Termination of lease by “utilization notice”

As long as tenants comply with their obligations in the lease agreement and pay their rent on time, they hardly have to worry about termination. For this to happen, a special situation must exist. This includes, for example, the so-called “utilization notice” by the landlord. What is it all about and what do you have to bear in mind?

What is a notice of utilization?

The landlord can give notice of utilization if renting out the property is no longer economically viable. According to the German Civil Code, such a case exists “[…] if the landlord would be prevented from making reasonable economic use of the property by continuing the tenancy and would thereby suffer considerable disadvantages […]”.

However, various requirements must be met for this to happen: First, the landlord must state the reason for using the property in a different way. This includes, for example, that he wants to renovate or modernize the property, sell it, or combine several residential units. Another reason may be that the landlord wants to demolish the building and replace it with a new one. In addition, the new utilization must be comprehensible and reasonable for the property – reasonable are, among other things, cases in which the landlord has to pay off debts or wants to create new living space. If he is prevented from doing so by the tenancy agreement and suffers economic disadvantages, this may result in a notice of utilization.

When is a notice of utilization invalid?

First, the landlord must observe the notice period. This is normally three months, but can also be extended. If the tenant has already lived in the property for more than five years, it is six months, and even nine months for more than eight years. In addition, the notice of utilization must be received in writing no later than the third working day of a month.

It is relatively common for notices of utilization to be invalidated in court. To protect tenants from profit maximization and speculation, the legislature has introduced various protective measures. For example, a notice is not valid if the landlord merely wants to re-rent the property at a higher price. Even if one or more residential units have already been converted into condominiums, or this is imminent, such a termination does not apply.

In many cases, the economic exploitation in particular can be challenged in court. Landlords should precisely document all steps, such as cost estimates, offers or construction inquiries.