The CO₂ Cost Sharing Act, in force since 1 January 2023, is significantly expanded by the recently adopted Building Modernisation Act. The German Bundestag passed this Act on 10 July 2026, with planned entry into force on 1 November 2026. Previously, landlords were already obliged to bear a portion of the state CO₂ price, included in heating costs, themselves, depending on the energy efficiency of the building.
The upcoming amendment goes beyond this regulation and will also affect certain other components of heating costs in the future, which will no longer be fully transferable to tenants. Oliver Letzner, a lawyer specialising in tenancy and residential property law and partner at the law firm Müller Radack Schultz in Berlin, emphasised that the public debate had primarily focused on the new regulations concerning the choice of heating systems, while the far-reaching financial implications of CO₂ cost sharing for landlords and tenants had largely gone unnoticed so far.
Expanded Freedom of Choice for Heating Systems and Their Consequences
With the new Act, owners will, in principle, gain more freedom of choice when selecting their heating systems. In addition to heat pumps, the installation of new gas and oil heating systems will also remain permissible. However, this is subject to the condition that these heating systems must progressively be operated with an increasing proportion of climate-neutral fuels, such as biomethane or bio-oil. For letting owners, however, this freedom implies extended responsibility.
If owners decide to install new gas or oil heating systems, they must also consider tenancy law and economic consequences. Certain components of heating costs, arising from the use of climate-neutral fuels and future network charges, can no longer be fully passed on to tenants. Mr Letzner explains that the CO₂ Cost Sharing Act thus evolves from a mere distribution regulation of the CO₂ price into a set of rules that additionally controls the sharing of specific operating costs for new gas and oil heating systems.
Reassessment of the Economic Viability of Fossil Heating Systems
The initially lower acquisition costs of a gas or oil heating system compared to a heat pump must be re-evaluated in the future against the background of potentially higher fuel costs. The legally mandated, increasing proportion of climate-neutral fuels can lead to an increase in operating costs. This shifts part of the economic risk from the tenant to the landlord. Tenants do not benefit unrestrictedly from this new regulation, as they will still have to bear a share of the higher fuel costs resulting from the use of climate-neutral fuels.
Mr Letzner stresses that owners will no longer primarily need to check the technical admissibility of a heating system in the future, but rather the long-term economic effects of the investment decision for both parties, landlords and tenants, will be decisive.
