Renovating a block of flats in Berlin: modernisation, tenants and funding

Renovating a block of flats in Berlin adds two management challenges compared with a detached house: existing tenants and a larger volume across several units. Legally, classification as modernisation or maintenance determines whether you may raise the rent — and modernisation must be announced three months in advance. With around 84 per cent rented homes, Berlin is characterised by rental buildings, where neighbourhood protection and restrictions on conversion to individual ownership also apply. This guide explains the rules, funding and the right company structure.

Key points at a glance

• Only modernisation (§ 555b BGB) permits a rent increase — ordinary maintenance (§ 555a) does not
• Announce modernisation at least 3 months in advance in text form (§ 555c BGB); tenants can raise a hardship objection (§ 555d)
• Funding is tiered per housing unit: KfW heating grants up to 70 % (30.000 € for the 1st, 15.000 € each for the 2nd–6th units), KfW Efficiency House up to 150.000 €/unit⁴
• In Berlin, neighbourhood protection (§ 172 BauGB) applies to rental buildings, with a conversion ban for buildings with more than 5 flats until the end of 2030 (§ 250 BauGB)⁷
• The volume and tenant coordination usually make this a job for a main contractor or a larger construction company

Modernisation or maintenance — what is the difference?

The distinction determines your rights as an owner. Maintenance measures (§ 555a BGB) preserve the existing condition — for example, replacing a defective window with an equivalent one; tenants must tolerate them, but no rent increase is possible. Modernisation (§ 555b BGB) brings lasting improvements: energy renovation, increased utility value, a lasting improvement in living conditions or the creation of new living space (such as a loft conversion).¹ Only modernisation permits a rent increase: under § 559 BGB, 8 per cent of modernisation costs may be added to the annual rent, capped at 3 euros per square metre over six years (2 euros if the starting rent is below 7 euros).⁸

What must you consider regarding tenants?

You must announce modernisation at least three months before work starts, in text form. The notice must include the nature and scope, expected start and duration, expected rent increase and future operating costs (§ 555c BGB).² Tenants are generally obliged to tolerate the work — but may raise a hardship objection in text form by the end of the month following receipt of the notice; the obligation to tolerate the work falls away in cases of unreasonable hardship (§ 555d BGB).³ Ordinary maintenance measures do not have this notice period. Allow time in the construction schedule of an occupied building for notice, coordination and possible objections.

What funding is available for a block of flats?

Funding is tiered per housing unit — so the amounts add up considerably for a block of flats. The KfW heating grant (programme 458) subsidises replacement with climate-friendly heating by up to 70 per cent; eligible costs are 30.000 euros for the first unit, 15.000 euros each for the second to sixth, and 8.000 euros each from the seventh unit onwards.⁴ For a complete energy renovation to Efficiency House standard, KfW residential building loan 261 offers up to 150.000 euros per housing unit and a repayment grant.⁵ In Berlin, IBB adds an interest subsidy of up to 0,6 per cent per year on the KfW loan.⁶ The important rule remains: always apply before awarding the contract. More on measures and Efficiency House standards in our guide to energy renovation in Berlin.

Neighbourhood protection and the conversion ban in Berlin

Berlin rental buildings are often located within the 82 social conservation areas. Modernisation there requires approval under § 172 BauGB, and luxury upgrades are often prohibited. A conversion ban has also applied since 1 January 2026: dividing buildings with more than five flats into individually owned flats requires approval and is usually prohibited; the regulation expires at the end of 2030. The number of conversions in Berlin fell from 28.783 (2021) to 1.552 (2024).⁷ Clarify your building's protection status with the district office before planning.

Who should renovate a block of flats?

Several units, often occupied, and a large volume of work generally favour a main contractor or larger construction company over separate contracts — having coordination and defect management in one place is more valuable here. Our guides show how to choose and assess a suitable company: Finding & comparing renovation firms, Comparing construction companies and Main contractors in Berlin. For renovation by a homeowners' association, see our guide to WEG renovation.

Frequently asked questions

What legally counts as modernisation and what as maintenance?

Maintenance/repair (§ 555a BGB) preserves the existing condition — for example, replacing a defective window with an equivalent one. Modernisation (§ 555b BGB) brings lasting improvements, e.g. energy renovation, improved layouts or new living space. Only modernisation permits a rent increase under § 559 BGB.

How far in advance must I announce modernisation?

At least three months before work starts, in text form (§ 555c BGB). The notice must include the nature and scope, expected start and duration, expected rent increase and future operating costs. Ordinary maintenance measures have no 3-month notice period.

Can tenants refuse modernisation?

Tenants are generally obliged to tolerate it. However, they may raise a hardship objection in text form by the end of the month following receipt of the notice (§ 555d BGB). The obligation falls away if the work would cause them unreasonable hardship.

How much KfW funding is available for a block of flats?

It is tiered per housing unit. For heating (KfW 458), eligible costs are 30.000 euros for the first unit, 15.000 euros each for the second to sixth and 8.000 euros each from the seventh onwards, with a maximum grant of 70 per cent. For Efficiency House (KfW 261), loans of up to 150.000 euros per housing unit are available with a repayment grant. In Berlin, the IBB interest subsidy (up to 0,6 per cent per year) is added.

What neighbourhood protection rules must I consider for my Berlin rental building?

Modernisation in the 82 social conservation areas requires approval under § 172 BauGB. Berlin also has a conversion ban for buildings with more than five flats (§ 250 BauGB): dividing them into individually owned flats requires approval until the end of 2030 and is usually prohibited.

Would you like quotes from vetted specialist companies for your Berlin block of flats? Use our introduction service for vetted specialist firms. Given the high contract values, an independent review is worthwhile beforehand: quote review.

Sources

1. § 555b BGB, modernisation measures (distinction from § 555a maintenance measures)
2. § 555c BGB, notice of modernisation measures (3 months, text form)
3. § 555d BGB, tolerating modernisation measures and hardship objections
4. KfW, residential building heating grants (458): eligible costs tiered by housing unit, max. 70 %
5. KfW, Federal Funding for Efficient Buildings — residential building loan (261), up to 150.000 € per housing unit
6. Investitionsbank Berlin (IBB), energy building renovation: interest subsidy up to 0,6 % p.a.
7. Berlin Senate Department for Urban Development, Building and Housing, conversion regulation (§ 250 BauGB, buildings with more than 5 flats, limited until 2030)
8. § 559 BGB, rent increases after modernisation (8 %, cap of 3 € or 2 € per sqm over 6 years)