Attention, rental nomads!

THE SPECTRE OF RENTAL NOMADS: How can I prevent them?

They nest and destroy everything: Mietnomaden

Nomad tenants often cause a lot of trouble and damage for landlords. That's why owners should know how to expose rental nomads or take action against rental fraudsters. Anyone who rents out an apartment counts on the rent payment as a regular income - but not every tenant pays it. It's particularly bad when a rental nomad lives in the apartment, doesn't pay and also causes damage.

Anyone who has allowed a tenant nomad to move into their rented apartment is therefore faced with many inconveniences. Laut Haus & Grund gibt es Zehntausende von ihnen: doch lasst uns mal genauer schauen wie es um die Mietnomaden in Deutschland wirklich bestellt ist.

I will take a closer look at the following 5 topics here:

1. Frequency
2. Damage
3. Legal situation
4. Measures
5. Studies and reports

But first a look at the press. I found a few articles about this. You can read them there:

• Can happen to anyone: Rental nomads reduce houses to rubble.
• First they dazzle with good manners and a fat car
• Before signing a contract, they "usually present themselves as sophisticated and pretend to have an upscale lifestyle.
• Then "the enemy in the house" pays the bill for months
• They often destroy the premises
• At least they left the toilet there.
• Even concrete beams are not safe from rental nomads

And a very well-known German daily newspaper reports that a Stuttgart rental nomad is not only causing trouble for her "unsuspecting neighbors", no, she is "terrorizing" them.

But how great is the risk of becoming a victim of rental nomads really?

Astonishingly identical in wording, the media emphasize: "Although the probability is low", those who are affected "care little about the statistics. And that is true. Every single case is already too many and for landlords this can quickly turn into a drama. From the perspective of the affected owners, this is understandable - after all, the damage caused can amount to five-figure sums. But at least we should take a little care of the statistics. It is therefore important to discuss the issue, classify it correctly and take measures to avoid falling for rental nomads.

Problem apparently much smaller than expected

Tenant nomads are a major nuisance for landlords. They can cause immense damage. However, according to the study, there are nowhere near as many cases as landlord associations had previously assumed. The German Tenants' Association (DMB) has called on the German government to be more objective when dealing with the figures on rental nomads. The study by the University of Bielefeld showed that there had only been 200 cases of rental nomads over a period of 5 years. Landlord and estate agent associations, on the other hand, speak of 15,000 to 30,000 cases per year. How can that be? 200 versus 30,000?

According to the Federal Ministry of Building, in the last 44 years there have only been around 1,500 known cases of rental nomads who refused to pay the rent, citing alleged defects and other reasons, and then moved elsewhere. Incidentally, this is also confirmed by our practical experience.

Over the last 30 years, we have sold tens of thousands of apartments to investors throughout Germany and we have not had a single rental nomad in that time. 0 - cero - None! What we do and how we protect ourselves - I also talk about this in this video to help all those who can't use a professional property management company like us.

Incidentally, "rental nomads" are people who move into an apartment, do not pay rent and then move on before they can be evicted. Although this problem is known in Germany, exact statistics are difficult to determine as not every case is officially recorded and definitions can vary.

Here are some relevant information and data points that can contribute to the discussion about rental nomads in Germany:

Frequency

There are no precise figures on the frequency of rental nomads. Various sources estimate that between 0.1% and 0.5% of rental contracts in Germany are affected. This depends heavily on the region and the type of rental property. Haus & Grund estimates that there are 15,000 cases involving over 40 million tenants nationwide. According to the study, over 90% of cases are due to landlords being too gullible. However, scientifically reliable studies come to different conclusions.

A study by the University of Bielefeld has been available since 2010 (www.jura.uni-bielefeld.de), which deals with the issue of rental nomads in Germany. It was produced in collaboration with Haus & Grund. For months, those affected were asked to take part in the survey. Under the direction of the lawyer, the Research Center for Real Estate Law investigated the phenomenon. After the extensive campaign, 1347 cases were finally reported to the university. However, it turned out that most of them were not really tenant nomads at all. The number of actual cases shrank to 426, spread over several years.

Damage

Landlords often suffer financial losses due to rental nomads. These can amount to several thousand euros and include outstanding rent payments, costs for clearing and renovating the apartment and legal costs. Haus & Grund estimates the average amount of damage to be between 25,000 and 30,000 euros. According to the study from Bielefeld, in 45 percent of all cases the amount of damage is less than 5,000 euros and a further 30 percent is less than 10,000 euros. Insiders and real estate professionals agree that it is very difficult to make serious statements about the exact scale of the annual cases.

We can conclude that the problem is apparently "dramatically overestimated" and that the perceived impact is greater than the actual impact. But here, too, opinions differ. Some say that there is no significant tenant nomad problem in Germany, others say that this result exceeds our worst fears. Rental fraud has "obviously taken on dimensions that the legislator can no longer ignore".

Legal situation

In Germany, there are laws designed to protect landlords from tenant nomads. These include the Tenancy Law Amendment Act and Section 543 of the German Civil Code (BGB), which allows extraordinary termination without notice for good cause. However, implementing these laws can be time-consuming and costly. On average, an action for eviction is filed three and a half months after the notice of termination - the delays often occur because the tenant assures that they will move out and then does not. The eviction processes then took a further 5.4 months on average. After the judgment, it often took almost another three months to evict the tenant. And this is not because the bailiffs are overworked, but because the landlord is reluctant to pay the advance of well over 1000 euros for the removalists and the storage of the furniture.

The so-called Berlin eviction is being sought nationwide. The landlord does not have to hire a bailiff for thousands of euros to remove and store the furniture remaining in the apartment. Instead, they can take the furniture into their own care and sell it.

Measures:

Some landlords use preventative measures, such as careful credit checks before signing a contract, self-disclosures and obtaining Schufa extracts. In fact, there is hardly any risk of falling for a fraudster if you check prospective tenants properly. As a landlord, it is legitimate to want to determine the solvency of prospective tenants. The law offers sufficient possibilities for this, for example by means of a Schufa report or proof of income.

The aforementioned report for the German government speaks for itself. Two thirds of the cases analyzed were "amateur landlords". In most cases, they did not ask for a Schufa report, information on the previous tenancy or proof of fixed income. Once the tenancy agreement had been signed, the horror began. Rent was often not paid at all - usually because of alleged damage to the apartment. And so it was that tenancy law was tightened in 2012 in order to take better action against tenant nomads.

However, even tenants who do not deliberately skip out on their rent but fall into temporary arrears due to financial difficulties can be evicted more easily since the change. But how many cases of rental nomadism are there actually? In most cases, the authorities are unable to provide reliable figures, as "rent arrears are disputes under private law.

According to statistics from municipal housing associations, only one in 200 tenants register any payment arrears at all in the first twelve months. This is usually not because there is fraudulent intent, but predominantly for "personal reasons that lead to arrears", for example due to strokes of fate. In contrast, a rental nomad is, by definition, "someone who rents an apartment with the intention of never paying rent and only moves out in the course of an eviction action.

What happens if I come across a rental nomad?

As an experienced real estate professional with many years of experience in this business, I would like to assure you that this problem occurs far less frequently than feared. Over the years, we have helped thousands of clients to acquire their investment property, and in that time we have never encountered a genuine rental nomad. Nevertheless, it is advisable to be prepared should this situation ever arise.

Over 40 million tenants live in Germany. The overwhelming majority of these people pay their rent reliably. The climatic conditions of our country - cold winters and many rainy days - contribute to the fact that the priority of rent payments is high. So before a tenant in economic difficulties stops paying his rent, he will probably reduce other expenses: he might return his soccer shirt, give up his season ticket for his favorite club, go on vacation less often or get rid of his second car.

But one thing is certain: rent will be the last thing to be saved, because nobody wants to sleep under a bridge in Germany.

Now for the concern about rental nomads:

My recommendation is to focus on the overwhelming majority of good tenants. In the course of my career, I have left letting to professional management companies. They do the credit check, payroll check and ask for a self-disclosure. They also require proof from the previous landlord that the tenant has always paid on time.

If these steps are followed, the likelihood of finding reliable tenants increases considerably. I also recommend focusing on quality properties. First-class properties attract more solvent tenants who are prepared to pay accordingly. If you invest in quality, you will also attract quality tenants. This will ensure a stable rental income.

But what should you do if it does happen?

Suppose you come across one of the few rental nomads. If he messes up your property and doesn't pay the rent, he will be given notice and will ultimately have to move out. Friends who have experienced such cases report that a professional cleaning and renovation team will often repair the damage in a weekend. The costs usually amount to 4,000 to 5,000 euros. These can be deducted from tax, which reduces the net expenditure to around 2,500 to 2,700 euros.

So if you are asking about the worst-case scenario, let me tell you: with a professional approach, selection of the right properties and strict management, you minimize your risk to zero.

How can I recognize rental nomads?

At first glance, rental nomads are indistinguishable from legitimate tenants. Even at second glance, it is difficult to unmask rental nomads. Landlords are usually unable to determine from the appearance or behavior of a prospective tenant whether they will later turn out to be a rental nomad.

Landlords should therefore ask prospective tenants for a number of forms in advance to make sure they are secure:

• request a credit report from the prospective tenant (from Schufa or Creditreform). 
• request current - usually the last three - proofs of income or, in the case of self-employed persons, corresponding income tax assessments. 
• if necessary, use the employment contract to determine whether they come from the right employer.
• critically check the employer's details and, if in doubt, ask the employer. 
• establish the identity on the basis of an official identity document and compare it with the following proofs.  
• check the potential tenant's ID for a permanent residence (rental nomads often do not have one). 
• contact the tenant's last landlord. If the tenant does not want to name the landlord, you should be suspicious. 
• get a certificate from the previous landlord confirming that you are free of rent arrears.
• before signing a tenancy agreement, landlords should obtain as much information as possible about the prospective tenant. An important document here is the tenant self-disclosure. Free forms can be downloaded from the Internet.

With the documents and papers mentioned above, the landlord can check whether the tenant can afford the apartment at all. In order to better assess the prospective tenant, it can also be helpful to ask for a certificate of no rental debts or a short reference letter from the previous landlord.

Rental deposit

The deposit serves as security for the landlord in case the tenant leaves any damage to the apartment. In general, the landlord should request the deposit directly at the start of the tenancy - this means either that the money is received in his account on the day the tenancy starts or that the new tenant actually pays the money in cash. Do not hand over the key until the first deposit and rent have been paid.

Last but not least, it is also helpful to research the tenant on the Internet and especially on social networks. If the tenant then provides false information, the landlord can terminate the tenancy agreement. If you check carefully, it won't come to that. The more clearly you announce such security measures, the more effective they usually are. Many tenant fraudsters can be recognized or deterred in advance. 

If fraudulent tenants have already moved in, landlords can force them to leave the property even before the outcome of an eviction process. 

Is there a database of rental nomads?

There is no reputable list of tenant nomads, which some providers advertise on the internet. However, tenant databases on the Internet that provide credit information for a fee or store data on breaches of contract or rental behavior could be useful for landlords. From this, the landlord can draw conclusions about the seriousness of the prospective tenant.

If the rental nomad has found his way into the rented apartment, landlords should know how best to react. How landlords should proceed with a rental nomad depends on the amount of outstanding rent. In the event of non-payment of the deposit, termination is already possible under Section 569 (2a) of the German Civil Code (BGB) if this amount corresponds to twice the monthly rent. 

Extraordinary termination is possible if the tenant is more than two months in arrears with the payment of a not insignificant part of the rent. If the period of rent arrears extends over several months, the total amount of unpaid rent must be at least two full months' rent. Extraordinary termination can be declared without notice. It must be declared in writing, stating the reasons - namely the default in payment. 

Alternatively, ordinary termination should also be declared, as the tenant cannot avert this by paying the rent arrears. If the tenant is one month's rent in arrears, a warning letter should be sent with a 10-day deadline for payment; if this is ignored, ordinary termination will follow.

The landlord can proceed differently if the tenant is already in arrears with two months' rent or more. Then you can terminate without notice. As a rule, the tenant has 14 days to vacate the property. If the tenant ignores this, eviction proceedings are often the only option. The next step is to apply to the court for the associated eviction order. How long this takes varies. However, it is often four to five months. It depends on the court, but also on whether the tenant defends themselves and objects. The latter in particular can prolong the process.

Once an eviction order has been obtained, a bailiff can be instructed to enforce it. As the tenant is guilty of tenancy fraud by deliberately causing the loss of rent, you can also take criminal action against this by filing a complaint with the police, the public prosecutor's office or the local court. 

Premature eviction in the event of tenant fraud

With the Tenancy Law Amendment Act, the legislator wanted to help landlords in the fight against tenant nomads almost 10 years ago and made it easier to bring eviction proceedings against defaulting tenants. The amendments to the Code of Civil Procedure in force since May 2013. (ZPO) can be found in Section 940a ZPO and Section 283a ZPO. Landlords no longer have to wait for the outcome of eviction proceedings before the apartment can be vacated. After terminating the tenancy agreement due to late payment, they can obtain a so-called security order against their tenant. The tenant must then provide a security deposit. This is intended to prevent further payment defaults. This has indeed reduced the financial risk for landlords.

If the tenant provides security, the landlord's risk of ultimately receiving nothing from an insolvent tenant is reduced. If, on the other hand, the tenant does not provide security, the now faster possible eviction can prevent further rent arrears from accumulating due to the otherwise longer stay of the non-paying tenant until the end of the process. The apartment that is vacated earlier can also be re-let more quickly to paying tenants. This is because a landlord can have a tenant who does not comply with the order evicted before a final decision is made on the eviction action. 

Unfortunately, this procedure has disadvantages for both tenants and landlords. Tenants are threatened with eviction by temporary injunction and thus the loss of the apartment before a final decision on the eviction action. If the eviction action later turns out to be unfounded, the loss of the apartment can usually no longer be reversed. Many courts are also aware of this, which is why they tend to handle eviction orders under Section 940a III ZPO rather restrictively. This is why the law also requires that the action for payment of rent claims has a high chance of success.

The landlord must prove this. The requirements are close to those in normal proceedings and are therefore relatively high. The deterrent effect of facilitated eviction on rental nomads is also low. They are already in the apartment at that moment and can only lose it a little more quickly. Accordingly, they quickly end up with the next bona fide landlord.

The simplified option of evicting tenants therefore does not solve the fundamental problem of tenant nomads getting into the apartment. 

How does a normal enforcement proceed?

Upon request, the bailiff will arrange for the tenant's belongings that he has left behind to remain in the apartment and therefore in the care of the landlord. The landlord can simply leave the tenant's furniture in the apartment - or must arrange for alternative storage. When using the Berlin model, the landlord is only liable for the tenant's possessions left behind in the event of intent or gross negligence. However, they should document exactly what is in the apartment. Otherwise the tenant will end up asking for his gold Rolex in the cupboard at the back left.

Avoid eviction with the deed process

To avoid eviction, the landlord can use the so-called documentary process. This is a quicker version of the normal lawsuit. The tenant cannot delay the process with witnesses - because everything is proven by documents. Accordingly, the landlord then needs the rental agreement and a complete bank statement to prove in court that rent payments have not been made. Then there is usually a corresponding enforcement judgment quite quickly.

If there is a subsequent procedure, this would again be a completely normal procedure. However, this variant is rarely carried out. The documentary process is relatively unknown and cumbersome because everything really has to be proven by documents.

Who pays for the eviction of rental nomads?

In principle, the landlord has the right to be reimbursed by the tenant for the costs of clearing out and storing furniture - but if the tenant is unable or unwilling to pay, he is still left with the costs, at least temporarily. They can only protect themselves against this by taking out special insurance. Normal legal expenses insurance does not cover nomadic tenants.

There are special landlord legal protection insurance policies - but you have to pay for each apartment individually. With rental nomad insurance, also known as loss of rent insurance, the landlord is not stuck with the costs caused by rental nomads. This includes the loss of rent itself, the costs of renovation or a possible clear-out. I recommend professional advice to anyone who has a problem with a tenant nomad. It doesn't matter whether you first seek help from a landlord's association or directly from a lawyer.

Special form: Berlin eviction

A special form of eviction action is the Berlin eviction - and at the same time considerably cheaper. In this case, the landlord only needs the bailiff to hand over the premises. The bailiff comes by, puts the tenant in front of the door, changes the lock and leaves. The costs here are usually only 300 to 500 euros.

Studies and reports

There are several studies and reports from interest groups such as "Haus & Grund Deutschland" that deal with the issue and try to raise awareness and develop solutions. These organizations regularly report cases and try to improve the legal situation for landlords.

It is important to note that the phenomenon of rental nomads is relatively rare compared to other problems in the rental housing market (e.g. rising rents, housing shortage). Nevertheless, it remains a relevant issue for affected landlords. The Bielefeld study speaks of 426 cases of rental nomads out of 40 million tenants in Germany. The study is important for making the debate more objective. Figures of 15,000 cases were still circulating.

Here are links to sources and organizations where you can find relevant studies and reports:

Haus & Grund Deutschland

Deutscher Mieterbund

Study by Bielefeld University

Finally, I would also like to briefly address the question of whether there are apartments that are particularly popular with rental nomads?

There is no one apartment that is particularly targeted by rental nomads. However, apartments with the following criteria are more at risk than others: High vacancy rate: in areas where many apartments are empty, landlords are usually happy to have found a tenant at all. This makes it easy for rental nomads to get a commitment. Expensive apartments: In large metropolitan areas such as Munich, Hamburg or Frankfurt, apartments are scarce and correspondingly expensive. This can attract rental nomads, as they know in advance that they will never be able to pay the rent.

To prevent landlords from falling into the trap in the first place, they should check the prospective tenant carefully in advance. If you don't want to do all the work yourself, you can also hire someone who deals with such issues. This is because rental properties that are let without professional support are the targets of the few rental nomads.

Private landlords are often easier to fool because they usually do not carry out standardized inspection processes. If you keep these points in mind, you should never encounter a rental nomad in your real estate life. After all, owning a property should be fun.

I wish you every success in this endeavor.

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Kind regards,

Matthias Holzmann

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