Renting a granny apartment – what tenants and landlords have to pay attention to

If the general conditions are right, both parties benefit: both the tenants and the landlords of a granny flat. What you should pay attention to, what advantages you can expect and what else plays an important role in this topic, you will learn below.

When to speak of a granny annexe at all?



The so-called "Einlieger" helped this housing concept to get its name. In the past, this was the name given to agricultural workers who rented accommodation from farmers and supported them on their farms. In the years following the end of the Second World War, a law even obliged owners of new single-family houses to install granny apartments. This was to meet the shortage of living space at the time.

Before discussing the aspects of such a tenancy, it is useful to define the term granny apartment. Different conditions must apply, so that one can speak at all of this real estate type. The essential prerequisite is that it is a self-contained residential unit within a house. Another important condition is to be able to run the household completely independently – having your own kitchen and bathroom is essential for this. In summary, a granny apartment has to meet these criteria:

  • It is lockable and thus separated from the rest of the living area.
  • It cannot be reached from the outside via a separate entrance.
  • The way to the apartment is instead through the front door or staircase.
  • It allows independent household management.
  • It must offer a bathroom with shower and toilet as well as cooking facilities.
  • Its area is smaller than that of the main living area.

Without own household management it would be a classical room rental. Equally important is the criterion that there is no separate access from the outside. Otherwise, it is not a single-family house with a granny annexe, but a two-family house.

If you want to rent a granny apartment, you should also pay attention to the minimum size. Although this is not regulated uniformly throughout Germany, 25 square meters are usually mentioned as a guideline. To be profitable for renting, however, 50 square meters is considered a good guideline. There is no upper limit. The only decisive factor is that the granny annexe has a smaller living area than that of the owner of the house.

Renting a granny annexe: Owners must pay attention to this

The basis for the rental relationship is the associated contract. The living concept of the granny apartment is special in that owner and tenant live closer together than usual. This may seem fairly straightforward in a family relationship. The situation may be different for third-party tenants. To create clarity, precise agreements in the contract are important. Points such as these can be noted:

  • Rules for sharing the garden
  • Possible obligation to maintain the exterior, incl. Clearing snow in winter
  • Arrangements for keeping pets
  • Use of areas such as cellar or attic

One contentious point can also be avoided right from the start: It concerns the consumption costs. Owners who rent out a granny apartment are not obliged to charge for it according to consumption. For maximum transparency, however, it is advisable to install separate meters for energy and water supply.

Good to know: If relatives rent your granny apartment, you should in any case also draw up a contract. In the absence of such an agreement, you as a landlord may not be able to benefit from the tax advantages, unless the lease is recognized as such.

The amount of rent is another important aspect. If relatives live in the granny annexe, it is obvious to grant them particularly favorable conditions. As understandable as this approach may be, the tax consequences should not be ignored. The amount charged should definitely not be less than 50 percent of the standard local rent. Expenses such as loan interest, depreciation or maintenance costs may then only be deducted on a pro rata basis.

Critically is to be regarded however already the range starting from 66 per cent up to said 50 per cent. If the rent is within this range, the tax office carries out an audit. This examines the extent to which the owner has an income-producing intent over the long term. If the result of the calculation is positive, the costs can be claimed in full – otherwise only on a pro-rata basis.

Owners who rent out a granny apartment enjoy a special right of cancellation. Unlike traditional tenancies, they do not need to present a valid reason such as a personal need. However, it is important to remember that the legal notice period for the tenant is extended if the landlord exercises his special right of termination – to what extent depends on the term of the existing contract. These deadlines must be taken into account:

  • 6 months in the case of a rental agreement that has been in place for up to 5 years
  • 9 months for a rental period between 5 and 8 years
  • 12 months for a lease of more than 8 years

Renting out a granny apartment: What tenants should consider

All prospective tenants who would like to rent a granny annexe also have certain points to consider. To the basic conditions for the notice of the contract can be tied up immediately from view of the tenants. They must be aware that these legal requirements are associated with certain disadvantages for them. As a rule, they have no choice but to accept a termination of contract if the landlord exercises his special right of termination.

All those who rent a granny apartment can only help themselves with the social clause. For this to take effect, however, they must provide proof. It is necessary to prove that the dismissal means a special hardship for the tenants. This would be the case, for example, if they suffer from a serious illness or have problems finding adequate replacement housing. However, it is also possible to talk to the landlord in advance and make different arrangements for the notice periods. This may only be done for the benefit of the tenants. However, the landlord does not have to agree to this.

Another critical aspect is the billing of consumption costs. The landlord is not required to determine the heating costs based on consumption. They are also allowed to prorate it according to square footage. In an unfavorable scenario, tenants thereby share in some of the landlord's costs. Such an agreement is only effective, however, if it is so noted in the contract. Ideally, separate water and gas and electricity meters are in place.

Renting out a granny apartment: That speaks for it

One very obvious reason for renting out a granny apartment is the income it generates. They can be helpful while still in the real estate financing process to make the payments. Later they serve as a second income. There is also the option of taking out 2 loans, one of which is for the main home and one for the granny apartment. If the property meets the requirements of the Kreditanstalt fur Wiederaufbau (KfW), you can benefit twice over from the state subsidy.

Tax advantages are also a very important reason for renting a granny apartment. The following expenses in particular are taken into account:

  • Interest costs
  • Expenses for maintenance
  • Modernization work
  • Repairs
  • Brokerage costs
  • Manufacturing costs in the case of new construction (2% depreciation per year)

Ultimately, the interpersonal factor also favors the decision to rent out a granny apartment. Who accommodates its relatives in the object, can create thereby a multi-generation house, in which old and young mutually support each other. Of course, it is also conceivable to build a close relationship with third-party tenants and benefit from each other.

Rent a granny apartment: This speaks for it

Also for tenants, living in a granny apartment brings certain advantages. Financial aspects also play a role here. Objects of this type are often offered at more attractive conditions than classic rental apartments.

Certain sacrifices in privacy and the not unusual location in the basement or under the roof justify a discount. This makes it easier for certain target groups, such as students or trainees, to find affordable accommodation. Ideally, the granny apartment for rent is already furnished and thus ready for immediate occupancy. A final argument unites tenants and landlords: Families can live together under one roof with certain retreat possibilities and independent household management.

Bottom line: the granny apartment is a special living concept

Anyone who wants to rent a granny apartment must bear in mind that this living concept is different from others. The separate cancellation conditions are a very significant difference. But also pay attention to the billing of consumption costs. A significant advantage are the mostly lower rents.

All those who rent out a granny apartment benefit from the possibility of being able to claim the related expenses for tax purposes. For this to be fully permissible, they must not set the rent too low. Due to the very close residential relationship, precise and, if necessary, additional agreements in the rental contract are recommended. In this way, possible disputes can be largely ruled out. To avoid this, separate meters for billing consumption data are also helpful.

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