German tenancy law

Real estate and commercial law firm with specialized lawyers in Germany

Commercial leases in Germany are long-term business relationships. Their existence and structure are often of existential importance for both landlord and tenant. Over the years, certain industry-specific standards have emerged in german practice, so that a good commercial lease agreement should always reflect the specifics of the tenant's industry.

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Legal services in the area of german commercial tenancy law

As a commercial law firm in Germany, we assist landlords and tenants in all matters relating to commercial tenancy law - from drafting the commercial tenancy agreement to representation in court in the event of a dispute over the tenancy. The services of our lawyers for german commercial tenancy law in Berlin, Hamburg, Munich, Frankfurt and Cologne include:

  1. Letter of intent under german tenancy law
  2. Drafting and reviewing commercial leases, including eviction agreements, taking into account the specifics of the sector (office, retail, retail parks, shopping centers, pharmacies, medical and dental practices)
  3. Regulations on the term of the contract as well as option and termination rights as well as competition and product range protection clauses
  4. Agreements on rent adjustments and operating costs Maintenance, repair and cosmetic repairs
  5. Agreement on rental securities
  6. Advice on questions of the legal written form
  7. Execution of a tenancy law due diligence for the purchaser when purchasing real estate in Germany
  8. Advice on tenant easements
  9. Sales tax law issues (option for sales tax)
  10. Representation in and out of court in commercial tenancy law disputes - including brokerage law issues

Overview and special problems concerning commercial tenancy law in german practice

In the following, we would like to give you a brief overview of the area of commercial tenancy law and commercial tenancy agreements under german law. In addition, we will briefly present issues that our attorneys for commercial tenancy law in Berlin, Hamburg, Munich, Frankfurt and Cologne frequently deal with in their practice.

Basics of commercial tenancy law in Germany

The basics of commercial tenancy law can be found in the German Civil Code. In german practice, the protection of the tenant is not as much in focus in commercial tenancy law as in residential tenancy law. In the case of commercial leases, there is greater contractual freedom, which is limited primarily by the law on general terms and conditions. However, german case law is very critical of clauses enforced unilaterally by the landlord. The utilization of the legal freedom for the client is the central task of the lawyer for commercial tenancy law in Germany. In addition to the regulations in the German Civil Code (BGB), special norms such as the Heating Costs Ordinance (Heizkostenverordnung) or the Pharmacy Operations Ordinance (Apothekenbetriebsverordnung) must also be observed in german practice.

Competition protection clause and assortment protection clause in german practice

Commercial leases in Germany often contain so-called competition protection clauses. By means of these clauses, the german landlord undertakes vis-à-vis the tenant not to rent in or near the rented premises to competitors of the tenant or to participate in the tenant's competitors. It is also often the case that the tenant makes a commitment to the landlord not to compete with co-tenants in Germany. Landlords often overlook the fact that the german law already imposes on the landlord the obligation to protect the tenant from competition - i.e. without agreeing to a competition protection clause at all. If the landlord nevertheless rents to a competitor of a tenant, the tenant concerned can take action against this and, among other things, reduce the rent and claim damages under german law. If the landlord wishes to retain the freedom to also rent to competitors of his tenants, he must expressly exclude the obligation to protect against competition in his rental agreements. From the tenant's point of view, it is important to describe the purpose of the lease as precisely as possible in the contract. The more precisely the purpose of the lease is described, the less leeway the landlord has to rent to competitors of the tenant.

There are also so-called assortment protection clauses in german practice; these clauses ensure that in the case of overlapping assortments (for example, cosmetics in a pharmacy and drugstore), it is guaranteed that a certain assortment may only be sold by one of the resident tenants.

We advise landlords and tenants in Germany on the drafting and enforcement of competition and assortment protection clauses in lease agreements.

Written form in german commercial tenancy law

Under german law, commercial leases with a term longer than 1 year must be concluded in writing (Section 550 BGB). In simple terms, written form in german practice 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 concluded by email does not comply with the written form in Germany. Of course, this applies even more to verbal agreements.

In german practice, all subsequent amendments to a rental agreement (addenda) must also always and without exception be recorded in writing. If the statutory written form is not complied with under german law, the lease is deemed to have been concluded for an indefinite period. As a result, either party may terminate the contract with the ordinary notice period of six months.

A tenant in Germany could therefore get out of a lease that has become unwelcome long before the fixed lease period expires. A landlord whose calculations are based on long-term leases may find such a termination difficult. 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 have tried to minimize this risk for years by means of so-called cure clauses. The content of these clauses was that both parties were obligated not to terminate the lease agreement with reference to possible breaches of form under german law. On September 27, 2017, the German Federal Court of Justice (BGH) ruled that such clauses are always invalid. This decision was quite surprising. Tenants and landlords in Germany must therefore pay even more attention to ensuring that all agreements are always set out in writing.

Purchasers of leased properties now also need to take an even closer look as part of their due diligence and purchase agreement negotiations in german practice. Only a small spark of hope remains: the German Federal Court of Justice (BGH) has repeatedly clarified that, in individual cases, a termination based on a lack of written form can be abusive and therefore invalid. This is the case, for example, if the terminating party has benefited for years from an agreement concluded without a written form or if the assertion of the right of termination would be unreasonably harsh for the party terminating the agreement.

There is also german case law to the effect that the landlord cannot invoke a formal defect if the formal defect was apparent when the rental property was acquired and he could have inquired of the seller. Nevertheless, it cannot be overemphasized that landlords and tenants in Germany should not rely on judicial assistance, but should always pursue the observance of the statutory written form with maximum formalism.

It should be noted that a legislative initiative is currently underway (spring 2020), according to which in the future, in principle, only the landlord will be able to invoke deficiencies in the written form under german law.

Another topic of practical relevance in Germany is the termination of commercial and medical practice leases. Any termination, even if it is merely an ordinary termination, should always be well prepared in german practice, too much is at stake financially!

Commercial use of apartments in Germany

Apartments are often not only used for residential purposes under german law. It is not uncommon for tenants in Germany to carry out commercial or freelance activities in the apartment. The question then arises as to whether the landlord's consent is required for this. Among other things, the german case law focuses on the external effect and the impairment of other tenants. A successful overview can be found on the Internet portal

Furthermore, the respective state legislation on the misappropriation of living space must be observed in this context. In times of housing shortage in metropolitan areas, the conversion of residential space into commercial space is subject to official permission under german law in many places.

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