Higher Regional Court of Düsseldorf, 21.11.2013, Case No.: 10 U 49/13
Pursuant to § 550 of the German Civil Code (BGB), a lease agreement that is concluded for a term of more than one year in non-written form is considered to be concluded for an indefinite period. This provision is intended to protect a subsequent purchaser, as it allows them, in accordance with § 566 BGB, to fully understand the rights and obligations under the lease that will be transferred to them.
In the context of residential leases, this provision has relatively little significance, as fixed-term leases in residential tenancies are only permissible under certain conditions in accordance with § 575 BGB. However, § 550 BGB holds greater importance for commercial leases and land leases, to which it applies via the reference in § 578 BGB.
This provision is particularly relevant in cases where the termination of such a lease is at issue. Fixed-term contracts can only be terminated without notice. A violation of the written form requirement renders the fixed term invalid, meaning the lease is considered to be concluded for an indefinite period, making it subject to regular termination.
In the judgment mentioned above, the Higher Regional Court of Düsseldorf had to decide in the context of an appeal, among other things, whether the written form requirement had been met in a commercial lease agreement.
Background of the Case
The parties disputed the termination date of a fixed-term lease for a commercial property. The plaintiff, the tenant of the property, objected to the defendant’s termination and exercised its contractually agreed option to extend the lease. This raised the question of whether the lease continued and when it would end at the earliest. The Regional Court had already ruled in favor of the plaintiff, leading the defendant to file an appeal.
Decision of the Regional Court
The regional court upheld the plaintiff's claim and ruled that the tenancy agreement could end on 12 May 2016 at the earliest. The defendant had terminated the contract with effect from 12 May 2013, but by exercising the option right on 21 May 2012, the tenancy was extended until 2016. The Regional Court found that the tenancy agreement had been properly concluded and did not contain any formal defects, meaning that a ordinary cancellation by the defendant was inadmissible.
Judgment of the Higher Regional Court of Düsseldorf
The Higher Regional Court of Düsseldorf upheld the decision of the Regional Court. It ruled that the lease was not terminated by the defendant’s termination letter dated May 16, 2012. Rather, the lease was extended by the plaintiff’s timely exercise of the option. The court emphasized that the lease complied with the written form requirement under § 550 BGB, and therefore, termination due to an alleged formal defect was excluded.
Reasoning and Legal Assessment
The court explained that § 550 BGB primarily serves to protect a purchaser of real estate, allowing them to understand the content and duration of a lease. Additionally, the provision serves a clarification and evidentiary function, ensuring that long-term agreements are documented in writing. In this case, the lease was formally valid, even though the signature of the landlord was executed by one person without a representative designation. Since the contract and the surrounding circumstances clearly indicated that the signing individual was representing the landlord, an additional representative notation next to the signature was not required.
The decisive factor was that the contract was sufficiently clear and all essential agreements were recorded in writing. The fact that the contract was entered into on behalf of a group of landlords did not present any formal issues, as the representation was clearly evident from the contract.
Source: Higher Regional Court of Düsseldorf
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