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Tenants beware of Waiver Clauses in German Property Lease Agreements

By February 26, 2016Property Lease

Renting a House or Flat in Germany? Do not sign a “Kündigungsverzicht” Clause

The basic rule under German law is that tenants have the right to terminate an open-ended lease agreement by giving 3 months notice (see s. 573c German Civil Code in the chapter “property leases for an indefinite period” ). In contrast to the UK, such open-ended lease agreements are standard in Germany.

However, a tenant can waive this right by signing it away (Kündigungsverzicht). In our firm we regularly come across cases, where the German landlord includes such a termination waiver clause, without expressly discussing this with the prospective tenant. Since tenants from the UK are used to fixed term lease agreements, they are mostly not aware that they are signing something which is the rare exception in Germany and which is to their disadvantage compared to the default rule in the German Civil Code.

Again: The statutory rule is that a tenant (but not the landlord!) can always terminate by giving three months notice (without having to give a reason). The thinking behind this law is that a tenant must be flexible, in case he has to relocate to another town for job reasons. The landlord – in contrast – cannot freely terminate, but must be able to demonstrate “berechtigtes Interesse”, which can be translated as legitimate reason or justified interest.

In practice, a landlord in Germany can thus only terminate the property lease in three cases:

(i) because the tenant has breached his contractual obligations, or

(ii) if the landlord can credibly establish that he (or a close family member) wants to move into the flat or house himself. This rule annoys some landlords, thus the attempt to sneak in the waiver clause (Kündigungsverzicht); or

(iii) continuing the lease would prevent the landlord from making appropriate commercial use of the property.

Back to the tenant perspective: If you realise that you have signed such a clause which binds you for a longer period than you wish to be bound, all is not yet lost, because German courts still do protect tenants by finding those clauses void, which result in an unreasonably long commitment of the tenant.

Here is where it gets complicated, because the German courts distinguish between cases where the landlord has provided to the tenant a standard lease agreement template, which he does use or intends to use regularly. Such standard templates are called “Allgemeine Geschäftsbedingungen” (AGB), see sections 305 to 310 German Civil Code. AGB’s are subject to strict scrutiny, because the natural assumption is that the other party does not fully understand the implications of all these clauses with the user of the template had all the time in the world to fine tune in his best interest.

Thus, if a landlord has used AGB, such a waiver of the termination right (Kündigungsverzicht) is only legally permitted for a maximum of 4 years. If the period is longer, the clause is simply void and the general rules of German Civil Code apply.

If, however, the landlord can establish that the lease agreement (especially the termination waiver clause) was really intensely negotiated between lessor and lessee, then the agreement would no longer qualify as a “standard template”, but as an “Individualvereinbarung” (individually negotiated contract). In those cases, the courts tolerate longer periods, up to 10 years or longer, because the court takes the position that the tenant has thought about whether he actually wanted to accept this. If so, the tenant does not need to be protected.

Thus, be careful, if a prospective landlord wishes to discuss such a waiver clause with you. Chances are, he is planning on to later reason that you have explicitly wished such a clause to be included in the agreement. Sometimes, they use the argument that it is in your best interest to have such a long term lease agreement, so he cannot kick you out after one or two years. But remember: The landlord can only terminate for cause anyway. So, in general, the tenant is already well protected against termination.

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More information on buying or leasing property in Germany, the German Land Registry, the German conveyancing process and the rights and duties of tenants and landlords in Germany is available in these posts:

Or simply click on the sections “Property” or “Conveyancing in Germany” in the right column of this blog.

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The law firm Graf & Partners and its German-English litigation department GP Chambers was established in 2003 and has many years of experience with British-German and US-German probate matters, including the representation of clients in contentious probate matters.

We also advise and represent foreign clients who wish to purchase, sell or lease property in Germany. In case you would like to obtain specific advice on a specific case or need assistance in buying, selling or leasing property in Germany, please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 463 7070.