E-ISSN 2549-0680

Vol. 7, No. 1, January 2023, pp. 25-42
doi: https://doi.org/10.24843/UJLC.2023.v07.i01.p02

This is an Open Access article, distributed under the terms of the
Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/)

Distinguishing German Residential and Commercial

Tenancy Law: Are Tenant and Landlord in an Equal
Position?

Christin Eissing*

Faculty of Management, Social Work, and Construction,
University of Applied Science and Art, Holzminden, Germany

Abstract

The German housing market, particularly in major cities, is very tight. This situation makes
Tenancy Law the issue that has attracted the most attention in local and federal elections.

This article presents and illustrates various methods of protecting the individual parties to

a lease contract. Besides, it highlights the differences between Residential Tenancy Law and

Commercial Tenancy Law and explains why legislation distinguishes between these two
types of tenancies. This research establishes arguments and interpretations from relevant

laws and regulations, including the German Civil Code and German General Equal

Treatment Act, and judicial decisions that clarified the legal relations between tenants and
landlords. This article concludes that Tenancy Law in Germany distinguishes in different

ways between Residential Tenancy Law and Commercial Tenancy Law from legal, social,

and economic perspectives. It also infers that the provisions stipulated in German Tenancy
Law protect the tenant's right while remaining attractive for landlords to offer the house(s)

for rent.

Keywords: Tenant; Landlord: Contractual Protection; German Legal System; Social Justice.

1. INTRODUCTION

The German Basic Law determines the Federal Republic of Germany

as a Democratic and Social Federal State.1 It entails that the government
and the legislation are concerned with ensuring that social justice and social

security for the population in various sectors. The housing sector is one of
the government's concerns in formulating regulations and policies that
provide maximum benefits for people's prosperity, in line with the high

demand for people to gain access to housing. In this context, the Tenancy
Law becomes having a strong relevance.

In Germany, more than 70 percent of single-person households do not
live in their own house or apartment but in rented accommodations. At

around 58 percent, this also applies to the majority of the German
population as a whole.2 This percentage is very high compared to other
European Union (EU) member states. In 2020, just under 25 percent of the

*Email/Corresponding Author: christin.eissing@stud.hawk.de

1 German Basic Law, Art. 20.
2 Federal Statistical Office (ed.) (2022). “Distribution of the population in Italy from

2004 to 2020 by tenant and owner;”

https://de.statista.com/statistik/daten/studie/370713/umfrage/bevoelkerung-in-italien-

nach-mieter-und-eigentuemer/

https://doi.org/10.24843/UJLC.2023.v07.i01.p01
http://creativecommons.org/licenses/by/4.0/
mailto:christin.eissing@stud.hawk.de
https://de.statista.com/statistik/daten/studie/370713/umfrage/bevoelkerung-in-italien-nach-mieter-und-eigentuemer/
https://de.statista.com/statistik/daten/studie/370713/umfrage/bevoelkerung-in-italien-nach-mieter-und-eigentuemer/

Distinguishing German Residential and Commercial Tenancy Law:
Are Tenant and Landlord in an Equal Position?

Christin Eissing

population of Spain lived in rented accommodation and around 75 percent

lived in owner-occupied housing.3 Another example is Italy where some
24.9 percent of its population lived in rental accommodation and 75.1

percent lived in their own houses or apartments.4

Germany has a large private rental sector where landlords are

typically institutions or private persons, housing is allocated based on the
market and there are typically no subsidies.5 Germany is a country in
Europe that established a rent regulation system and is classified as a third-

generation rent control system where rent increases are controlled within a
tenancy but are unrestricted between tenancies.6

This fact emphasizes the importance of Tenancy Law and tenant
protection, especially in Germany, because the State is obliged to ensure

social justice and social security. The state is responsible for preventing
people from becoming homeless due to losing their rented apartment or
paying enormously high rents so that they cannot afford other necessities.

Currently, single-person households in Germany have to spend an
average of just over a quarter of their net income on rent payments. The

additional costs for electricity, waste disposal, property tax, water supply
and disposal, street cleaning, heating, and some other costs that are

regulated by German Operating Costs Regulation7 are their extra regular
spending.8 Rising gas prices due to the Russia-Ukraine conflict are also an
additional financial burden for tenants that pushes up the total amount of

the rent, including the utilities and heating costs, which requires the State
to intervene on that issue. For example, the gas price brake or additional

financial support for low-income earners or students.

It is generally understood that the relationship between landlord and

tenant usually puts the latter in a weaker position that needs special
protection from the government. The German Civil Code (Bürgerliches
Gesetzbuch/BGB) regulates the rights and obligations of tenants and

landlords in sections 535 – 580a. These sections describe how to ensure the

3 Ibid.
4 Ibid.
5 Hanna Kettunen and Hannu Ruonavaara, “Rent regulation in 21st century Europe.

Comparative perspectives,” Housing Studies 36. no.9 (2020):1448, 1454.
6 Ibid., 1448, 1450, 1453.
7 Operating expenses as a legal standard regulation: Regulation on the

establishment of operating costs. See Thomas Harborth, "Housing in Germany - A Case

Study in the Light of Government Guidelines," Ekonomika a Management, Prague University
of Economics and Business 2 (2012): 8.

8 German Operating Costs Regulation (BetrKV), Section 2. See analysis regarding
this issue in Julia Cornelius and Joanna Rzeznik, “Tenlaw: Tenancy Law and Housing

Policy in Multi-level Europe,” National Report for Germany. Deliverable no. 3.2, Brussels,

European Commission, 2014, 63,135-138; Rolf Müller, “Tenancy law and energy renovation
in European comparison,” BBSR-Online-Publikation Nr. 14/2016, Federal Institute for

Research on Building, Urban Affairs and Spatial Development (BBSR) within the Federal

Office for Building and Regional Planning (BBR), Bonn, 84; and Rödl & Partner, “Landlord-
to-tenant electricity generated from PV power plants: Are you still supplying or already,” 20

May 2021, https://www.roedl.com/insights/renewable-energy/2021/may/landlord-to-

tenant-electricity-pv-power-plants

https://www.roedl.com/insights/renewable-energy/2021/may/landlord-to-tenant-electricity-pv-power-plants
https://www.roedl.com/insights/renewable-energy/2021/may/landlord-to-tenant-electricity-pv-power-plants

Udayana Journal of Law and Culture
Vol. 7 No. 1, January 2023

safety of the tenant and the landlord when they conclude a lease agreement.
Nevertheless, the laws also ensure that the landlord is protected from the

misbehavior of his or her tenants. It is particularly worth mentioning that
the BGB also distinguishes between private and business tenants. This

article assumes that business tenants are not as inferior to the landlord as
private tenants so there is greater contractual freedom and much fewer

restrictions for commercial leases. This seems to indicate where the State is
required to provide a guarantee of liberty for businesses against barriers
stemming from private property.9

When it comes to the BGB and Tenancy Law, it can get a little
confusing, because different rules apply to business tenancy agreements

than to a residential tenancy agreement for a private individual. The original
German Civil Code was drafted in 190010 and a lot of new regulations have

been added over the last 122 years, so a significant overhaul of the Tenancy
Law would be helpful.

Especially in major German cities, the real estate market is very tight,

leading to some property owners taking advantage of the plight of the
population and charging exorbitantly high rents because of the high

demand. For this case, there are, for example, instruments such as a rent
brake11 or strict regulations on rent increases.12 But if tenants do not have

enough knowledge about their rights, they cannot fight for their rights
properly.

However, to gain benefit from the legal measures and the rights and

restrictions through a lease agreement, both parties need a good overview of
the relevant laws. This article critically examines the security measures for

tenants and landlords that the law seeks to implement and discusses in
particular, the differences between leases with private individuals and

companies as contracting parties.

This article presents and illustrates various methods of protecting the
individual parties to a lease agreement and highlights the differences

between Residential Tenancy Law and Commercial Tenancy Law. Besides, it
analyzes the reasons why German legislation distinguishes between these

two types of tenants. The legal argumentation and interpretation are
developed based on BGB, German General Equal Treatment Act

(Allgemeines Gleichbehandlungsgesetz/AGG), and some relevant laws and
regulations. In addition, it refers to case law settled before the German

9 See Simon Deakin, “Private Law and the New Social Question,“ German Law
Journal 23 (2022): 862.

10 Johannes W. Flume, “Strict Liability in Austrian and German Law: On the
Concept of Strict Liability in the Age of Technological Advancement,” Journal of European
Tort Law 12, no. 3 (2021): 210.

11 Berliner-Mieterverein, “Rent Control/Rent Brake in Germany, for example Berlin,

Part I Berlin,” 9 January 2018, 1. https://www.berliner-
mieterverein.de/uploads/2018/01/Rent-Control-Rent-Brake-in-Germany-IUT-1-2018.pdf

12 German Civil Code, Section 558 See also Sergio Nasarre-Aznar, “Leases as an

Alternative to Homeownership in Europe. Some Key Legal Aspects,” European Review of
Private Law 22, no. 6 (2014): 815-846; and Moritz Rinn, Jan Wehrheim, and Lena Wiese

“How Tenants’ Reactions to Rent Increases Affect Displacement: An Interactionist Approach

to Gentrification,” Urban Studies 59, no.15 (2022): 3064.

Distinguishing German Residential and Commercial Tenancy Law:
Are Tenant and Landlord in an Equal Position?

Christin Eissing

Federal Court of Justice (BGH), as they provide a framework for the current

starting position for tenants and landlords.

Some previous academic works have discussed the issue of

contractual relations between tenants and landlords in Germany. Cornelius
and Rzeznik (2014) composed a national report on tenancy law for Germany

that explores various aspects of tenancy contracts, including preparation
and negotiation stages, conclusion, contents, implementation, termination,
and enforcement.13 Braeuer, Kleinebrahm, and Naber (2019) analyze the

techno-economic effects of the German Tenants Electricity Law 2016 on the
energy system layout of multifamily buildings that can create a symbiotic

relationship between landlords and tenants because the landlord acts as the
local electricity provider who sells proper price of electricity to the tenants

efficiently.14 Kettunen and Ruonavaara (2020) conducted a comparative
study of 33 European countries, including Germany, to analyze the
correspondence between the welfare state regime and the rent regulation

system.15 Some papers have discussed thematic issues related to, or covered
by, the BGB, such as the limitation of claims,16 development of private

law,17 historical development,18 interpretation of a contract,19 and its impact
on the foreign legal system.20 Differing from the topic of those studies, this

article, however, focuses on the elaboration of relevant provisions of the
BGB, which regulate contractual relations between tenants and landlords in
Germany.

2. RESULT AND ANALYSIS

2.1. Freedom of Contract and Prohibition of Discrimination

Before dealing specifically with the German Tenancy Law, it is worth

mentioning that the prohibition of discrimination to protect tenants is
related to the principle of freedom of contract. In general, freedom of

13 Cornelius and Rzeznik, op.cit, 103-183.
14 F Braeuer, M Kleinebrahm and E Naber, “Effects of the tenants electricity law on

energy system layout and landlord-tenant relationship in a multi-family building in

Germany,” IOP Conf. Series: Earth and Environmental Science 323 (2019): 1-9.
15 Kettunen and Ruonavaara, op.cit., 1446.
16 Sibilla Buletsa and Piotr Zakrzewski, “Limitation of Claims in Polish and

Ukrainian Civil Code against the Background of the Principles of European Contract Law

and the German Civil Code,” Journal of Legal Studies 24, no.38 (2019): 63-67.
17 See Reinhard Zimmermann, “The German Civil Code and the Development of

Private Law in Germany” Oxford University Comparative Law Forum, 2006,

https://ouclf.law.ox.ac.uk/the-german-civil-code-and-the-development-of-private-law-in-

germany
18 See Hannes Rösler, “Harmonizing the German Civil Code of the Nineteenth

Century with a Modern Constitution--The Luth Revolution 50 Years

Ago in Comparative Perspective,” Tulane European and Civil Law Forum 23 (2008): 1-36.
19 Magdalena Bławat, “The Court’s Interference with Contracts by Supplying and

Converting the Contractual Terms,” Utrecht Law Review 18, no. 1 (2022): 78-90.
20 Jacques Henri Herbots, “The Chinese new Civil Code and the Law of Contract,”

China-EU Law Journal 7 (2021): 40, 48.

https://ouclf.law.ox.ac.uk/the-german-civil-code-and-the-development-of-private-law-in-germany
https://ouclf.law.ox.ac.uk/the-german-civil-code-and-the-development-of-private-law-in-germany

Udayana Journal of Law and Culture
Vol. 7 No. 1, January 2023

contract is a basic principle of contract in the context of Private Law.21
However, the concept of the freedom of contract in a country may differ from

the concept recognized or accepted in other jurisdictions that apply
distinctive legal systems.22 It seems necessary to include a historical-

conceptual perspective on how freedom of contract is rooted in Germany by
citing Klaas Hendrik Eller's view as follows:

“In Germany, it was the realist tradition that introduced a thicker concept of
“contract” compared to the rather marginal idea embodied in the German

Civil Code of 1900. Not only was the codification under the influence of
German idealism with its three freedoms of contract, property, and the

freedom to make a will, but legal sociology was also still in its infancy and
unable to call for a more contextualized assessment of contract. In fact, in

the eyes of contemporary critics like Otto von Gierke, the codification paid

insufficient reverence to the Germanicist tradition, which had developed
independently of a nation-state for more than a century and thus

incorporated collective effects of individual rights into the idea of freedom of

contract.”23

The conceptual restriction (and lack of restriction) of freedom of
contract has been discussed academically from legal and economic
perspectives.24 The freedom of contract applies in Germany in accordance

with Section 311 BGB, which means that everyone is free to choose their
contractual partner and the contents of the contract, as long as it does not

violate applicable laws.25

On the one hand, the contract form is freely selectable for most

contracts. An example of this would be a contract for a real estate purchase,
which must be in writing and notarized to be valid.26 On the other hand, a
rental agreement is free of form, so the tenant and landlord are free to

record the agreement e.g., orally or in writing. However, here, of course, the
written form is recommended in order to avoid possible discrepancies.27

The BGB also determines positive and negative obligations for tenants
and landlords. On the one hand, tenants must use the rented premise as

agreed upon, while on the other hand, landlords must keep the rented
premise in the state as it is (contractually) agreed upon.28

21 Steve Hedley, “Private Law Theory: The State of the Art,” School of Law, Áras na

Laoi, University College Cork (2021): 4.
22 See for example, Wei Wen, “Formality, Freedom of Contract, and China's New Civil

Code: A Legal Reform Recommendation for Land Sale Contracts,” University of Pennsylvania
Asian Law Review 17 (2022): 334.

23 Klaas Hendrik Eller, “Comparative Genealogies of “Contract and Society,” German
Law Journal 21, no. 7 (2020): 1401.

24 See for example Daniel Müller and Patrick W. Schmitz, “The Right to Quit Work:

An Efficiency Rationale for Restricting the Freedom of Contract,” Journal of Economic
Behavior & Organization 184 (2021): 653-666.

25 German Civil Code, Section 311.
26 Ibid., Section 311b. See also Roland Montfort, “EY Global Commercial Terms

Handbook,” second edition, EY, October 2020, 106.
27 German Civil Code, Section 550.
28 Michel Vols and Marvin Kiehl, “Balancing Tenants’ Rights while Addressing

Neighbour Nuisance in Switzerland, Germany and the Netherlands,” European Property Law
Journal 4, no. 2 (2015): 98.

Distinguishing German Residential and Commercial Tenancy Law:
Are Tenant and Landlord in an Equal Position?

Christin Eissing

However, there is an essential restriction to the point of the free choice of

the contracting parties. The AGG prohibits discrimination in particular to
the search for housing and extends from the newspaper advertisement to

the rental to the termination of the tenancy.

The individual reasons for discrimination according to Section 1 AGG

are race, ethnic origin, gender, religion, disability, age, and sexual identity.29
If a landlord violates this law, the disadvantaged person can demand, among
other things, the removal of the impairment in the case of a violation of a

discrimination prohibition. A contracting obligation is derived from the
obligation to make in rem restitution. If the landlord is no longer in a

position to conclude a contract because, for example, he or she has rented
out the apartment in the meantime, a claim for damages under Section 826

BGB or Sections 280 and 283 BGB or a claim for reimbursement of
expenses under Section 284 BGB may be considered. In addition, the
disadvantaged party can sue for injunctive relief. The damage may, for

example, consist of a more extended stay at a hotel or a delay in taking up a
professional activity.30

The Federal Anti-Discrimination Agency's current figures show that
this law is necessary to protect tenants against discrimination. According to

a representative survey conducted by the Federal Anti-Discrimination
Agency in 2020, around 15 percent of all respondents who have searched for
accommodation in the last ten years have experienced discrimination based

on race because they belong to an ethnic group or come from a different
country. People with immigrant backgrounds are particularly affected by

this. According to the survey, one in three apartment seekers with a migrant
background (35%) said they had experienced racial discrimination.31

2.2. The German Tenancy Law

The BGB, Book 1, Division 8 – “Particular types of obligations”, Title 5

– “Lease, usufructuary lease” defines the German Tenancy Law in Sections
535-580a.32 A rental agreement is a continuing obligation.33 A tenancy is a

legal relationship or interest in properties or land in which the tenant has
exclusive possession of the facilities for a specified period and pays rent to

the landlord. The difference between a lease agreement and a usufruct
agreement is that in a usufruct agreement, in addition to the use of the
land, the lessee may also keep the fruits of the land. That is, for example,

the harvest of the fields or fishing.34

29 German General Equal Treatment Act, Section 1.
30 German Civil Code, Sections 826, 280, 283, 284.
31 Federal Anti-Discrimination Agency (2020).
32 German Civil Code, Sections 535 - 580a.
33 Volker Emmerich, Mietrecht: Kommentar zu den mietrechtlichen Vorschriften des

Bürgerlichen Gesetzbuches und zum Zweiten Wohnraumkündigungsschutzgesetz, Die Miete
als Schuldverhältnis (Berlin, J. Schweizer Verlag, 1981), 10.

34 German Civil Code, Section 581.

Udayana Journal of Law and Culture
Vol. 7 No. 1, January 2023

Sections 535-548a BGB regulate “general provisions for leases”. The
further regulations refer to these general regulations and are specified in

more detail. After the general provisions for leases there are the specified
regulations for “provisions applicable to leases of residential space” in the

Sections 549 - 577a. They refer to residential rental agreements with private
tenants. For business tenants, the “leases of other things” apply, which is

regulated in Sections 578 - 580a.35

2.2.1. Regulations to Protect the Landlord

A landlord in Germany can be a private person, a housing cooperative,
or a housing company that owns a building or an area of land and is paid by

the tenant for its use of it. Especially when a landlord is a private person or
a small real estate company, it is vital to protect them. The landlord's

principal obligation is to hand over the leased property to the tenant at the
agreed time in a condition suitable for its intended use and to maintain it in
this condition. In return, he receives the rent payments.36

a. Security Deposit and Extent of the Security Right of the Lessor

A rent security deposit is a crucial tool to protect the landlord from
losing rent due to difficulty in getting a tenant out of the apartment, even

though he or she does not pay the rent. It consists typically of three net cold
rents,37 which the landlord can keep in case of non-payment to cover his or
her costs. If the tenancy is terminated smoothly, the tenant will receive his

or her rent security deposit back after moving out of the apartment.

Suppose the tenant has damaged something in the apartment during

the rental period. In that case, the landlord can retain a part of the rent
security deposit to replace what has been damaged.38 The landlord also has

a lien on the tenant's belongings for its claims under the lease.39

b. Cancellation of the Lease Contract

Under German law, a distinction can be made between two types of
termination of rental agreements: ordinary termination and termination

without notice. Section 573 (1) BGB sets out the rules for ordinary

35 Ibid., Book 1, Division 8, Title 5.
36 Ibid., Section 535.
37 Cold rent means that the monthly payment of the basic rent for the apartment

does not require additional costs while warm rent means that the monthly payment

includes the basic rent for the apartment and additional costs - called apportionments or
additional costs.

38 Ibid., Section 551.
39 Ibid., Section 562.

Distinguishing German Residential and Commercial Tenancy Law:
Are Tenant and Landlord in an Equal Position?

Christin Eissing

termination. The landlord is entitled to terminate the lease if he or she has a

legitimate interest in the termination.40

The landlord can terminate the contract without prior notice if the

tenant significantly violates the rights of the landlord by endangering the
rented property by neglecting the care incumbent upon him or by leaving it

to a third party (a person other than the tenant and the landlord) without
authorization. In addition, he may terminate the contract without prior
notice if the tenant is in default of payment of the rent or a not insignificant

part of the rent for two consecutive dates.41 Ordinary termination is very
difficult to assert.

c. Notice of Termination for Own Use

The German legal system, primarily its BGB, recognizes three types of
termination, namely ordinary notice of termination, termination for cause
without notice, and the special rights of termination. The provisions relating

to the termination of tenancies are mandatory for the landlord. Further, the
landlord must explain the reason for the termination, otherwise it would be

regarded as an unlawful termination.42

The best-known and most frequent reason for landlords to terminate a

lease is "own need". Pursuant to Section 573 (2) No. 2 BGB, own use exists
if the landlord needs the entire tenant's apartment for himself or herself or a
person belonging to his or her household (e.g. a caregiver), or for a family

member for residential purposes. Family members for whose benefit the
landlord can terminate the lease due to own needs are, for example, parents

or children, grandchildren or siblings of the landlord. As a rule, more distant
family members are not included.43

The landlord must need the apartment. The bare desire to live within
one's own four walls is insufficient. Own need is only present if the landlord
can give reasonable and understandable reasons why he, she, or a

beneficiary wants to move into the apartment. The reasons may be the plan
to establish a retirement residence for himself or herself, or the urgent needs

of his/her family member to use it. In this situation, the landlord must state
in writing in the letter of termination for which person he or she needs the

apartment and he or she must describe a concrete fact on which he or she
bases the interest of this person in the apartment.44

40 Michel Vols, Marvin Kiehl, and Julian Sidoli del Ceno, “Human Rights and

Protection against Eviction in Anti-social Behaviour Cases in the Netherlands and
Germany,” European Journal of Comparative Law and Governance 2, no.2 (2015): 177.

41 German Civil Code, Section 543 (2).
42 Cornelius and Rzeznik, op.cit., 92.
43 German Civil Code, Section 573 (2) No. 2.
44 DMB Deutscher Mieterbund (2022). Eigenbedarf; available online at:

https://www.mieterbund.de/mietrecht/ueberblick/eigenbedarf.html

Udayana Journal of Law and Culture
Vol. 7 No. 1, January 2023

d. Rent Increase as a Result of a Modernization Measure

Modernization measures are structural changes that affect the rented

property. These changes are referred to as energy efficiency modernizations.
They sustainably save non-renewable primary energy, protect the climate, or

reduce water consumption. The utility value of the leased property is
sustainably increased, the general living conditions are sustainably

improved or new living space is created as a result.45

Of course, these measures cost the landlord a lot of money. That is
why it is permitted to increase the rent after these measures have been

carried out. It is precisely specified by what percentage the rent may be
increased so that the modernization pays for itself after a few years.

Moreover, in this particular case, the tenant is not allowed to reduce the
rent because of the construction noise or similar things.

The landlord must give the tenant a written modernization notice of
the modernization measures at least three months before they are about to
begin.46 The tenant must then tolerate these modernization measures.47

After receipt of the modernization notice, the tenant may give extraordinary
notice of termination of the lease as of the end of the month after the next, if

he or she does not want to tolerate the modernization measures, because
this implies the right of extraordinary termination. 48

2.2.2. Regulations to Protect the Tenant

A tenant is a person who signs a lease contract. If more than one

person signs the lease contract, more than one person is a tenant, i.e., they
are both entitled to use the apartment. However, they are also jointly liable

to the landlord for the payment of the rent. The tenant's primary obligation
is to pay his or her rent and utilities - if agreed - regularly and on time. At

the latest on, the third working day of a month, the tenant of a residential
property must instruct his bank to make the transfer.49

a. Rent Reduction in Case of Material Defects and Legal Defects
If the leased property has a defect at the time of handover to the

tenant that renders it unsuitable for use in accordance with the contract, or
if such a defect arises during the term of the lease, the tenant shall be

released from payment of the rent for the period during which the leased
property is rendered unsuitable. For the period in which the suitability is
reduced, the tenant must pay only a reasonably reduced rent as stipulated

in Section 536 BGB as a mandatory provision.50 If the tenant knows the

45 German Civil Code, Section 555b.
46 Ibid., Section 555c.
47 Ibid., Section 555d.
48 German Civil Code, Sections 555d and 555e. See also Jan Bonhage and Thomas

Lang, “The Real Estate Law Review: Germany,” The Law Reviews, 23 February 2022, 6.
49 Judgment of the VIII. Zivilsenat from 5.10.2016 - VIII ZR 222/15
50 Cornelius and Rzeznik, op.cit., 97. See also Tjakie Naudé, “The Principle of

Reciprocity in Continuous Contracts Like Lease: What is and Should be the Role of the

Exceptio Non Adimpleti Contractus (Defence of the Unfulfilled Contract)?,” Stellenbosch Law

Distinguishing German Residential and Commercial Tenancy Law:
Are Tenant and Landlord in an Equal Position?

Christin Eissing

defect of the rental object at the time of the conclusion of the contract, he or

she is not entitled to these rights.51

b. Protection against Termination and Opposition Right of Termination
Either contracting party may terminate the lease without notice for

good cause. The termination of the lease agreement must always be in
writing. The landlord must also inform the tenant of the possible time, form,
and deadline of the objection, which the tenant always has.52 As mentioned

above, the landlord can only terminate the lease contract for legitimate
interest. The tenant can always terminate the lease with a notice period of

three months if he or she wishes to do so.53

The special protection in the right of termination is that the tenant

can always object respectively contradict to the termination and demand the
continuation of the lease. In the case of termination without notice and
regular termination, this is possible if the termination would mean hardship

for the tenant, his or her family or another member of his or her
household.54 Such hardship exists, for example, if adequate replacement

housing cannot be obtained on reasonable terms. In other words, if the
tenant cannot find a new apartment of comparable size at a comparable

price in the same area, a hardship claim exists. This means that the tenant
can remain in the apartment, even though the landlord has, for example,
written a notice of termination due to personal need, until a new appropriate

apartment has been found. Finding such a property is very difficult in the
tight German housing market, especially in major cities.

The statutory provisions relating to the tenant’s protection against
termination are mandatory. The clause "The tenant waives his protection

against termination" is therefore invalid, even if it was signed in the rental
agreement.55

Tenants are very well protected by law in Germany. They are safe from

sudden evictions and protected by the statutory notice period of at least
three months. The longer a tenant lives in the apartment, the notice period

becomes longer as well. The landlord must give six months’ notice if the
tenant has lived in the apartment for five to eight years. If the tenant has

lived there for longer, the notice period is nine months.56

Review 27, no.2 (2016): 337; and Lea Crist, “Comment on Judgement no. XII ZR 8/21 of
the German Federal Court of Justice on the Obligation to Pay Rent in the Event of a COVID-

19 related Shop Closure,” 24 January 2022, https://dwfgroup.com/en/news-and-

insights/insights/2022/1/german-federal-court-of-justice-on-the-obligation-to-pay-rent-in-
the-event-of-a-corona-shop-closure

51 German Civil Code, Section 536b.
52 Ibid., Section 568.
53 German Civil Code, Section 573c (1).
54 Bill Davies et.al. “Lessons from Germany – Tenant Power in the Rental Market”

Report, Institute for Public Policy Research, London, 2017, 15.
55 Andreas Klaner. Ratgeber Mietrecht: Mehr wissen - Recht bekommen (Berlin,

Humbolds: Verlag GmbH, 2006), 23.
56 Marle, “You guide to German Rental Laws and Tenant Rights,” Housing Anywhere,

2022. https://housinganywhere.com/Germany/tenant-rights-in-germany

https://dwfgroup.com/en/news-and-insights/insights/2022/1/german-federal-court-of-justice-on-the-obligation-to-pay-rent-in-the-event-of-a-corona-shop-closure
https://dwfgroup.com/en/news-and-insights/insights/2022/1/german-federal-court-of-justice-on-the-obligation-to-pay-rent-in-the-event-of-a-corona-shop-closure
https://dwfgroup.com/en/news-and-insights/insights/2022/1/german-federal-court-of-justice-on-the-obligation-to-pay-rent-in-the-event-of-a-corona-shop-closure
https://housinganywhere.com/Germany/tenant-rights-in-germany

Udayana Journal of Law and Culture
Vol. 7 No. 1, January 2023

They are safe from sudden evictions and protected by the statutory
notice period of at least three months. The longer a tenant lives in the

apartment, the longer the notice period. The landlord must give six months'
notice if the tenant has lived in the apartment for five to eight years.

c. The Permissible Amount of Rent

In Germany, a rent index may not be exceeded by more than 10
percent to protect tenants in tight housing markets. If this is exceeded, the
contract is invalid. A rent increase always requires the text form.57 In

addition, the tenant must agree to a rent increase. Otherwise, it cannot
become legally effective.58

The landlord may sue for granting the consent if the tenant does not
consent to the rent increase by the end of the second calendar month. The

court, in this case, may decide based on the legality of the increase. If it
decides in favor of the landlord, the ruling replaces the tenant's consent to
the new rent amount.59

d. Purchase Subject to Existing Lease Contract

If the owner of the rented apartment changes because the residential
property is sold, the new owner acquires the lease, and the tenant can

continue to live in this apartment. The rent is paid to the new owner, who
becomes the new landlord, as the purchase does not break the rent.60

e. Right of Pre-emption of the Tenant
If rented residential premises are sold to a third party, the tenant is

entitled to preemption. In this context, the third party is anyone other than
the tenant and the landlord. The tenant, therefore, can buy the apartment in

which he or she lives before someone else does so.61 After the Tenancy Law
reform, tenants are entitled to the pre-emption right in case of selling the
residential premises to a third party. This right can be exercised as long as

the ownership of the apartment has been established, or, is to be
established after the tenant is allowed to use the residential space. 62

f. Rent Brake or Rent Control

On June 1, 2015, Mietrechtsänderungsgesetz (Rent Law Amendment
Act) came into force in Germany, authorizing the Federal State to designate

by statutory order "tight housing markets" in which a rent brake will apply
for the next five years. The rent brake prohibits landlords from charging

57 The text form according to Section 126b German Civil Code allows the user - in

distinction to the written form according to Section 126 German Civil Code and the
electronic form according to Section 126a German Civil Code (qualified electronic signature)

- to communicate electronically by means of a readable, signatureless declaration.
58 German Civil Code, Section 559b.
59 Ibid., Section 558b.
60 Ibid., Section 566.
61 Ibid., Section 577.
62 Cornelius and Rzeznik, op.cit., 84.

Distinguishing German Residential and Commercial Tenancy Law:
Are Tenant and Landlord in an Equal Position?

Christin Eissing

more than 10 percent of the local average rent for new leases in an area

designated as a tight housing market.63

Tight housing markets are defined as "communities or parts of

communities in which the adequate supply of affordable housing for the
population is particularly at risk." However, a higher rent may be required if

the previous rent exceeds the maximum allowable rent, the rooms were built
after October 1, 2014, or the rooms were extensively modernized.64

2.2.3. The Differences between the Regulations in Residential Tenancy
Law and Commercial Tenancy Law

Both Residential Tenancy Law and Commercial Tenancy Law are
regulated in the BGB. On the one hand, there is regularly a disparity in the

balance of power in Residential Tenancy Law, as the landlord is in a
stronger position than the tenant. In the commercial sector, on the other
hand, landlords and business owners are usually on an equal footing.

a. Due Date of the Rent

In Residential Tenancy Law, the rent must always be paid by the third
working day of the month. This regulation does not exist in Commercial

Tenancy Law. Here, the BGB stipulates that the rent must be paid at the
end of the rental period. In practice, however, this is often not applied and a
monthly payment is nevertheless agreed to in the lease contract.65

b. Amount of Rent

In the case of commercial real estate, rents are freely negotiable, but
there are limits in the case of residential real estate. In principle, residential

rents must be based on local custom or at least on comparable rents. If the
landlord demands a significantly higher rent, this can lead to severe
penalties as a "punishable rent overcharge" or even "rent usury".66

c. Limitation of the Lease

One significant difference is, for example, the possibility of limiting the
lease term. While this is only possible within the narrow limits of Section

575 BGB in the case of a residential lease, a commercial lease can be limited
in time without further notice.67

d. Security Deposit

The agreement of a deposit is also highly regulated for the residential

tenancy. For example, the amount of the deposit is limited to a maximum of
three rents in Section 551 BGB. A payment in installments is possible. In

63 BVerfG paras. 1-4; German Civil Code, Section 556d.
64 German Civil Code, Section 556e, 556f.
65 Ibid., Section 579.
66 ImmoNürnberg Immobilienvertrieb (2020). Residential vs. Commercial Lease: the

5 Most Important Differences; available online at:

https://www.immonuernberg.de/unterschied-wohnraum-versus-gewerbemietvertrag
67 German Civil Code, Section 575.

https://www.immonuernberg.de/unterschied-wohnraum-versus-gewerbemietvertrag

Udayana Journal of Law and Culture
Vol. 7 No. 1, January 2023

the commercial tenancy, on the other hand, this can be largely freely
arranged.

e. Passing on the Operating Costs

Another significant difference lies in the passing on of operating costs
to the tenant. In a residential tenancy, only the costs listed in Section 2 of

the Operating Costs Ordinance may be passed on to the tenant. In the
context of a commercial tenancy, the operating costs can be extended
considerably. However, these must be agreed upon at the conclusion of the

contract in such a precise and transparent manner that the tenant has an
exact picture of the costs incurred.68

f. Transfer of Maintenance and Repair Measures

The transfer of maintenance and repair work on jointly used areas and
facilities is excluded in residential leases. It is applicable in commercial
leases as long as the arrangement is negotiated individually.69

g. Local Place of Jurisdiction

The local place of jurisdiction for a residential rental agreement is
always tied to the location of the dwelling. In the case of a commercial lease,

on the other hand, the place of jurisdiction can be determined by the
contracting parties.70

h. Right of Termination and Periods of Notice
There are also considerable differences in the right of termination. A

commercial lease, for example, can be terminated in due time without
stating reasons. In the case of a residential lease, ordinary termination is

only possible for certain reasons. In addition, the notice periods for
residential leases extend in favor of the tenant based on the duration of the
lease.

There is also a significant difference in the case of rent arrears.
Whereas in the case of termination without notice due to rent arrears in

residential leases, the termination without notice is cancelled by the timely
payment of the rent arrears. In commercial leases, the termination is

effective even if the rent arrears are eliminated.71

2.3. Reflection on German Residential and Commercial Tenancy

Agreements

Generally, the purpose of the contract determines the type of contract.

There are some significant differences between a commercial lease and a
residential lease. While the initial part of the Tenancy Law contains general

provisions, the last part contains specific provisions for Residential Tenancy
Law. Tenancy Law in Germany can be viewed from at least three different

68 Ibid., Section 556.
69 Ibid., Section 580a.
70 Code of Civil Procedure, Section 29a.
71 German Civil Code, Section 569.

Distinguishing German Residential and Commercial Tenancy Law:
Are Tenant and Landlord in an Equal Position?

Christin Eissing

perspectives: legal, social, and economical components that cannot be

separated from each other. In principle, tenants must be protected while it
must remain attractive for landlords to offer housing. The task of the

judiciary is to combine these components. It inferred that Germany had
made proper law and regulations related to the amount of rent, security

deposits, protection against termination, land compensation for damages.

Nevertheles, changes in circumstances made Tenancy Law constantly
evolving. During the Corona Virus pandemic, tenants who could no longer

generate income to pay their rent needed special protection. Currently,
rising gas prices are a new problem. These imply the relevance of Residential

Tenancy Law that provides stringent rules to protect tenants.

Tenant and landlord should always stay up to date and informed

about the latest changes in the law, so that they can take maximum
advantage of them and point out any mistakes to the other party, and
possibly prevent the lease or parts of the lease from becoming invalid.

Critically, the role of the landlord is always assumed to be that of a
contractual party superior to the residential tenant. Many private

individuals also use the ownership of the non-owner-occupied real estate
and the rental income generated from it for their retirement provision.

However, a private individual repays the real estate loan with the rental
income for many years and cannot use it for private purposes. In cases
when rent nomads destroy the apartment, do not pay rent or compensation

for damages, and do not move out of the apartment, a private landlord can
quickly get into financial difficulties because the tenants are overprotected.

3. CONCLUSION

There are various ways to protect the individual parties to a lease.
Measures such as the protection against termination and the right of
objection, the tenant's right of first refusal, the rent brake, or the rent cap

protect the tenant in various ways against the arbitrariness of the landlord.
In Germany, the practice of both commercial and residential leases is

legitimate. German Tenancy Law distinguishes between commercial tenancy
agreements and residential tenancy agreements. It implies that the

regulations for residential leases predominate over those for commercial
leases. On the one hand, residential tenancy agreements generally aim at
the tenant's social protection from the landlord's arbitrariness. This kind of

agreement includes a disproportion in the balance of power since the
landlord regularly occupies a stronger position than the tenant. On the

other hand, commercial tenancy agreements assume a balance of power
between the parties, as landlords and business owners are usually more

equal.

Udayana Journal of Law and Culture
Vol. 7 No. 1, January 2023

Author’s Statement of Acknowledgment

This article is the personal work of the Author. The article's analysis and

opinion reflect the Author's ideas and shall not be associated with the
affiliation where the Author is studying at the Faculty of Management,

Social Work, and Construction, University of Applied Science and Art,
Holzminden, Germany.

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