Local court Dachau, judgement of 10/05/2024 - 4 C 240/22
One way to terminate a tenancy is the so-called realisation termination. This is always possible if the owner (landlord) is prevented from making proper commercial use of the property due to the letting of the property.
But where exactly is the threshold at which it can be argued that realisation in the rented state brings significant disadvantages with regard to realisation in the unrented state? This cannot always be determined precisely. In the present case, a court expert opinion was obtained as part of an eviction dispute.
Facts of the Case:
Landlord had let a detached house to a tenant
The plaintiff in this case was the landlord and the defendants were tenants of a detached house. The tenants had rented the detached house with a written rental agreement dated 18 December 2007 from 15 March 2008. The current net rent was EUR 2,110.97 per month.
In a letter from a lawyer dated 24.02.2022, the plaintiff declared the ordinary termination of the tenancy with effect from 30.11.2022 due to economic realisation (so-called termination for realisation).
As he wanted to sell the house, the landlord declared the cancellation of the sale
With the termination notice, the landlord asserted that the existing tenancy prevented him from realising an appropriate economic value for the property. In the event of the sale of the property in dispute, a maximum sale price of 1.3 million euros could be realised if the property was rented out and a sale price of 1.75 million euros if it was not rented out. This means that in the event of the sale of the property in dispute, the plaintiff would have to accept a reduction in proceeds of % 25.71 in relation to the expected proceeds from the sale after the end of the tenancy if the tenancy with the defendants continued.
He cited a loss of more than 20% as the reason for this
Furthermore, the landlord claimed that in the event of the construction of a further detached house on the rear part of the property, which was also rented out, a profit of 400,000.00 euros would be generated and the loss ratio would therefore total 48.57 %. The plaintiff had already made intensive efforts to sell the property. He was also financially dependent on the possible proceeds from the sale of the rental property in unrented condition and the simultaneous realisation of the construction project for the purchase of a property abroad to realise a lifelong dream.
As the tenants had not moved out within the notice period for ordinary termination, the landlord filed an action for eviction at Dachau Local Court. As part of this eviction dispute, the landlord applied for a court expert opinion.
Decision of the Local Court of Dachau:
Local court considered the realisation termination to be justified
The Local Court of Dachau ruled that the landlord had a claim against the tenants for eviction and surrender of the rental property in dispute, as the ordinary termination (notice of termination for realisation) had effectively ended the tenancy.
In the present case, the requirements for termination for realisation pursuant to Section 573 (2) No. 3 BGB were met, as the court was convinced that the plaintiff would be prevented from making appropriate economic use of the property by continuing the tenancy and would suffer considerable disadvantages as a result.
Expert had determined that the loss from letting was significant
In the event of a sale, the tenancy prevents realisation if, as a result of the letting, a sale on commercially reasonable terms is not possible or no interested party can be found for the rented flat. The landlord himself must suffer considerable disadvantages by continuing the tenancy. However, it is not only the landlord's point of view that is relevant here, but the disadvantages suffered by the specific landlord must be weighed up in the light of the social obligation of ownership. On the one hand, it is not sufficient "any" disadvantage to the landlord, while on the other hand it is not necessary for the disadvantage to be so serious that the landlord's existence is jeopardised.
According to the expert's conclusive and comprehensible explanations, the market value of the property in dispute without further development is EUR 1,614,000 in its freehold condition and EUR 1,182,000 in its rented condition.
Value is to be determined here using the capitalised earnings value method and not the asset value method
As part of the oral explanation of the expert opinion, the expert had also convincingly explained that the market value of the rented property was to be determined according to the capitalised earnings value method, whereby the rear part of the property was to be taken into account as garden land, as this could not be used in any other way in the case of a rental. In the case of a freely available property, on the other hand, the market value was to be determined according to the asset value method, whereby the rear part of the property was to be valued as building land, as a buyer in a freely available state could also use the property accordingly.
The reduced proceeds resulted in a significant disadvantage.
The reduced proceeds of EUR 432,000.00 determined by the expert, i.e. approx. 26.77 %, was also to be regarded as significant, as the materiality threshold at which a significant disadvantage within the meaning of Section 573 (2) No. 3 BGB could be said to exist was to be set at a reduced proceeds of 15 % to 20 %. The financial circumstances of the landlord should not normally be taken into account, as the disadvantage - in relation to the specific property - is no less for the wealthy landlord than for the economically weaker landlord.
Under these circumstances, the specific financial circumstances of the plaintiff were not relevant in the present case, especially as he had sufficiently substantiated his desire to sell the property in dispute. In this respect, it was also irrelevant in the present case whether the construction of a further detached house on the property in dispute would result in a further reduction in proceeds.
As a result, the tenants have to vacate the detached house
In the court's opinion, the cancellation of the sale was therefore also effective, as the landlord did not have to accept a loss of more than 20%. The tenants were therefore ordered to vacate and surrender the detached house.
Source: Local court Dachau
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