Court of Appeal Munich, April 7, 2016, Case No.: 23 U 3162/15
An important and frequently relevant regulation in commercial tenancy law is Section 550 of the German Civil Code (BGB), which requires the observance of the written form for tenancy agreements. Section 550 BGB reads:
„If the lease is not concluded in written form for a period exceeding one year, it is deemed to be for an indefinite period. However, termination is permissible at the earliest after the expiry of one year from the transfer of the leased premises.“
If the written form is not maintained, this leads to the early termination of the contract. Although the initial consequence of the lack of written form is that the lease remains valid indefinitely, it can be terminated by either party after one year with a notice period of almost six months to the end of the quarter.
This can have unpleasant consequences for the tenant, who, having invested in the long-term occupation of the rental space, may face existential threats.
Compliance with the written form must therefore include all necessary content of the tenancy agreement:
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- Parties to the lease
- Precise description of the rental property
- Amount of rent
- Duration of the contract
- Purpose of the lease
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The requirement of written form also applies to all changes to the contract that are intended to have an effect lasting longer than one year. According to prevailing opinion, any subsequent agreement must be firmly attached to at least one copy of the original lease contract or contain all essential provisions of the lease and refer to the original document.
In the case discussed here, the landlord in a commercial tenancy relationship terminated the lease contract citing the lack of a written agreement on an extension option.
Facts of the tenancy relationship
The plaintiff was the owner of a commercial property that the defendant rented from January 15, 2014. The lease agreement, signed on November 30, 2013, included the rental of a shop space, storage rooms, and parking spaces in the yard. It was an open-ended lease with a handwritten clause granting the tenant a three-month notice period.
Additionally, on February 1, 2014, a supplementary lease agreement was signed, defining the tenant’s advertising spaces and media. Due to exceeding the advertising specifications, the tenant received warnings from the plaintiff. On July 10, 2014, the plaintiff properly terminated the tenancy as of December 31, 2014. Despite this termination, the defendant did not vacate the premises, which led to the lawsuit.
Positions of the parties in the dispute
The defendant claimed that the lease was only agreed upon under the condition of a long-term contract for at least 25 years, which the plaintiff allegedly confirmed in a subsequent conversation. However, the plaintiff denied that such a long-term agreement had been reached, neither in the lease contract nor in prior discussions.
The Regional Court initially dismissed the lawsuit, assuming that the plaintiff had verbally waived the right to terminate for five years after the tenant’s move-in. The court found the double written form clause of the lease contract to be invalid, as it did not meet the requirements of Section 307 BGB (German Civil Code).
Decision of the Court of Appeal Munich
The Court of Appeal followed the plaintiff’s appeal and ruled that she was entitled to a claim for eviction and return of the commercial premises under Section 546 (1) BGB. The lease was considered open-ended, and the plaintiff had validly terminated the lease with the notice letter dated July 10, 2014. Accordingly, the termination became effective under Section 580a (2) BGB on March 31, 2015. The defendant had been obliged to vacate the premises since April 1, 2015.
The defendant could not provide evidence that the plaintiff had declared a waiver of the right to terminate. Neither the written lease agreement nor the supplementary agreement dated February 1, 2014, contained such a waiver. At no point had the plaintiff waived her right to terminate the lease.
Invalidity of the verbal waiver of termination
The Court of Appeal clarified that even if the plaintiff had verbally agreed to waive the right to terminate for five years, such an agreement would have been invalid due to the requirement of written form under Sections 550 Sentence 1, 126 BGB. Since a long-term exclusion of termination constitutes a substantial contractual element, compliance with the written form would have been mandatory. The invalidation of the double written form clause, as declared by the Regional Court, did not release the defendant from the obligation to provide written evidence of such a waiver.
In conclusion, the Court of Appeal ruled in favor of the plaintiff and granted her the claim for the eviction and return of the rental spaces.
Source: Court of Appeal Munich
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