Practice lease agreement under german law

Information for doctors, dentists, pharmacists and landlords in Germany

The location and location security are an important cornerstone for lasting entrepreneurial success, especially for healthcare professionals such as physicians, dentists, psychologists, etc in Germany. Therefore, the physician should not take the topic of the practice lease lightly and check it off as a supposed standard document, but act carefully.

In the following, we provide guidance regarding "classic" topics of such lease agreements in german practice.

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Who exactly is a tenant under german law?

Health care professionals in Germany conclude lease agreements either individually or on behalf of a group practice or as a joint practice. Errors in the drafting of the contract can have serious consequences for the tenant in german practice, up to and including forced abandonment of the practice premises. Physicians are therefore well advised to invest in a carefully drafted lease agreement in order to have location security and to prevent costly legal disputes from arising in advance. In the case of several healthcare professionals working together, the question arises as to who signs the lease. From the point of view of each individual physician within, for example, a professional practice association (BAG), it is extremely important under german law to ensure that the lease agreement is not concluded in the name of a co-partner, but in the name of the BAG, i.e. the civil law partnership.

If this is not observed in german practice, the health care professional will find himself in the unwelcome role of subtenant of one of his co-partners. This can result in undesirable dependencies and shareholder disputes. It is also not clear whether a german court will not consider this an unauthorized transfer of use, with the result that a termination by the landlord for unauthorized transfer of use could possibly succeed. This would be the greatest possible damage, as it would mean that the entire practice would have to be evacuated.

Linkage to health insurance license; pharmacy operating license under german law

The tenant in Germany should, to a certain extent, as an emergency exit, make the lease agreement subject to the resolutory condition that he - contrary to expectations - does not obtain a health insurance license or financing or even becomes professionally incapacitated before the start of the lease. If one of these cases occurs, the lease is considered not concluded and the tenant is released from all obligations under german law. Furthermore, the rental agreement should also contain a special right of termination in german practice, according to which the tenant should be able to withdraw from the rental agreement prematurely in the event of proven professional incapacity or withdrawal of the license to practice or operate a pharmacy.

Suitability and use of the rented premises in Germany

Unlike regular office space, medical practices in Germany often require a high level of technical equipment, for example radiation protection (X-ray equipment), installation of disposal equipment (amalgam separators, etc.), heavy equipment and high-voltage connections. The rented premises must be suitable for this purpose. In german practice, the landlord must be expressly contractually responsible for this. The tenant should ensure that, in addition to the exact designation of the medical activity, any ancillary business is also covered, e.g. laboratory activity, sale of remedies and aids (example: dental care products in dental practice).

In the case of pharmacy leases, particular attention must also be paid to the German Pharmacy Operating Ordinance (Apothekenbetriebsverordnung), which, for example, lays down strict rules regarding the maximum permissible temperature in pharmacy premises. This, in turn, is a very relevant issue in german practice in view of the generally rising temperatures in the summer months and the fact that air conditioning has not yet been installed in commercial leased properties across the board. From the german landlord's point of view, there will be an interest in precisely not being legally responsible for avoiding particularly high temperatures in the workrooms.

Competition protection in Germany

Doctors profit from other doctors. It is no coincidence that there are various medical centers in Germany. For this to work, however, doctors of different specialties must be resident there, otherwise a harmful competition will arise right in front of the door. The german tenant should definitely insist on the granting of a protection against competition, so that the german landlord undertakes not to rent any rooms in the rented property or within a certain radius to tenants of the same branch of medicine.

Structural changes under german law

Significant alterations are often required in medical practices. This can also be the case - for example, in the case of a modernization of the practice inventory - only after a few years. In this case, the tenant in Germany should give his express consent to conversion measures and have floor plans handed over together with the rental agreement. Even when concluding a lease agreement for completely new practice premises, it is essential in german practice that clear and detailed regulations regarding the fit-out and equipment are recorded in writing. From the landlord's point of view, care must be taken to ensure that the tenant only employs competent personnel and, in particular, respects restrictions imposed by german public law.

In german practice, it is strongly recommended that the tenant and landlord have a clear arrangement regarding the installation of signs (size, color design, cost of installation, possibly cost of lighting). In the event that the tenant moves out at a later date, it should also be stipulated that the tenant is permitted to display a sign referring to the new address of the practice during a transitional period.

Practice extension/subtenant clause in german practice

It is also important in german practice that the tenant retains the freedom to expand the practice in terms of personnel. The german tenant should therefore stipulate that he may take on additional partners or cooperation partners (joint practice). In particular, he should reserve the right to sublet the practice. The landlord can be protected here by the fact that only demonstrably solvent subtenants may enter under german law.

In german practice, the tenant should reserve the right to withdraw from the lease agreement if an adequate subtenant is found. This is fundamentally important for a legally secure sale of the practice under german law. After all, it is certainly attractive for a potential takeover bidder for a practice to read that he can enter into the existing practice lease agreement on unchanged terms. In Germany, a provision should also be included in the event of the death of the sole remaining practitioner, according to which his or her heirs may either terminate the lease or provide another doctor as a successor tenant.

Special termination rights for the german tenant

The tenant in Germany should reserve an extraordinary right of termination in the event that he/she demonstrably (e.g. pension notice from the pension fund on the onset of occupational disability or reduction in earning capacity; official medical certificate on the onset of occupational disability; official notice on a reduction in earning capacity (MdE) of 50%) becomes occupationally disabled. In the case of pharmacies, the existence of the lease agreement must always be linked to the permission to operate a pharmacy in Germany.
It is also conceivable that he is entitled to terminate the lease if, for example, he has been incapacitated for more than 6 months. A special right of termination should also be agreed as a matter of urgency in the event that the tenant's license is withdrawn by the Association of Statutory Health Insurance Physicians or the Association of Statutory Health Insurance Dentists in Germany.

Finally: the "perennial issue" of german commercial tenancy law: defects in written form

German commercial leases with a term longer than 1 year must be concluded in writing (Section 550 of the German Civil Code (BGB)). In simple terms, written form according to german law means that a rental agreement contains all essential contractual contents (person of the landlord, person of the tenant, rental object, rental period, rental amount) and that the rental agreement is signed by both parties. A rental agreement that has been concluded by email, for example, does not comply with the written form under german law. All subsequent amendments to a rental agreement (addenda) must also always and without exception be recorded in writing. If the legal written form is not complied with, the lease agreement shall be deemed to have been concluded for an indefinite period. As a result, either of the two parties to the contract in Germany may terminate the contract with the ordinary notice period of six months. The landlord in Germany could therefore "kick out" the health care professional by ordinary notice and rent the property to a better-paying tenant.

Precaution: Any changes to the lease must be set forth in a written addendum according to german law. Verbal agreements or email correspondence will not suffice in german practice!

A german landlord could therefore get out of a lease that has become unwelcome long before the fixed lease period expires. This would be a disaster for the practice owner. On the other hand, it is not said that a landlord will not terminate a tenant ahead of time, citing formal defects, thereby making room for a more lucrative tenant.

In german practice, landlords and tenants tried to minimize this risk for years by using so called cure clauses. The content of these clauses is that both parties are obligated not to terminate the lease agreement with reference to possible breaches of form under german law. Whether and to what extent such clauses are effective has not yet been definitively decided in Germany. In 2014, the German Federal Court of Justice (BGH) ruled that such a cure clause may be invalid, depending on how it is worded.

Precaution: In the event that, despite all efforts, the written form is not observed in german practice, a so-called cure clause should be included in the original lease - it can help to "keep the lease alive". However, the countless healing clauses from current rental agreements are likely to be invalid against the background of the new case law. Tenants in Germany should not fall back on older sample contracts or templates under any circumstances, but should seek legal advice on the subject of healing clauses.

Finally, you will find a checklist that can serve as a thought-provoking guide for any practice lease agreement in german practice:

  1. Conclusion of contract: In the case of professional practice associations, care should be taken to ensure that the GbR and not an individual physician signs the lease agreement.
  2. Suitability and use of the practice premises: Not every rental space is suitable for the special requirements of healthcare professionals in Germany. Here, a precise description of the activity in the lease is important.    
  3. Protection from competition: Those who do not want competitors in their neighborhood must ensure this with a corresponding clause in the lease.
  4. Structural changes: Because future conversion measures for modernization and expansion of the practice are often not foreseeable when the lease is concluded under german law, it is advisable to obtain consent for certain conversions already in the lease.
  5. Practice sign: Particularly in the medical professions, the practice sign still plays an important role in attracting new patients. Size, design, lighting, etc. should be included in the practice lease agreement.
  6. Practice expansion: Because personnel constellations often change in the case of freelancers, the lease agreement should give the tenant flexibility in this regard and also not place too high demands on subletting.
  7. Special termination rights under german law: In the event of professional disability or loss of license, a contractual special termination right can be of great importance for the physician as tenant.
  8. Death provision: A provision that gives the heirs the right to either terminate the lease or provide another health care professional as a successor tenant in the event of the tenant's death is in the best interests of the tenant.
  9. Lack of written form under german law: For commercial leases of 1 year or more, the written form is mandatory. This applies both to the conclusion of the contract and to all subsequent amendments. Agreements e.g. by email are not sufficient.

Consulting background in Germany

ROSE & PARTNER's clients include many freelancers such as doctors throughout Germany, especially at our offices in Hamburg, Berlin, Cologne, Frankfurt and Munich. These have long had the same need for advice on german commercial law as business people. Our lawyers and tax advisors advise and represent members of the medical professions on all legal and tax issues in Germany - from practice lease agreements and ongoing tax returns to shareholder disputes in joint practices.  

Special legal information for physicians and health care professionals in Germany can be found here:

General information on german commercial tenancy law can be found here:

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