Keywords: landlord, tenant, rent, Civil Code, tenancy termination,

Flensburg Regional Court, decision of March 28, 2014 – 1 T 8/14

If the tenant is in arrears with the rent, the landlord is entitled – taking into account the legal provisions of Section 543 para 2 no. 3 Civil Code – to an extraordinary termination of the tenancy. However, in this context the question as to whether such a right to termination is present (or endures) if the tenant makes part payments, thus subsequently reducing the existing arrears of rent after the landlord has given notice, is not unambiguously regulated. The Flensburg Regional Court in its decision of March 28, 2014 has now taken up this question.

Guiding Principle

The circumstances leading to a termination no longer need to be present at the time of termination. The landlord's right to termination is only excluded if full settlement is made.

Content and Subject of the Decision

The Flensburg Regional Court in its decision held the termination of a residential tenancy by the landlord to be permissible under Section 543 para 2 sentence 1no 3b Civil Code. According to said provision, a compelling reason for termination is given if the tenant is in arrears, on two successive dates, of payment of the rent in an amount equal to two months' rent. These requirements were met in the present case, irrespective of the fact that the tenant had made part payments towards the rent owed following receipt of termination.

Thus it should be considered that once extant, a reason for termination only lapses when all debts to the landlord have been settled. Neither does the validity of a termination without notice due to arrears require that the circumstances of the termination still be extant at the time of termination; rather, it is sufficient that the circumstances of the termination were extant prior to issuance of the termination letter.

Impact on Day-to-Day Business

The Flensburg Regional Court, with its decision that applies equally to commercial tenancy law, joins the relatively unanimous opinion in adjudication and literature. Accordingly, landlords may uphold the termination they issued, even if the tenant has made subsequent payments to reduce the arrears in rent. The situation only changes if the tenant has paid all outstanding rent prior to receipt of the termination.

The legal opinion voiced is welcomed by landlords. As the Flensburg Regional Court correctly points out, a different interpretation would result in the tenant being able to consistently escape termination by making a minor part payment when arrears total two months' rent, thus bringing the total arrears just below the limit. This would constitute an unreasonable burden on the landlord, particularly over a longer period of time, as it would not only make it significantly more difficult for the landlord to dispose of the arrears but also to calculate anticipated future rent income.

However, it should be noted in this specific context that the above question regarding if and to what extent a right to termination, once extant, may lapse following subsequent payment, must be separated from the question of the time by which circumstances for termination must be present by the latest. The legal position is far more ambiguous in this context and thus far has not been decided by the highest court. Whereas some in adjudication and literature hold the view in this case that circumstances of termination must already be present when the termination is issued, a slim majority hold that it is sufficient if circumstances for termination are present only at the time of receipt of the termination letter. If one agrees with the latter opinion, this would mean that a termination is permissible, even if the arrears justifying the right to termination only commence after issuance of the relevant termination letter, but prior to or simultaneously with receipt of the termination letter.

Originally published July 9, 2014

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