German Federal Court of Justice Prohibits Profit from Subletting

Landmark Ruling by Federal Court of Justice

Germany's highest civil court, the Federal Court of Justice (Bundesgerichtshof – BGH), issued a significant ruling on Wednesday, January 28, 2026, declaring that tenants are prohibited from making a profit when subletting their apartments. The court clarified that the purpose of subletting is to cover housing-related expenses, not to serve as a source of income.

The decision, under case number VIII ZR 228/23, is expected to have broad implications for rental practices across Germany, particularly in cities with tight housing markets.

Background of the Berlin Case

The ruling originated from a specific case in Berlin involving a tenant who had sublet a 65-square-meter, two-room apartment. The tenant was paying a cold rent of 460 euros per month (which later increased to nearly 500 euros) but charged subtenants 962 euros per month, effectively more than double their own rent. The landlord discovered the profitable and unauthorized subletting and subsequently terminated the rental contract.

The tenant argued that the higher sublet price was justified due to the apartment being fully furnished with items such as a television, sound system, and dishwasher. Initially, the Charlottenburg District Court in Berlin dismissed the landlord's eviction suit in 2022. However, the Berlin Regional Court later upheld the eviction, a decision that the BGH has now affirmed.

Court's Rationale and Definition of 'Legitimate Interest'

Presiding judge Ralph Bünger emphasized that a tenant's only legitimate interest in subletting should be to cover housing-related expenses, not to generate profit. The BGH stated that a 'legitimate interest' in subletting, as per § 553 Abs. 1 S. 1 BGB (German Civil Code), does not include the intention to make a profit. The court's decision clarifies a legal question that had previously not been definitively settled at the highest judicial level.

The ruling confirms that income exceeding the tenant's actual housing expenses is considered a violation of the primary rental agreement, which can lead to eviction.

Implications for Tenants and Future Legislation

This judgment strengthens the position of landlords and aims to curb practices where tenants exploit tight housing markets for financial gain. It also reaffirms that the rent price brake (Mietpreisbremse), which regulates rents in areas with strained housing markets, applies to sublets. Furthermore, subletting without the landlord's explicit permission can still be grounds for eviction.

The ruling highlights a current gap in German law regarding how much can be charged for furnishings in sublet apartments. The German Tenants' Association confirmed the lack of a reasonable model for this. In response, the Federal Ministry of Justice is reportedly planning to outline new legal rules for a furnishing surcharge, with proposed rules potentially including a 5% cap on net rent for fully furnished units to prevent 'shadow rental markets.'