A temporary commercial lease agreement ends when the agreed lease period expires – unless it is extended. Whether this is successful usually depends on deadlines that run long before the end of the contract: an option period, a period for objecting, or the question of whether an extension agreement maintains the legal form.
This article explains the four ways in which a temporary commercial lease agreement can continue: option, renewal clause, renewal agreement and tacit renewal under § 545 BGB. Our article covers general questions regarding the formalities of writing and text. Main article on the written form requirement in commercial tenancy law.
Four ways in which a temporary commercial lease agreement proceeds
| Mechanism | Who needs to take action? | Form | Typical risk |
|---|---|---|---|
| Option to extend | The option holder – usually the tenant – explains the exercise. | Legally, this is not allowed for exercise; the option clause itself must be included in the legally correct contract. A contractually agreed form must be adhered to. | Frist missed; explanation not provided or not delivered to the correct recipient |
| Extension clause | No one. The contract is extended if neither side objects in time or terminates it. | What the contract stipulates applies to the objection. | Missed the objection period |
| Extension agreement (supplement) | Both parties agree on a new term of office. | In the case of a binding agreement of more than one year: written form (§ 578, paragraph 1, item 2, in conjunction with § 550 of the German Civil Code) | Lack of form: The agreement remains in effect, but the fixed term expires; the contract can be terminated at any time. |
| Continuing silence (§ 545 BGB) | The tenant continues to use the property, and neither party declares any opposition within two weeks. | None | The lease agreement continues indefinitely and can be terminated – no new fixed term. |
The option of extending the contract
What an option is
With an option, a party – in practice almost always the tenant – reserves the right to extend the lease term by unilateral declaration. A typical clause reads: „The tenant is entitled to extend the lease term twice by five years each time. The option must be exercised in writing at least six months before the expiration of the respective lease term.“
The option is a discretionary right. If the entitled person exercises it effectively, the existing contract is extended without the landlord having to agree to it. A new contract is not created. The terms of the clause – such as an earliest exercise date, a specific form, or the requirement that the tenant is not in default on payment – must be met.
Option period and access
The option must be exercised within the agreed deadline. The applicable deadline is Access The declaration to the landlord, not the submission thereof. A declaration submitted after the deadline does not extend the contract (OLG Hamburg, decision of 18.08.2022 – 4 W 44/22).
Example: The rental period ends on December 31, 2027. The option must be exercised „no later than six months before the end of the rental period.“ The declaration must therefore be sent to the landlord no later than June 30, 2027. Those who send it by mail at the end of June risk missing the deadline; those who deliver it in a verifiable manner by the beginning of June have a reserve.
If the end of the term falls on a weekend or a public holiday, the declaration should be submitted on the last working day before that. Whether such a calculated term under § 193 BGB is extended to the next working day is not guaranteed; one should not rely on that. If the rental period only begins with the handover of the premises, the contract termination and the option period usually also shift with it.
Form of exercise
The legal form of Section 550 BGB This does not apply to the exercise of the option. The BGH has ruled that the exercise of an extension option is not required in writing, because it is exercising a right that has already been agreed upon (judgment of November 21, 2018 – XII ZR 78/17). In the case decided, the tenant declared the option by computer fax without a signature; the extension also bound the later acquirer of the property.
On the other hand, the form is necessary. Option clause yourself. It must be included in the legally compliant rental agreement or in a legally compliant addendum.
If the contract for the exercise provides for a form – for example „in writing“ or „by registered mail“ – that form must be followed. For a contractually agreed form of writing, see § 10. Section 127, paragraph 2 of the BGB In doubt, a telecommunications transmission may suffice, for example by email, unless the contract states otherwise. According to the case law, a registered letter should generally ensure receipt and is not necessarily a prerequisite for effectiveness. The Dresden Higher Regional Court allowed exercise without signature because the sender could be clearly identified from the letterhead and name (judgment of 22 February 2017 – 5 U 961/16). Whether this is also the case in your own case depends on the interpretation of the clause.
Example of a clear option statement:
„Lease agreement dated 15.03.2022 for the commercial unit Musterstraße 12, ground floor, 50667 Cologne, including addenda No. 1 and 2 – Exercise of the renewal option
By this I exercise the option granted to me under § 4, paragraph 2 of the tenancy agreement and extend the tenancy by five years until December 31, 2032.“
Signed, addressed to the landlord, and with verifiable access – by courier with delivery record, drop-off notice, or hand-over against receipt confirmation. An additional agreed form will be followed accordingly.
The right recipient
- After a sale Upon the transfer of ownership, the acquirer enters into the lease agreement (§ 566 BGB), including the option. From then on, the option is to be exercised against the acquirer. When an acquirer is still bound even if the seller was not the landlord, our contribution to the topic shows: Obligation of the acquirer in the case of a different seller (OLG Munich).
- In the case of forced administration The option to exercise the property against the enforcement administrator is available to the property owner (BGH, XII ZR 78/17).
- With several landlords The explanation must be sent to all landlords or to a representative authorized to receive it. Simply mentioning all names in the letter is not sufficient if the letter reaches only one of them.
- House management companies and asset managers They are not automatically entitled to receive the notice. In case of doubt, the notice is sent to the landlord himself; the management receives a copy.
- For several tenants The option must be exercised in principle for all tenants. This can be done by all tenants themselves or by a duly authorized representative. The declaration must clearly indicate which tenants are being addressed.
The rent after exercising the option
Exercising the option does not automatically increase the rent. The existing terms of the contract remain in effect – including an index or fixed-term rental agreement, insofar as it extends beyond the original term. Some contracts provide for a separate adjustment for the option period. Clauses that stipulate that the rent is to be renegotiated upon exercising the option often lead to disputes if it remains unclear what applies without agreement. For security provisions, see our article on Index rental prices in the commercial sector.
The extension clause
An extension clause automatically extends the contract for a certain period of time if neither party objects or terminates within a specified timeframe. Therefore, anyone who does not want to extend must take action. Unlike with the option, here each party can prevent the extension through timely objection.
If a contract includes an extension clause and an option, the interpretation of how both work together is crucial. A landlord’s objection to the automatic extension does not necessarily eliminate the tenant’s option. The Dresden Higher Regional Court has ruled that in such a situation, the tenant can regularly prevent the contract from expiring by exercising his option in a timely manner (judgment of 15 August 2018 – 5 U 539/18).
Option missed
Once the option period has expired, the tenant can no longer unilaterally extend the contract on a regular basis. A continuation then generally requires agreement with the landlord – unless the contract is extended in another way: through an extension clause that intervenes independently and no one has objected to it in time (see The Extension Clause), or by tacit continuation under § 545 BGB, if this is not excluded (see Silent Continuation).
If the landlord agrees to a late exercise, it no longer constitutes an option to exercise, but rather a Agreement on the continuation of the contract. If she establishes a binding relationship lasting more than a year, she must maintain the legal form. In the case of the Hamburg Higher Regional Court, the confirmation under the law in effect at the time did not constitute written form; the contract therefore was deemed concluded for an indefinite period and was subject to regular termination (4 W 44/22).
Today, the text form of such an agreement is sufficient, even via email. What matters is not the medium but the completeness: the statements from both parties must indicate which contract will continue under what conditions and by when. A mere „agreed“ to an unclear request often leaves these points open.
In a special case, the Dresden Higher Regional Court held a landlord in good faith liable for a late performance that he himself had signed (5 U 961/16). The circumstances of the individual case played a significant role in this; as a general rule, the decision is not applicable.
Extension by agreement
When the legal form applies
According to § 550 of the German Civil Code, a tenancy agreement that is not concluded in the legal form for a period longer than one year shall be for an indefinite period. For commercial premises, the addition of the following provisions has been effective since the date of entry into force: Section 578, paragraph 1, item 2 of the German Civil Code through the Fourth Bureaucratic Relief Act, in text form. The wording of § 550 of the German Civil Code itself remains unchanged.
Two types of agreements are distinguished here. The formal requirement only applies to agreements that bind the parties for more than a year. A breach does not invalidate the extension: the agreement remains in effect, but the fixed term is omitted, and the contract can be terminated properly. cancelled become.
Which form applies to which contract?
- Contracts from 01.01.2025: Text form.
- Old contracts that have been changed since January 1, 2025: Textual form from the date of the amendment agreement (Art. 229 § 70 EGBGB).
- Existing contracts that remain unchanged: The old law applied until 01.01.2026; since 02.01.2026, the text form also applies to them.
An earlier written form defect loses its significance only to the extent that the text form that is currently authoritative is preserved. If there is a settlement that is not even documented in text form – for example, an orally agreed extension –, the defect persists.
What an extension bill should contain
Textual form means a readable explanation on a permanent data carrier that allows the explainers to recognize it (Section 126b BGB). A clearly documented addendum avoids disputes over whether and what content an extension was agreed upon. It should identify the parties, the rental property, the main contract, and all previous addendums, specify the new term exactly, and state that the remaining provisions remain unchanged or that they are subject to change.
If the acceptance comes too late
If the tenant signs an extension agreement only after the acceptance period has expired, his acceptance under § 150, paragraph 1, BGB constitutes a new offer. A lack of form does not necessarily follow from this. The BGH has ruled that the form of § 550 BGB is preserved if a document signed by both parties fully reproduces the contractual terms, even if the contract is only later concluded through decisive conduct (judgment of 24.02.2010 – XII ZR 120/06; judgment of 17.06.2015 – XII ZR 98/13).
These decisions were made in the former written form. Whether the idea is transferred to the written form has not yet been decided by the BGH.
Contractual written form clauses
Many rental agreements still require written form for changes. For such a contractual form applies:
- Starting point: If a contractually agreed form is not observed, the declaration under § 125 S. 2 BGB nullified in the event of doubt.
- Design: What „in writing“ means in the contract must be interpreted in accordance with § 127 of the German Civil Code. In case of doubt, a telecommunication transmission is sufficient.
- Formual clauses: If the written form clause is included in the general terms and conditions, an individual agreement reached orally or by conduct that is decisive later in accordance with § 305b BGB takes precedence – even in the case of a so-called double written form clause (BGH, decision of 25.01.2017 – XII ZR 69/16). Otherwise, an individual agreement negotiated between merchants may prevail over the written form clause. However, this does not mean that the statutory text form is guaranteed. A verbal change to the essential terms of a contract – for example the duration or the rent – can therefore still endanger the fixed duration: The agreement remains valid, but the contract can be terminated in accordance with § 550 BGB.
- No automatic reason for termination: A breach of a purely contractual term of form does not automatically lead to the contract being deemed indefinite under § 550 BGB; this legal consequence is linked to the statutory form. It is not clear, however, whether a clause that, following the reform, is intended to take on the function of the former statutory form of form can trigger a comparable legal consequence.
The BGH declared written form remedies clauses, whereby the parties undertake not to claim a defect in form and to remedy it, to be invalid (judgment of 27 September 2017 – XII ZR 114/16).
Continuing silence pursuant to § 545 BGB
If the tenant continues to use the property after the end of the rental period, the lease will be extended for an indefinite period unless one of the parties declares their opposition within two weeks to the other party (Section 545 of the German Civil Code). The deadline begins for the tenant with the continuation of use, for the landlord with the date on which he becomes aware of it.
The result is not a new fixed-term tenancy, but an indefinite lease. It can be terminated with the agreed term or, if no agreement is reached, with the statutory period set out in § 580a, paragraph 2 of the German Civil Code (BGB). In commercial tenancy agreements, § 545 BGB is often excluded. More about deadlines and the termination form in our guide to Termination of the Commercial Lease Agreement.
Checklist before the end of the rental period
- Determining the end of a contract: When does the fixed-term rental period end? Has the start date of the lease been postponed due to a later handover?
- Recognizing the mechanism: Option, extension clause, both – and is § 545 BGB excluded?
- Check the option terms: Time limit, earliest possible date, agreed form, other requirements.
- Set the access day: By when must the declaration be submitted to the landlord? If the day falls on a weekend or a public holiday, choose the last working day before that.
- Receiver clarifies: Who is the landlord today – after a sale, inheritance or in the event of forced administration? Who is entitled to receive the rent?
- Submit a statement and secure access: Clear, signed statement; keep a record of the delivery.
- Rental during the option period: Is an adjustment, index or instalment scheme being implemented?
Our guide provides an overview of the drafting of commercial lease agreements. Guide to commercial lease agreements. Anyone who signs a new contract should have the renewal arrangements checked before signing – see Have a commercial lease checked.
Frequently asked questions
Does the landlord have to agree to the exercise of an option?
No. The option is a discretionary right. If exercised effectively and in a timely manner, the contract will be extended without the consent of the landlord.
What happens if I miss the option period?
The option is regularly forfeited. A continuation generally requires an agreement with the landlord; if this binds the parties for more than a year, it must maintain the legal text form. However, the contract can also be extended through an independently operative extension clause or by tacit continuation pursuant to Section 545 of the German Civil Code (BGB), provided that this is not excluded.
Is an email sufficient for an extension agreement?
Yes, for the legal form, provided that the statements of both parties contain all the essential points. If the contract requires a stricter form for changes, this must also be checked in addition.
To whom do I exercise the option after a sale?
After the transfer of ownership to the buyer, who entered into the lease agreement pursuant to § 566 of the German Civil Code (BGB). In the case of forced administration against the forced administrator.
Will the rent increase if I exercise the option?
Not due to the exercise itself. Existing adjustment, index or instalment regulations however continue to apply, insofar as they also apply to the extended rental period.
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Important Note: The content of this article has been prepared to the best of our knowledge and belief. However, due to the complexity and constant evolution of the subject matter, we must exclude liability and warranty. This article serves general information purposes and does not replace legal advice in individual cases. Option clauses and renewal arrangements are formulated very differently; please check your contract before a deadline expires. Although we have carefully prepared it, we cannot guarantee its completeness or up-to-dateness. Please contact us for a non-binding consultation at 0221 – 80187670 or write to us at info@mth-partner.de.
