Is an end to the “written form requirement” for commercial leases in sight?

The written form requirement for commercial leases

Commercial leases with fixed lease periods that exceed one year are subject to the written form requirement under §§ 578 para. 2, 550 of the German Civil Code. If the written form requirements are not met both parties are able to terminate the lease within the statutory periods of notice.

Especially in the commercial sector, both landlords and tenants have an interest in long-term planning and security by entering into multi-year leases. Thus, most commercial leases have a fixed term lease period and options for lease extension agreements. 

As (unintended) violations of the written form requirement often arise in complex and multi-year commercial lease agreements and their numerous addenda, the risk of a corresponding termination is high. This risk forces tenants and landlords into bureaucratically complex procedures when concluding and amending their lease agreements.

Some requirements of the written form requirement are the following:

Firstly, the lease documents must be connected physically or contentually, such that they appear as a uniform document. According to a 2020 decision of the Brandenburg Higher Regional Court, this is not the case if the lease agreement refers to an annex that does not exist or even if parts of the lease agreement vary in their graphical design and lack page numbers - if there is no physical connection between the individual pages. A physical connection can be made by stapling or binding the lease agreement, a paper clip however is not sufficient and poses a violation of the written form requirement.

Furthermore, the basic terms of the lease agreement such as its parties, the leased property, the rental period, and rent must be sufficiently specified. If e.g., a party, their legal representation, the location and condition of the leased property or the lease period is described incorrectly or inaccurately, the lease agreement does not meet the written form requirement.   

The aforementioned requirements must also be complied with in all subsequent addenda. Otherwise, addenda to the lease agreement may also constitute a breach of the written form requirement.

End in sight?

At a cabinet meeting in Meseberg on August 30, 2023, the federal government adopted a paper on the principal issues regarding a new Bureaucracy Relief Act (BEG IV) presented by Federal Minister of Justice Dr Marco Buschmann. Among many proposed amendments which aim to reduce bureaucratic hurdles and ease the burden on administrative bodies, the paper outlined the abolition of the written form requirements in the law of associations, the law of obligations and tenancy law. Particular emphasis was placed on the written form requirement for commercial lease agreements.

Although the Bureaucracy Relief Act is only at an early stage (a first draft must be written and submitted to the Bundesrat (upper house of the German parliament) for an opportunity to state its position), the paper on the principal issues regarding a new Bureaucracy Relief Act brings the end of the written form requirement one step closer.