Germany: Compliance With Written Form In Case Of Undefined But Determinable Begin Of Lease

Last Updated: 3 April 2014
Article by Jürgen Streng

Keywords: tenancy, property, rental, lease

BGH (German Federal Court of Justice), ruling dated July 24, 2013 – XII ZR 104/12

With its July 24, 2013 decision, the Federal Court of Justice has confirmed its rulings of recent years for a practical interpretation of the written form requirement. With reference to rental start dates it has, based on a new configuration of its rulings, determined that it is sufficient if the start and end dates of the lease term are noted in a sufficiently clear way in the contract document at the time the contract is entered into (Ruling of February 24, 2010 IX ZR 120/06, NJW 2010, 1516 margin no.11 with further notes).

Facts

At issue was a lease with the following provisions:

"The and therefore the obligation to pay the rent, begins with the handover/takeover of the leased property.

If the handover/takeover is delayed due to changes requested by the tenant (...) or by failure promptly to submit the plans or documents required for the upgrading of the rental space (...) or through the late payment of the security (...), then the tenancy begins on the day on which the property would have been handed over in the absence of these alteration requests or had the documents or plans, and/or the bank guarantee been made available promptly. If the rent falls into arrears upon the takeover of the rental property, then the tenancy begins with the occurrence of a delay in accepting the property."

The lower court (Higher Regional Court of Hamm) had taken the view that the requirement for written form under Sections 550 and 578 BGB ["German Civil Code"] was infringed, as the tenancy may have begun to run from the time of a fictitious transfer. This additional agreement would have allowed the start of the lease to appear unascertainable. In particular, a purchaser bound, under Section 566 BGB, by the provisions of the lease, could be faced with considerable practical difficulties in trying to determine the date of the start of the lease. It followed that, due to the impossibility of determining the start of the lease the written form requirement had not been met.

Content and subject of the decision

In contrast, the Federal Court of Justice explains that the appeal court had placed excessively high demands on the concept of determinability. An abstract description, which makes it possible to determine the rental period, was sufficient. It is sufficient if the facts to which the contracting parties tie the beginning of the contract were determined sufficiently precisely for there to be no remaining doubt about the start of the contract once the contract is implemented. This is the case here.

This sufficient certainty of the start of the tenancy was also not called into question by the provisions in the second paragraph concerning the beginning of the rental period. These provisions also made it possible for a potential purchaser of the leased property to ascertain when the contract began. The purchaser is able to discern from the contract document in which cases the lease should begin before the actual handover, and it would be apparent to him which point in time should be used for the beginning of the contract instead of actual takeover. This is sufficient to satisfy the requirement for written form. The written form was, in particular, not subject to question simply as a result of the agreement on the contract start date containing terms of interpretation or the finding of whether the circumstances to which the parties had linked the start of the contract had actually occurred.

Impact on day-to-day practice

This ruling by the BGH deserves approval, in particular because for reasons of the legal certainty, practicality and manageability of leases, no excessively high demands should be linked to the written form requirement. This is because infringements of the written form requirement in practice do not usually concern the protection of a potential purchaser, but rather relate to the desire by one of the parties to the contract to be released early from the tenancy. Accordingly, the lease should contain no impractical requirements or requirements that bypass the legal reality concerning the determination of the start and end of the lease. Thus, for example, when the lease document provides for a renewal option in favor of a party, it is not clear from the document itself whether the option was exercised. The same applies to a longer-term lease, which provides that it becomes effective only upon the occurrence of a future condition. Should it be necessary to lay down all these facts in the lease document, this would result in high costs in relation to the addenda as well as a high degree of legal uncertainty with regard to compliance with the requirement for written form. For that reason, the BGH should be concurred with that it did not set the requirements too high, and thus ensured that the conclusion of long-term leases is legally secure.

Originally published on March 27, 2014

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2014. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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