Tenancy law issues for residential and commercial premises
In principle, according to the case law of parts of the Berlin Regional Court, a tenancy can be terminated if the tenant sublets the property rented as living space as a holiday flat without consent or subsequent approval, which is a permit.
In Berlin, we have 5 appeal chambers at the regional court for tenancy law alone. So if you read in the press, for example, that the Berlin Regional Court has decided this, this is only one of 5 appeal chambers. The appeal chambers are responsible for the assigned districts of Berlin. In this respect, it also depends on the district in which the flat is located. For example, the Chamber of Appeal for the Tempelhof Kreuzberg district assumes that, in any case, the tenant must be given a warning before a notice of termination is issued in such cases.
The court of appeal responsible for the district of Neukölln also considered a termination to be justified if the tenant sublet to various third parties on an almost commercial basis. According to the statutory regulations, a warning is generally required for termination without notice. This is not the case for ordinary termination. However, even in the case of ordinary termination, there may be a lack of the necessary weight for a breach of duty without a warning. You should therefore definitely consider issuing a warning. However, if the tenant then complies with the warning, termination is no longer possible. In this respect, the administrator or landlord should consider whether to issue a notice of termination immediately. This is because a notice of termination regularly also constitutes a warning. A notice of termination without notice, or alternatively an ordinary notice of termination due to a precise description of the breach of duty, would therefore be sent to the tenant with conclusive evidence and, as a precautionary measure, request the tenant to terminate the transfer of use to third parties immediately, or alternatively within a period of one month.
In the event that this period expires without result, i.e. if the tenant does not fulfil the demand, you would threaten to terminate the tenancy again, in the alternative. If the termination is then not complied with, i.e. the tenant does not cease subletting within a set period, the tenancy would be terminated again as a precautionary measure. In the case of behaviour-related terminations, it is extremely important to establish the breach of duty with conclusive evidence. The landlord has the burden of proof for the breach of duty.
Statements from tenants of the property alone are not sufficient, as they are unlikely to be able to confirm the subletting. In this case, you should consider having someone rent the flat on relevant platforms. The involvement of a detective agency can also be very useful. Such behaviour-related terminations should be examined by a lawyer in order to work out the previous case law of the court of appeal responsible for the district.
Subletting is a triangular relationship. On the one hand, there is a tenancy between the landlord and the main tenant. On the other hand, there is a tenancy between the main tenant and the subtenant. The subtenant pays the rent to his landlord, who is the main tenant.
There is a decision on this from the division of the regional court responsible for the Mitte district, among others. In this case, it is reported that the changing guests of a holiday flat have celebrated parties. There are also cases in which guests appear in the stairwell drunk from a tour of Berlin, for example, and then make noise. This then leads to an impairment of use of the tenants' flats affected. Even if the landlord himself does not maintain a flat there that is rented out to holiday guests, i.e. if he is not responsible for the noise, his tenant can claim a reduction in rent. This is because a reduction is not dependent on the landlord being at fault. However, if we were representing the landlord, we would argue that it is subjectively impossible for the landlord to remedy this defect in accordance with Section 275 BGB and that there is therefore no entitlement to a reduction. In the case decided by the regional court, however, the landlord himself had let the flat to someone who then sublet it to holiday guests. The landlord was therefore able to intervene here.
When letting a flat or house for residential purposes, you should create a very good contractual basis, just as you would when letting a commercial property.
Attention must be paid to the quality of the respective tenancy agreement. Among other things, a lawyer can advise on whether there is a good model tenancy agreement for renting a flat or even a house. A good model tenancy agreement should also take into account the case law of the Berlin Regional Court. Berlin is also the tenant capital and knowledge of the special features of the case law of the chambers responsible for different districts in Berlin at the Berlin Regional Court can be helpful. There are also model contracts for renting out a house with a garden, where there is even more to consider than with a residential lease. In this case, it is helpful to have a lawyer supplement a contract. As a rule, it is no longer possible to amend the tenancy agreement at a later date because the tenant will refuse to give their consent. It is therefore all the more important to seek advice before concluding a tenancy agreement.
It is particularly important to have a detailed report on the furnishings and the rented property countersigned by the tenant after a prior inspection when the tenancy agreement is concluded, as otherwise the tenant could possibly contest the tenancy agreement and have it signed as part of the tenancy agreement. This effort can pay off if the tenancy ends after many years and a dispute arises as to whether or not damage was already present at the beginning of the tenancy. As the so-called rent cap applies in Berlin, according to which the comparative rent may not exceed 10 %, the question arises as to whether the simple application of a rent index can be averted by special features in the letting of the flat.
This raises the question of whether a room in a larger flat can be let commercially due to the boom in home offices. There are many special features to consider here, such as legal regulations on misappropriation, the question of whether such a letting is possible at all based on the building permit, whether the declaration of division of condominiums permits such use, etc. Legal advice should definitely be sought here. Legal advice should definitely be sought here. Another important point is whether, for example, a graduated rent or, in view of the current inflation, an index-linked rent is concluded, at least for a limited period. The increases in rent from rent index to rent index are extremely low.
Commercial premises should not be let without seeking professional advice. Often, due to a lack of knowledge of the possibilities but also the risks, an unfavourable rental agreement is concluded for the landlord. There are many conceivable options here, so buying off the peg makes neither legal nor economic sense. Instead, you should turn to a law firm that not only practises residential tenancy law but also commercial tenancy law and has extensive experience in drafting tenancy agreements. We have been assisting our clients for decades with the drafting of commercial leases of varying scope.
According to Section 573 (2) No. 2 of the German Civil Code (BGB), a tenancy can only be terminated for personal use of residential premises, i.e. not commercial premises.
Another question is whether you can terminate a residential lease if you have a commercial need for the premises. In the past, this type of business-related termination has been used, for example, for use by an au pair or for the landlord's wife's law firm. A landlord's caretaker, for example, could also be eligible for such a business-related termination of a residential lease under very strict conditions.
As I said, this is not a termination for personal use, so the so-called blocking period of 10 years, for example, does not apply. By blocking period, I mean that there is a tenancy with a residential tenant and then later condominium ownership of this flat is established and this is sold. In such a constellation, you can only terminate the tenancy for personal use after 10 years. The aforementioned cases of termination for business reasons were still subject to the more liberal case law of the Federal Court of Justice. The case law has been adapted and tightened so that it is essential that the desired termination is scrutinised in legal terms. Such a termination is anything but a foregone conclusion.
In a residential tenancy, the legal right to partial subletting cannot be excluded. This is stated in § 553 Para. 3 BGB. However, the tenant is not entitled to sublet the entire flat. This is stated in § 540 BGB. The landlord's permission is required here.
In a residential tenancy, there are legal options for the landlord to increase the rent. This does not exist in commercial tenancy law. This is why it is important to agree the rent increase or options for increasing the rent in the commercial lease. The landlord is relatively free here. Nevertheless, there are also legal restrictions that can lead to the ineffectiveness of the possibility of a rent increase in a commercial lease. It is therefore essential to seek legal advice here too.
Both commercial tenants and residential tenants have a statutory right to reduce the rent.
The tenant must state their justified interest in partial subletting in the application. He must state that this interest only arose after the tenancy agreement was concluded.
If it is a matter of economic interests, he must probably provide details of the economic circumstances. In my opinion, however, it is sufficient for the residential tenant to state that he has to move to another city for a year because of a temporary job, for example, and therefore wants to save costs because of the double housekeeping.
In the case of non-economic interests, these must also be justified. According to case law, the legitimate interests for subletting are defined very broadly. The future subtenant must be named so that the landlord can check whether there are reasons in the tenant's person that prevent permission from being granted. According to an older decision, the tenant is also obliged to provide information about the professional or other activities of the third party. Here in Berlin, however, the prevailing opinion is likely to be that such information is not required because the subtenant does not pay the rent to the landlord, but to the main tenant.
Under commercial tenancy law, a tenancy agreement that is not limited in time can be terminated on the third working day of a quarter to the end of the next quarter in accordance with the statutory provisions, for example on 2 January to 30 June.
In the case of a residential tenancy, the landlord must have a legitimate interest in terminating the tenancy. These are, for example, personal use and economic utilisation. The landlord can also terminate the tenancy due to breaches of duty by the tenant, e.g. due to late payment. Neither in commercial tenancy law nor in residential tenancy law can the landlord simply throw the tenant out of the flat after a notice of termination and expiry of the notice period.
If the tenant does not move out after the notice period has expired, you have to sue them for surrender and eviction. And if you have a judgement, you must commission a bailiff to carry out the eviction of the flat or commercial premises.
The rent freeze has been extended until 2025 and there are endeavours to extend it beyond this date.
In principle, only the comparative rent plus 10 % can be effectively agreed when the tenancy agreement is concluded. The tenant can try to reclaim anything above this from the landlord or have the rent reduced. There are exceptions to the rent cap.
The rent freeze does not apply to residential space that is used or rented out for the first time after 1 October 2014, nor does it apply to the first letting after extensive modernisation. However, if the tenant was informed of the previous rent in writing when the tenancy agreement was concluded or later with a delay of two years, you can continue to demand this previous rent. However, the previous rent itself must not violate the rent freeze.
In the vast majority of cases, the comparative rent is determined using the rent index. At the moment, it is unclear whether the 2021 rent index of Berlin is effective and can be applied at all. We will have to wait and see how the case law develops.
Firstly, it can be said that in a residential tenancy, you are only allowed to live there. It is therefore not permitted to run a business in the flat, because otherwise it would be a commercial tenancy. If the tenant wants to run a business in the flat, this would be a breach of duty without the landlord's consent, which can also lead to termination of the tenancy after a warning at the latest.
In the case of a commercial lease, there is no legal regulation on rent increases, just as there is no legal regulation on rent increases when renting a garage. It is therefore necessary to agree with the tenant when the tenancy agreement is concluded when and how the rent is to be increased.
The statutory cancellation period is calculated as follows, at the latest on the third working day of the beginning of a quarter to the end of the next quarter. For example, on 2 January to 30 June.
There is a judgement on this question from the Federal Court of Justice from April 2022.
Five men aged 25-34 had concluded a tenancy agreement there. An addendum was concluded twice, with which tenants were released from the tenancy and new tenants were added to the tenancy.
The tenants then again requested permission to replace 4 tenants. The local court nevertheless upheld the action. The Berlin Regional Court dismissed the action on appeal. The tenants, on the other hand, dismissed the action. The BGH emphasises that there is no schematic solution, so an individual consideration is required. Tenants can be replaced if a civil law partnership has become the tenant. However, this was not assumed by the Federal Court of Justice in the present case.
There were also no contractual provisions, meaning that the declarations of intent were examined when the contract was concluded or when the two addenda were issued. Although tenants have already been replaced twice by agreement with the landlord, according to the decision of the Federal Court of Justice, this does not result in a claim for a future replacement of tenants. An interpretation of the original contract also shows that there is no such entitlement to the replacement of tenants.
There was no evidence that the landlord had consciously decided that a future change of tenants must be possible. The BGH sees the risk more with the tenants, who can ensure a clear regulation in the tenancy agreement. The tenants are also not without rights because there is a legal entitlement to partial subletting. The rights of landlords in such constellations have been strengthened by the Federal Court of Justice. Nevertheless, it depends on the individual case, so that a thorough examination must be carried out, in particular of the statements made by both parties when the tenancy agreement was concluded, especially in the run-up to the conclusion of the agreement. The chances for the landlord in a specific case should be determined by a lawyer based on the case law of the Federal Court of Justice.
The landlord may retain the commercial rental deposit if a security event has occurred. As there is no statutory regulation as in residential tenancy law, it must first be checked in the commercial tenancy agreement whether there are any restrictions on the retention and realisation of the security deposit. In principle, all claims of the landlord against the tenant arising from the tenancy are secured by the security deposit. It is disputed whether the landlord may realise the security deposit during the tenancy or only after the legal termination of the tenancy, particularly in the case of disputed claims. (Must be checked with Guling)
In commercial tenancy law, there are no legal restrictions on how landlords can secure their claim to rent. In particular, there is no statutory restriction to three net cold rents. However, there is also case law in commercial tenancy law regarding overcollateralisation, meaning that the tenant could reclaim part of the deposit. It is not possible to predict when this overcollateralisation exists due to the different case law. (Guhling) If the property is rented to a limited liability company, the managing director could be included as a tenant, for example, so that the company and the tenant are jointly and severally liable for claims arising from the tenancy. Guarantees are also possible. There are also, for example, letters of comfort (Guhling)
The landlord can authorise a representative to terminate tenancy agreements. It is important that the representative receives an original power of attorney from the landlord for the cancellation and that the original power of attorney is attached to the notice of cancellation as evidence and delivered. If notice is given without an original power of attorney, the tenant can reject the notice immediately in accordance with Section 174 of the German Civil Code (BGB), meaning that notice must be given again. However, the reason for termination may no longer exist when the notice of termination is issued again, for example if the default in payment has been fully settled.
There are many differences between commercial tenancy law and residential tenancy law. The landlord is much freer to organise a tenancy, but he must also agree his rights when concluding the tenancy agreement. For example, there is no statutory right to a rent increase for commercial leases, meaning that the landlord is left empty-handed in the absence of an agreement on a rent increase. Many statutory provisions from residential tenancy law do not apply to commercial tenancy law. The regulations that apply can be found in Section 578 (2) BGB for commercial leases, for example. In my opinion, the drafting of a commercial tenancy agreement should be in the hands of a lawyer who also specialises in commercial tenancy law.
