German law differentiates between leases of commercial and/or residential premises (Mietvertrag) and leasehold agreements (Pachtvertrag). Leases of commercial or residential premises are more common than leasehold agreements. While a lease of commercial and/or residential premises entitles the tenant to use the leased property, the beneficiary of a leasehold agreement is entitled both to use the leased property and to benefit from it, for example, in the case of a lease of a farm that includes all farm machinery and the right to harvest crops etc.
German law also recognises hereditary building rights (Erbbaurechten) entitling the holder to use the property for up to 99 years and to erect buildings on the land. However, hereditary building rights are closer in nature to freehold ownership than to leasehold.
Last modified 13 Mar 2025
There is no minimum or maximum period for general leases of commercial premises and they may be entered into for periods of more than 30 years. However, long-term arrangements like this may be terminated by either party after 30 years.
In commercial lease agreements, the tenant is often granted an option right. This allows the tenant to unilaterally extend the lease for a fixed period of time by exercising the option right.
Hereditary building rights (Erbbaurechten) that entitle the holder to use the leased property for up to 99 years and to erect buildings on the land can be created for longer periods of time, typically 99 years.
Last modified 13 Mar 2025
The legal framework is the same for all leases. They are governed by the provisions of the civil code. However, it is important to note that in the case of commercial leases (including leases of industrial property, retail property, office buildings and hotels) the parties are free to contract as they wish to a much greater extent than in the case of leases of residential premises.
The courts may control the terms of a lease under the general provisions of the law dealing with standard terms and may declare certain onerous contractual terms void. Typically, they do this in order to grant greater protection to tenants in residential leases. This is not as common in relation to commercial agreements. The principle behind this is that commercial negotiation has or should have taken place.
Furthermore, the Fourth Bureaucracy Relief Act (Viertes Bürokratieentlastungsgesetz, BEG IV) provides for far-reaching changes to the formal requirements for commercial leases. Until now, commercial leases with a term of more than one year had to be concluded in writing in order to avoid premature termination. The new law now abolishes the requirement of written form and replaces it with a requirement of text form. This means that a legible declaration on a durable medium, which clearly identifies the declarant, for example by e-mail, as a paper document without a signature or by fax, is sufficient. The new regulation applies to all contracts concluded from 1 January 2025. There is a transitional period for existing contracts, these contracts will be assessed according to the old law until 31 December 2025 and are subject to the written form requirement. To avoid ambiguity under the new law, it should be ensured that each notification and correspondence between the parties makes it clear whether the parties are still in the negotiation stage or whether a final agreement has already been reached.
Last modified 13 Mar 2025
No, the tenant is not entitled to continue to occupy the leased property. However, if the tenant continues to use the leased property in the manner provided for by the lease agreement after the expiry of the term of the lease, the lease continues as an unlimited lease agreement unless one of the parties contests this within two weeks. In the case of the landlord, this time limit dates from when the landlord first becomes aware that the tenant has not vacated the leased property. If the tenant does not leave the property and therefore the lease is extended for an indefinite period in the absence of an objection, the tenant shall of course continue to owe the rent. If an objection is raised in good time after the tenant has continued to occupy the property, the tenant shall owe the landlord reasonable compensation for use for the period of unlawful occupation. The automatic extension of the lease agreement if the tenant does not vacate the lease object can be excluded in the lease agreement. If such a clause exists, the lease agreement does not automatically become an unlimited lease agreement but remains terminated despite the continued occupation.
Last modified 13 Mar 2025
The landlord is entitled to file a claim to recover possession. It may take six months or more to obtain a judgment requiring the tenant to vacate. If the tenant fails to comply with such a judgment, the landlord may be forced to evict the tenant with the help of a bailiff. However, if the landlord files the claim prior to the expiry of the term of the lease, when there is no indication of any risk that the tenant will not move out, he may be obliged to bear the costs of the lawsuit, including the costs of the tenant’s lawyer in cases where the tenant immediately accepts the landlord’s claim. As a consequence, landlords do not usually file claims for repossession before the expiry of the lease unless there is reason to believe that the tenant will not vacate the property on the due date.
Additionally, the landlord has the option to demand a notarial declaration of submission (notarielle Unterwerfungserklärung) from the tenant. This is drawn up the notary and serves to simplify the execution for future enforcement proceedings. This is to ensure that all agreed obligations are adequately met. The notarial declaration of submission allows debts to be enforced without prior court proceedings. In practice, notarial declarations of submission are rarely used.
Last modified 13 Mar 2025
Where the parties have agreed a lease with a fixed term, the landlord can only bring the lease to an end before its expiry if the tenant commits a material breach of the agreement (termination for cause). Grounds for termination include significant rent arrears, neglect of the property, surrender of the leased property to an unauthorized third party or similarly serious breaches of contract. In the case of neglect, surrender of the leased property or other serious breaches, a warning must be issued prior to termination. After termination, the landlord must file a claim to recover possession if the tenant does not vacate the premises. It may take six months or more to obtain a judgment requiring the tenant to vacate. If the tenant fails to comply with such a judgment, the landlord may be forced to evict the tenant with the help of a bailiff.
Last modified 13 Mar 2025
No, neither the government nor any other authority may directly terminate a lease. The property itself may, however, be subject to compulsory purchase. In this case the authority must state whether the lease is to continue or is to be terminated. If the latter, the tenant will be entitled to compensation in accordance with statutory law. However, compulsory purchase does not happen frequently and is governed by strict conditions (a relevant power under statutory law is required and the process can be carried out only in the public interest).
It should also be noted that for properties within a special urban development area (städtebauliches Sondergebiet, eg redevelopment area (Sanierungsgebiet), development area (Entwicklungsgebiet)) , the conclusion and therefore the validity of the lease agreement may depend on the approval by the municipality.
Last modified 13 Mar 2025
Most landlords ask for security equivalent to between two and three net months’ rent, either as a deposit or in the form of a bank guarantee. Parent company guarantees are also common.
Last modified 13 Mar 2025
Leases generally specify that the leased property can only be put to a particular use. The use can only be changed with the consent of both parties. The tenant will also be restricted by planning/zoning law to a use approved by the planning/zoning authority or that is in line with past uses of the property. The building authority can provide information concerning permitted usage.
Last modified 13 Mar 2025
Standard leases require the landlord's prior written consent for alterations. It is often a condition of consent that the tenant restores the property to its original condition at the end of the term of the lease. Alternatively, the parties may agree that the tenant is entitled to leave the alterations in place. Sometimes, the parties agree that the landlord will compensate the tenant for the cost, but such provisions are subject to negotiation.
Last modified 13 Mar 2025
The transfer of the tenant’s interest in a lease requires the landlord’s consent. By law, a tenant is permitted to sublet only with the landlord’s prior consent. Whether the transfer/subletting of part of the leased property is allowed depends on the specific contractual provisions agreed by the parties. The parties can for example include a contractual provision allowing the subletting to companies affiliated to the tenant. As a basic principle, if the landlord denies its consent to subletting, the tenant is allowed to terminate the lease provided the choice of subtenant does not constitute good grounds for the landlord to refuse permission for the subletting.
Last modified 13 Mar 2025
Unless otherwise agreed, the rent payable throughout the lease period does not automatically change. However, most commercial leases lasting 10 years or more contain indexation clauses. In order for these clauses to be valid, the term of the lease can either be fixed for at least 10 years, or the tenant may be entitled to the automatic extension of a shorter fixed-term lease up to a total term of 10 years or more. Indexation clauses in commercial leases with a term of less than 10 years are invalid under statutory law, but remain valid until a court declares the indexation clause to be void.
Turnover related rents are sometimes agreed in leases of retail property and hotels.
In case of indexation clauses, rent review usually takes place if the consumer price index for Germany reaches a certain threshold. Annual rent adjustment is another possibility.
Last modified 13 Mar 2025
Indexation is the method normally applied to rent review, usually with reference to the German Consumer Price Index. A change in rent is normally triggered if the index changes by 10 points or by 10% or more in either direction. Where this is the case, the frequency of rent reviews depends on the rate of change to the Consumer Price Index. Annual rent adjustment is also possible, but in this case there is no 10 points/10% threshold.
Last modified 13 Mar 2025
Generally, rental payments are exempt from VAT. The landlord can waive this exemption if the real estate is leased to an entrepreneur who uses the land for business purposes. This will entitle it to reclaim input VAT. In this case, VAT will be payable at the current rate of 19%.
Last modified 13 Mar 2025
In the event of rent arrears, the landlord has the option to send a default notice to the tenant. However, this is not required by law.
Moreover, it can be in the interest of the parties to discuss the reasons for the rent arrears and, depending on the circumstances, to reach an agreement under which the lease agreement can continue, and the rent arrears are reduced.
If the tenant is in default of payment of the whole rent or a significant portion of the rent for two consecutive payment dates, the landlord also has an extraordinary right of termination for good cause. The tenant can be assumed to be in default for payment of a significant portion of the rent, if the arrear exceeds one month’s rent. This right of termination also applies if the period of rent arrears extends over more than two payment dates, and the tenant is in arrears with the payment of an amount equal to the rent for two months. In this case, the arrears consist of more than two payment dates. The extraordinary termination is invalid if the tenant can offset against claims that came into existence before the notice of termination was received and that cover the whole rent arrears. Furthermore, the extraordinary right of termination is excluded if the landlord is satisfied in full and before the tenant receives the notice of termination. The termination must be declared in writing, stating the reason for the termination.
Additionally, the landlord can file a lawsuit for payment of the outstanding rent. In case that the landlord has demanded a notarial declaration of submission (notarielle Unterwerfungserklärung) from the tenant, direct enforcement can also be carried out with regard to the outstanding rent or an eviction. This is drawn up the notary and serves to simplify the execution for future enforcement proceedings. This is to ensure that all agreed obligations are adequately met. The notarial declaration of submission allows debts to be enforced without prior court proceedings. In practice, notarial declarations of submission are rarely used.
If a rent deposit or another form of rental security has been provided, the landlord may also use the security to satisfy outstanding rent payments.
Furthermore, the landlord is entitled to a landlord’s lien unless this has been excluded in the lease agreement. If the tenant is in arrears with the payment of rent, the landlord can therefore obtain an enforcement order for the handover of the pledged items and obtain satisfaction by liquidating the items.
Last modified 13 Mar 2025
Often the tenant is obliged to pay a deposit, often equal to the sum of three net monthly rental payments.
Last modified 13 Mar 2025
In most cases this depends on the contractual agreement between the parties. According to recent case law, the tenant is only obliged to contribute towards the cost of maintenance and repair of common facilities if the relevant provision in the lease agreement contains a cap of not more than approximately 8-10% of the annual net rent per annum. In such cases, the landlord usually carries out any maintenance or repairs then reclaims the costs from the tenants.
Last modified 13 Mar 2025
According to statutory law, the landlord is responsible for the maintenance and repair of the leased property. However, most leases contain an apportionment of responsibility by which the landlord will be responsible for the structure, external appearance and common areas (Dach und Fach) and the tenant will be responsible for maintaining the interior. According to recent case law, however, the tenant may not be charged all the costs of maintenance and repair of the rented premises, as long as it cannot be ruled out that the defects may have been caused by the previous use of the rented premises. In this case the contractual chargeable amount must be caped to 6-10% of the annual net rent. Recent case law indicates that many German lease agreements contain potentially invalid provisions regarding decorative repairs. Such provisions are usually considered to be general terms and conditions and German case law imposes strict rules on the validity of these. In particular, a provision obliging the tenant to carry out decorative repairs at contractually fixed intervals irrespective of the actual state of the premises is invalid since it places the tenant at an unreasonable disadvantage.
Last modified 13 Mar 2025
Contracts for telecommunication services are usually concluded with each tenant individually. In consequence, several telecommunication agreements may apply to one property. In the case of utilities serving multiple occupiers, contracts are usually concluded by the landlord and the costs are then passed on to the tenants by agreement.
Last modified 13 Mar 2025
Usually, the parties will specify in the lease agreement which party takes out which insurance policy. In most cases, the landlord insures the leased property while the tenant takes out insurance for the objects and furnishings brought in. As the insurance of the leased property is also in the tenant’s interest. the tenant normally reimburses the landlord for the cost for the property insurance or, in the case of a multi-let building, an appropriate proportion of the cost via the service charge.
Building insurance usually covers, as a minimum, damage caused by fire, water supplies (eg overflowing of taps, burst pipes) and hail or storm and other natural hazards. Both terrorism insurance and loss of rent insurance are also available in Germany. In the case of terrorism insurance, the costs can be passed on to the tenant (according to recent case law) if the tenant is – as is usually the case – obliged to bear the cost of building insurance and if there are indications for a risk of terrorist attacks on the insured building. The costs for loss of rent insurance are not normally passed on to the tenants.
Last modified 13 Mar 2025
Can a lease be terminated by any third party, eg the government or a municipal authority? If so, how long does this process take? Is compensation payable and, if so, who pays it?
No, neither the government nor any other authority may directly terminate a lease. The property itself may, however, be subject to compulsory purchase. In this case the authority must state whether the lease is to continue or is to be terminated. If the latter, the tenant will be entitled to compensation in accordance with statutory law. However, compulsory purchase does not happen frequently and is governed by strict conditions (a relevant power under statutory law is required and the process can be carried out only in the public interest).
It should also be noted that for properties within a special urban development area (städtebauliches Sondergebiet, eg redevelopment area (Sanierungsgebiet), development area (Entwicklungsgebiet)) , the conclusion and therefore the validity of the lease agreement may depend on the approval by the municipality.
Last modified 13 Mar 2025