Agreement on Building Modernization Law – Cost Cap for Renters

Overview

On 30 April 2026 the black-red coalition (CDU/CSU and SPD) agreed on a reform of the heating law and introduced a new Building Modernization Law (GModG). The reform replaces the controversial 65-percent rule for renewable energies with a technology-neutral, four-stage system called the “Biotreppe” and introduces measures designed to limit cost burdens for renters.

The GModG aims to share cost risks more fairly between tenants and landlords, protect renters from excessive financial pressure, and at the same time encourage property owners to invest in modern heating technologies.

Main changes in the Building Modernization Law (GModG)

The law removes the 65-percent requirement for renewable energies and replaces it with a more technology-open approach. It introduces a four-stage Biotreppe to guide gradual modernization and defines specific cost-sharing rules for different heating situations. The GModG is set to come into force on 1 July 2026.

Abolition of the 65-percent rule

Instead of mandating that 65 percent of heat must come from renewable sources, the new law takes a technology-neutral stance. This change gives landlords and tenants more flexibility about which modern heating technologies to adopt while keeping the goal of decarbonising buildings.

The four-stage Biotreppe

The Biotreppe is a graduated, four-stage framework that structures the transition from fossil heating toward modern and renewable solutions. It is designed to phase in changes step by step so that costs and technical transitions happen in an orderly way.

1. Stage 1: Initial steps toward modernisation and partial use of bio-based fuels.
2. Stage 2: Further integration of biofuels and alternative technologies.
3. Stage 3: Advanced use of renewable or low-carbon solutions while limiting sudden cost spikes.
4. Stage 4: A later step in the modernization pathway representing deeper transformation toward low-carbon heating technologies.

How costs are shared

The GModG sets clear rules on how costs for heating and fuels are shared between landlords and tenants. For buildings with fossil heating, landlords will be required to pay half of net charges (Netzentgelte), half of the CO2 price, and half of the costs for biogenic (bio-based) fuels that are relevant under the law.

Cost split for biofuels under the Biotreppe

For the first three stages of the Biotreppe the law specifies a 50/50 split of costs for biofuels between tenants and landlords. This is intended to prevent tenants from shouldering the full burden of higher fuel costs during the early phases of modernisation.

1. Biotreppe Stage 1: Costs for biofuels are shared 50% tenant / 50% landlord.
2. Biotreppe Stage 2: Costs for biofuels are shared 50% tenant / 50% landlord.
3. Biotreppe Stage 3: Costs for biofuels are shared 50% tenant / 50% landlord.
4. Biotreppe Stage 4: The context establishes a fourth stage as part of the framework; specific allocation details beyond the first three stages are addressed within the law’s framework.

What this means for tenants and landlords

The Building Modernization Law balances tenant protection and landlord responsibility. By limiting how much of certain costs can be passed on to renters and by making landlords share a defined portion of charges, the law seeks to reduce the risk of sudden, unaffordable increases in heating costs while keeping incentives to modernize.

Protection for tenants (renters)

• Limits on passing through higher fuel costs help prevent excessive rent-related burdens.
• The 50/50 cost sharing for biofuels in the first three Biotreppe stages caps tenant exposure to rising biofuel costs.
• The law aims to distribute cost risks more evenly so renters are not left to bear the full financial impact of modernization.

Incentives for landlords (owners)

• Landlords must cover half of net charges, CO2 prices and certain biogenic fuel costs for fossil heating, which makes them partly responsible for ongoing operating costs.
• By sharing costs and offering a predictable, staged modernization path, the law is intended to motivate investment in modern, efficient heating technologies.
• The technology-neutral approach gives owners flexibility to choose suitable solutions for their properties.

Practical steps and timeline

The GModG is scheduled to come into force on 1 July 2026. Tenants and landlords should prepare now by reviewing heating types, costs, and existing rental agreements, and by communicating about planned modernization steps and expected cost effects under the Biotreppe.

1. Review your current heating system and recent bills to understand how costs are currently distributed.
2. Landlords should develop and share modernization plans that fit the Biotreppe stages; tenants should ask for clear explanations of how changes will affect charges.
3. Both parties should document agreements in writing and keep records of communications about modernization and cost-sharing.
4. Monitor invoices after 1 July 2026 to ensure cost allocations match the rules set by the GModG.

Key terms and quick FAQ

In short, the new Building Modernization Law seeks to cap costs for renters, distribute cost risks fairly, and encourage landlords to invest in modern heating solutions. The changes take effect on 1 July 2026, and both tenants and landlords should prepare by reviewing contracts, communicating about modernization plans, and watching how costs are allocated under the GModG.