Commercial tenancy law – The devil is in the detail

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There are a number of material differences between commercial tenancy law and tenancy law as it applies to private sector housing. The way in which leases for commercial premises are formulated is therefore a matter of particular importance.

Commercial tenancy law is not a field of law unto itself. As in the case of residential tenancy law, it is regulated by the provisions of the German Civil Code (Bürgerliches Gesetzbuch, BGB) dedicated to tenancy law. That being said, these reflect the legislature’s primary focus here on residential tenants and their protection, since they frequently find themselves in a weaker position in relation to landlords. By contrast, the landlord and tenant are assumed to be on an equal footing in commercial tenancy law. Consequently, neither party enjoys special protection. We at the commercial law firm MTR Rechtsanwälte note that this makes drafting detailed contracts all the more important.

At the same time, commercial tenancy law provides for extensive contractual freedom. The parties are responsible for individually addressing their respective rights and obligations in the lease. However, neither party is allowed to be unduly disadvantaged. Moreover, the principle of transparency needs to be observed. The content of clauses within the general terms and conditions is subject to review. Clauses that are ambiguous and opaque are often found to be void.

The level of contractual freedom afforded to the parties nonetheless grants them considerable leeway in drafting contracts, a key aspect of which is the contractual term. It is common for leases for commercial premises to be concluded for a fixed term. Particularly for the tenant, the commercial premises may be of great economic importance. That is why renewal clauses – including those that are unilateral – generally ought to be incorporated. However, in cases involving permanent contracts, it may be advisable to agree to notice periods that deviate from statutory provisions. For landlords, on the other hand, it is important to have arrangements in place for adjusting the rent.

Another important aspect is that both parties have a legal right to terminate the lease for good cause. What constitutes good cause ought to be set out in the contract as a matter of urgency. Having said that, ceasing commercial activity or experiencing economic hardship does not constitute good cause.

Many commercial leases are also currently being affected by the crisis surrounding the coronavirus. The legislature has determined that landlords are not allowed to terminate leases from April 1 to June 30 of 2020 on the basis of rent arrears. This is conditional on the coronavirus crisis being responsible for the tenant’s inability to pay rent. It should be noted, however, that the obligation to pay rent continues to apply. The payments will have to be made at a later date.

Lawyers with experience in the field of commercial tenancy law can offer advice.

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