calculator to calculate the rise
If the formal perquisites have been met, you should use a rent calculator to check whether the increase has been calculated correctly. To do this, you will need your tenancy agreement and – if the rent has already been increased – the relevant letter.
Note: There may be minor deviations in the calculations if you use a different rent calculation program.
If you also want to check inflation, the best way to do this is to use the national consumer price index.
Contest the rent increase within 30 days
If you spot any errors, you can contest the rent increase within 30 days of receipt. You must do this by writing to the relevant arbitration authority by registered mail. Otherwise, the increase will be legally valid. If you are unsure which arbitration authority is responsible for your area, you can enter your post code or place name here.
By the way, if you fail to collect the registered letter regarding your rent increase from the post office, it will be deemed to have been delivered on the final day of the collection period.
You can contest the rent increase yourself using our sample template.
If you need help from your legal protection insurance
If you have personal legal protection insurance with Fortuna and want to register your case in writing, you will need:
- your policy number
- the date you received notification of the rent increase
- a copy of your rent increase letter (including any attachments)
- a copy of your tenancy agreement
- any rent adjustments since the start of your rental contract
If you have any questions, please do not hesitate to contact our legal advice hotline:
(Tel. +41 58 472 72 00, Mon–Thu 8.00 am to 5.30 pm and Fri 8.00 am to 5.00 pm)
“A rise of 0.25% may not seem a lot at first glance, but it has a significant impact on your housing costs.”
Alain Dubuis, Head of Legal Protection, Fortuna Legal Protection Insurance
ABOUT THE EXPERT
Alain Dubuis is a lawyer and has worked at Fortuna Legal Protection Insurance for 15 years.
ABOUT FORTUNA LEGAL PROTECTION INSURANCE
Fortuna Legal Protection Insurance – a subsidiary of Generali Switzerland – has been helping customers to access justice for 50 years. During this time, it has grown significantly and now applies the expertise and experience of over 100 employees in 31 branches of law.
