As of: 31 August 2026 · Tieben Law Firm, Cologne
A company rents a four-room flat to accommodate two out-of-town employees. A standard form contract with the heading „Residential Tenancy Agreement“ is used. Two years later, the landlord gives notice to quit – without stating reasons, to take effect at the end of the quarter. The company invokes the Protection against dismissal of residential tenancy law. And loses.
That was precisely the case with Berlin Court of Appeal (Decision of 18 September 2024, ref. 8 U 40/24). The decision is not an outlier. It consistently continues the line taken by the Federal Court of Justice and makes clear what the classification of a tenancy agreement actually depends on: not the form, not the type of construction of the premises, but the purpose pursued by the tenant with the rental.
For landlords, companies and corporate housing providers in Cologne and across North Rhine-Westphalia, this is not an academic question. Tenant protection, notice periods, formal requirements, rent caps and even the competent court all depend on this classification.
The short answer
Whether residential or commercial tenancy law applies is determined by the contractually agreed purpose of use by the tenant – not the title of the contract and not the actual use by third parties. Under § 549 para. 1 of the German Civil Code (BGB), a residential tenancy agreement only exists if the rooms are intended to serve the tenant personally or their family members to cover their own housing needs. If a limited liability company (GmbH) rents an apartment to accommodate employees or to sublet it, this is commercial tenancy: no social protection against dismissal under §§ 573 et seq. BGB, different notice periods under § 580a para. 2 BGB, no rent brake.
Important Note: The content of this article has been prepared to the best of our knowledge and belief. However, due to the complexity and constant evolution of the subject matter, we must exclude liability and warranty. This post provides a general overview and does not replace legal advice in individual cases. Whether your specific contract is to be classified as a residential or commercial lease depends on the interpretation of that exact contract – and this interpretation often determines the outcome of an eviction lawsuit. Have your contract checked before you give notice or respond to a notice of termination.
Why classification decides so much
German tenancy law recognises two very different regulatory frameworks. Residential tenancy law is protective law: the legislature assumes that tenants lose their basis of existence if they lose their home. Commercial tenancy law is contract law between business people – here, what the parties agree largely applies.
The practical differences are considerable.
| Question | Residential rent | commercial property or business premises lease |
|---|---|---|
| Standard termination of tenancy by the landlord | Only with a legitimate interest, Section 573 of the German Civil Code (BGB) (e.g. personal use, rent arrears, utilisation) | Possible without justification, provided it is not contractually excluded |
| Cancellation period | 3 months for the tenant; for the landlord 6 months after 5 years and 9 months after 8 years, Section 573c(1) of the German Civil Code (BGB) | No later than the third working day of a quarter, effective at the end of the following quarter, Section 580a (2) of the German Civil Code (BGB) |
| Notice of objection based on hardship | Yes, hardship clause Section 574 BGB | No |
| form with a term of over one year | Written form, Section 550 of the German Civil Code (BGB) | Text form suffices, section 578 subsection 1 in conjunction with section 550 of the Civil Code (BGB) (since 1 January 2025) |
| Rent increase | Only in accordance with §§ 558 ff. BGB (German Civil Code), with rent increase cap | Freely negotiable; index-linked or stepped clauses are customary |
| rent brake (§§ 556d et seq. German Civil Code [BGB]) | Yes, in areas with tight housing markets – extended until 31.12.2029 | No |
| Jurisdiction | Always Local Court, regardless of the amount in dispute, Section 23 No. 2a of the Courts Constitution Act (GVG) | According to the amount in dispute; since 1 January 2026, the threshold for the Regional Court is 10,000 euros |
| vacating period in the judgement | Court may grant a period for vacation, section 721 of the Code of Civil Procedure (ZPO) | Section 721 of the Code of Civil Procedure (ZPO) applies only to residential space |
Anyone who gets this classification wrong rarely does so cheaply. A landlord who issues a commercial lease termination following the rules of residential tenancy law loses months. A company that relies on employment protection against dismissal that it does not have suddenly finds itself without premises.
The benchmark: the contractual purpose of use
What a residential tenancy agreement means legally
The term sounds self-explanatory, but it is not. What is not meant is: „The premises are lived in.“ What is meant is: The tenant has rented the premises so that they themselves – or their family, or people with whom they live together permanently – can live there. The tenant's own need for housing is the point of reference. If this is lacking, the protective law does not apply, even if someone actually sleeps, cooks and hangs out washing in the rooms afterwards.
Legally, this follows from the interaction of two provisions. Section 549(1) of the German Civil Code (BGB) orders that Sections 535 to 548 of the BGB shall apply to residential tenancy agreements, unless otherwise provided by Sections 549 to 577a of the BGB – which is where the entirety of tenant protection is set out. Section 578(2) of the German Civil Code (BGB) regulates as a mirror image which regulations apply to rooms that none Living spaces are. The switch is therefore set right at the very beginning.
What the Federal Court of Justice has decided
The Federal Court of Justice has set the standard in its Judgment of 13 January 2021 (case ref. VIII ZR 66/19) Clearly formulated: The decisive factor is the intended purpose that the tenant contractually pursues by renting the property. In the decided case, a GmbH & Co. KG had rented eight Berlin apartments – not to live in them itself, but to sublet them for commercial purposes. Result: no residential tenancy agreement in the head lease.
This purpose is determined by interpretation pursuant to sections 133 and 157 of the German Civil Code (BGB). What matters is what the parties actually agreed upon – not the label someone put on the contract.
The decision of the Berlin Court of Appeal of 18 September 2024
Berlin Court of Appeal, decision of 18 September 2024, ref. 8 U 40/24 (Court of first instance: Berlin II Regional Court, judgment of 6 March 2024, case reference 37 O 219/23)
A GmbH had rented a flat to accommodate its own employees. When the landlord gave notice of termination in due form, the company invoked the protection against eviction under residential tenancy law. The Regional Court ruled in favour of the landlord, and the Berlin Court of Appeal confirmed this in the appeal proceedings.
The reasoning is brief and plausible: A legal entity cannot live there herself. She also has no relatives. By definition, therefore, a GmbH cannot have its own residential need within the meaning of Section 549(1) of the German Civil Code (BGB). The purpose of the renting was economic – the accommodation of staff served the business operations. The tenancy was therefore commercial property rental, and the ordinary termination was valid without the landlord having to demonstrate a legitimate interest.
Four further points from the decision are important for practice:
- The form saves nothing. Using a residential lease template does not in itself create a residential tenancy agreement. Residential tenancy law only applies in such constellations if the parties expressly agree to its applicability – but in that case as a contractual arrangement, not by operation of law.
- Subletting is commercial letting. If the rooms are sublet, the headlease is commercial – even if the end tenants actually live there.
- Section 565 of the German Civil Code (BGB) only applies under strict conditions. The regulation on commercial sub-letting requires a commercial interim lease and requires a residential tenancy agreement with the end tenant. Free-of-charge transfers of use, such as a loan for use, do not fall under this.
- No unauthorised use. The subletting of residential space does not violate the Berlin ban on conversion to non-residential use, as long as the rooms are actually used for living.
Test schema: Five steps to correct classification
Before you resign, respond to a notice of termination or sign a new contract, work through this sequence.
- Who is the tenant? If it is a legal entity – GmbH, UG, AG, e. V., GmbH & Co. KG – that in itself points towards commercial property lease. A legal entity cannot have its own residential needs.
- What is the tenant's purpose? Your own home or that of your family? Then residential. Staff accommodation, sub-letting, use as a holiday home, or business operations? Then commercial.
- What does the contract say about the intended use? An explicit purpose clause is the strongest argument for interpretation – in both directions. If it is missing, things get complicated.
- Is there mixed use? Living and Working in the same rooms leads to a mixed tenancy with its own rules.
- Have the parties expressly agreed on residential tenancy law? Then it is considered a contractual agreement – even if the legal classification would be a different one. However, this agreement must be recognisably intended; according to the Kammergericht, the mere use of a form is simply not sufficient.
Special case of mixed tenancy: living and working in the same rooms
mixed-use leases mixed tenancies – and they cannot be split. Either residential or commercial tenancy law applies uniformly.
Which one, did the Federal Court of Justice in Judgement of 9 July 2014 (case reference VIII ZR 376/13) clarified. The deciding factor is which type of use predominates according to the intention of the parties. This must be determined on a case-by-case basis using all the circumstances. As indicators, the Federal Court of Justice (BGH) mentions, among other things:
- the contract form used – a residential or commercial tenancy agreement template,
- the area allocation between residential and commercial use,
- the rent split for both types of use,
- the question of whether VAT is shown – a strong indicator of commercial classification.
And if the interpretation does not lead to a clear result? In case of doubt, it is to be assumed that it is residential space. The Federal Court of Justice (BGH) justifies this by stating that tenant protection could otherwise be undermined through the construction of mixed contracts.
What is important is the difference from the Kammergericht's constellation: in a mixed tenancy, the tenant lives in the rooms themselves, they only use them additionally for professional purposes. When rented by a company for third parties, the tenant's own housing need is absent from the outset – there, the question of balancing interests does not even arise.
Special case of commercial subletting: What protects the end tenant
If the head lease is commercial, is the end tenant left completely unprotected? No – and that is the point where § 565 BGB comes into play.
The regulation stipulates: If, according to the tenancy agreement, the tenant is to commercially sublet the rented residential space to a third party for residential purposes, the landlord shall enter into the rights and obligations arising from the sublease upon termination of the main tenancy agreement. The final tenant therefore does not lose their home due to the intermediary tenant defaulting. Diverging agreements to their detriment are void pursuant to Section 565(3) of the Civil Code (BGB).
However, two conditions must be met, and both are frequently overlooked:
- Subletting must be provided for in the contract. The head lease must state commercial subletting for residential purposes as its purpose. If the landlord merely tolerates subletting, that is not sufficient.
- The sublease must be a residential tenancy. The end tenant must live there themselves. Gratuitous transfer of use – such as a loan for use to employees without rent payment – does not fall under § 565 BGB (German Civil Code).
For sublessors, this means: check whether your chain holds up legally. For landlords renting to a subleasing company, it means: you may end up with a residential tenancy agreement with the end tenant that you never concluded yourself.
Special case of company housing: tied flat or service flat?
Flats that are provided in connection with an employment relationship are subject to their own set of rules – and what needs to be legally and clearly separated is often confused here.
- Service accommodation (§§ 576, 576a BGB): There are two contracts – an employment contract and a separate tenancy agreement between employer and employee. Residential tenancy law applies, though with shortened notice periods pursuant to Section 576 of the German Civil Code (BGB) if the dwelling is required for another employee or if the nature of the service requires accommodation in the immediate vicinity. Agreements to the detriment of the tenant are void.
- Service tenancy (§ 576b BGB): The flat is part of the remuneration from the employment relationship; a separate tenancy agreement does not exist. Employment law applies during the employment relationship. Only after it has ended do the provisions of tenancy law apply accordingly – and even then only if the employee has furnished the flat predominantly with their own furnishings or runs a long-term shared household there with their family or relatives.
The situation at the Kammergericht was different: there, the employee was not the tenant, but rather the GmbH. Consequently, there was neither an employer-provided residential tenancy nor service accommodation, but rather a commercial lease held by the company for premises which it made available to its staff.
What changed in 2025 and 2026 – and why that makes differentiation more important
Since the decision of the Kammergericht, the legislature has shifted the legal consequences of the classification in several places. There are three changes you should know about.
1. Text form instead of written form for commercial property leases. The Fourth Bureaucracy Reduction Act has amended § 578 para. 1 of the German Civil Code (BGB). For tenancy agreements concerning land and – via § 578 para. 2 BGB – commercial premises, § 550 BGB has applied since 1 January 2025 with the proviso that text form (§ 126b BGB) suffices. An email can therefore be sufficient. For legacy contracts concluded up to 31 December 2024, a one-year transitional period applied; since 1 January 2026, text form has been consistently decisive.
For residential tenancy agreements, however, the requirement for written form under Section 550 of the German Civil Code (BGB) remains. Consequently, the question of form now also depends on classification: anyone who misclassifies a long-term contract risks turning a fixed-term contract into an indefinite one – with all the termination options that entails. The infamous „written form trap“ has therefore not ceased to exist; it has simply relocated.
2. Rent control cap extended. The regulations on the permissible rent at the start of a tenancy (§§ 556d et seq. of the German Civil Code - BGB) continue to apply until 31 December 2029 under the Act of July 2025. They apply exclusively to residential property rentals. For commercial property rentals, there is no statutory upper limit for the initial rent.
3. New amount in dispute threshold at the courts. Since 1st January 2026, local courts (Amtsgerichte) have jurisdiction in civil matters up to a value in dispute of 10,000 euros – previously it was 5,000 euros. Nothing changes for residential tenancy matters: pursuant to Section 23 No. 2a of the Courts Constitution Act (GVG), they are heard by the local court regardless of the value in dispute. In commercial tenancy disputes, however, the threshold for the regional court (Landgericht) shifts noticeably upwards.
Misuse of residential property in Cologne and NRW: the second level
The civil law classification is one question. The public law one is another – and it is regularly overlooked when it comes to company housing and workers' accommodation.
In North Rhine-Westphalia, the Housing Space Strengthening Act. On this basis, the City of Cologne has housing protection ordinance issued, which came into force on the same date. According to this, misuse is defined as any use of residential space for purposes other than living – such as conversion into office or retail space, prolonged vacancy, demolition, or letting as a holiday flat. Infractions are administrative offences and can be punished with fines of up to 500,000 euros.
Two points are crucial for our topic:
- A home is still a home. If the flat is actually used for permanent living – including by a company's employees – this generally does not constitute unauthorized use. This is in line with the ruling of the Kammergericht regarding Berlin law.
- Short-term rental is something else. Anyone who lets out residential space by the day or week in Cologne has needed a residential space identity number since 1 July 2022, must state it in every advertisement and must report every occupancy. In practice, the boundary between „accommodation of employees“ and „commercial short-term letting“ is often closer to short-term letting than those involved would like.
A commercial lease agreement for a flat is therefore not automatically safe under the law on the prohibition of unlawful change of use – and a residential lease agreement is not automatically safe if properties are in fact let out on a weekly basis. The two levels must be examined separately.
A worked example: What the notice period means in concrete terms
Assuming your tenancy agreement for a flat let to a company is a commercial property lease and you, as the landlord, wish to terminate it.
In accordance with Section 580a(2) of the German Civil Code (BGB), standard termination is permitted at the latest on the third working day of a calendar quarter, to take effect at the end of the next calendar quarter. If your notice of termination is received by the tenant on 3 January, the tenancy ends on 30 June. If you are a few days late and the notice is not received until 10 January, it will not take effect until 30 September – three months later, without anything else having changed.
By way of comparison, in the case of residential property, the landlord would additionally have to demonstrate a legitimate interest pursuant to Section 573 of the German Civil Code (BGB), the notice period would increase with the duration of the tenancy pursuant to Section 573c (1) BGB, and the tenant could object to the termination on grounds of hardship pursuant to Section 574 BGB. They are two completely different procedures.
When calculating the three working days, it is worth taking a close look – one day too late shifts the end of the contract by a full quarter.
Typical mistakes that prove costly in court
- The standard-form contract as evidence. „It says residential tenancy agreement on it.“ According to the Kammergericht, that is precisely not enough. Anyone who wants the applicability of residential tenancy law must agree on it, not merely use a template.
- The missing intended use in the contract. Many contracts are silent on what the rooms are to be used for. This shifts the decision to a subsequent dispute over interpretation – and that is difficult to predict.
- The termination under the wrong regime. Serving a residential termination with a statement of grounds and information on the social hardship clause for a commercial lease is not incorrect, but it takes time. Conversely, an unjustified termination for residential property is simply void.
- The subletting chain without section 565 of the German Civil Code (BGB). Anyone who sublets residential space as a sublessor without the main tenancy agreement stating this purpose does not have a secure arrangement – and neither, ultimately, might the final tenants.
- The forgotten misuse gaze. Legally sound under civil law, vulnerable under administrative law – we encounter this combination regularly in Cologne when it comes to corporate and contractor housing.
- Reliance on the old written form. Since 2025, text form has applied to business premises. Anyone who relies on the wrong formal requirement for a contract that is difficult to classify can lose a desired fixed-term arrangement.
What you should do now
If you are letting: Explicitly state the intended use in the contract – a single sentence is often enough, for example, that the premises are for the tenant to accommodate their own employees and that a commercial lease is established. Also, record whether and to what extent sub-letting is permitted.
If you are renting as a business: Do not count on Protection against dismissal. If you need certainty of planning, secure it through the term of the contract, through renewal options or through a contractual exclusion of ordinary termination – not through the hope of §§ 573 ff. BGB.
If you have already received a notice of termination: First check the classification, then the deadline, then the form. Respond promptly. In commercial tenancies there is no statutory objection period as with residential property, but there is room for negotiation as long as the tenancy is still running.
Legal assistance becomes advisable at the latest when termination is imminent, when a contract is to run for more than a year, or when a chain of subleases is being set up. In all these cases, the classification determines the outcome – and it can be shaped beforehand, but is very difficult to correct afterwards.
Frequently asked questions
Is a tenancy agreement for an apartment with a GmbH residential property tenancy?
As a general rule, no. Pursuant to Section 549(1) of the Civil Code (BGB), a residential tenancy agreement requires that the premises serve to cover the personal residential needs of the tenant or their family members. A legal entity can neither reside anywhere itself nor have family members. The Berlin Court of Appeal confirmed this in a decision dated 18.09.2024 (ref. 8 U 40/24) regarding a GmbH that had rented an apartment for its employees. The only exception is if the parties expressly agree on the application of residential tenancy law.
Does protection against dismissal apply if the contract says „residential lease“?
Not automatically. The heading and the form used are indicators for interpretation, nothing more. The decisive factor is the intended use pursued by the tenant contractually. Anyone who wants to be certain that residential tenancy law is to apply should explicitly include this as an agreement in the text of the contract.
What is a mixed tenancy agreement, and which law applies then?
A mixed tenancy exists when a single contract covers premises for both living and working – for example, an apartment and a surgery. The contract is not split; the law of the predominant type of use applies uniformly. The Federal Court of Justice (BGH) (judgment of 09.07.2014, ref. VIII ZR 376/13) relies on an overall assessment: contract form, floor space and rent proportions, and VAT identification. If the interpretation does not lead to a clear result, residential tenancy law is to be applied in case of doubt.
What notice period applies to commercial rent?
For business premises, ordinary termination pursuant to Section 580a(2) of the German Civil Code (BGB) is permitted at the latest on the third working day of a calendar quarter to take effect at the end of the next calendar quarter. In practice, this means a notice period of roughly six to nine months. The parties may agree on deviating notice periods; in commercial lease agreements, this is customary and permissible.
Does a commercial lease agreement still have to be concluded in writing?
Since 1 January 2025, the text form pursuant to Section 126b of the German Civil Code (BGB) has sufficed for commercial premises leases with a term of more than one year; Section 578(1) BGB refers accordingly to Section 550 BGB. For contracts concluded before 1 January 2025, a transitional period applied until 31 December 2025. For residential tenancy agreements, the written form requirement remains. If the form is not complied with, the contract is deemed to have been concluded for an indefinite period and may be terminated by ordinary notice.
What protects the end tenant in a commercial sublease?
Section 565 BGB. If the headlease ends, the owner enters into the residential tenancy agreement with the subtenant. This requires that the headlease provides for the commercial subletting for residential purposes and that a residential tenancy agreement actually exists between the subtenant and the intermediate tenant. Gratuitous transfers are not covered. Divergent agreements to the detriment of the subtenant shall be void.
Is the letting of an apartment to a company a misuse of residential space?
Not solely because the tenant is a company. The decisive factor is the actual use: if people live there permanently, there is generally no misuse. In Cologne, the housing protection regulations (Wohnraumschutzsatzung) have been in force since 1 July 2021 on the basis of the North Rhine-Westphalia Housing Strengthening Act (Wohnraumstärkungsgesetz NRW). Things become critical with day-to-day or weekly lettings: this requires a housing identity number, and violations can be punished with fines of up to 500,000 euros.
Which court has jurisdiction in the event of a dispute over classification?
If it is residential property, the local court (Amtsgericht) always has jurisdiction pursuant to Section 23 No. 2a of the Courts Constitution Act (GVG), regardless of the amount in dispute. In the case of commercial property rent, jurisdiction depends on the amount in dispute; since 1 January 2026, the threshold between the local court (Amtsgericht) and the regional court (Landgericht) has been 10,000 euros. If the classification itself is disputed, the court seised decides this in advance.
Conclusion
The decision of the Berlin Court of Appeal of 18 September 2024 (ref. 8 U 40/24) essentially says something simple: A tenancy agreement is what it is intended to serve according to the will of the parties – not what is written on the cover page. Anyone who rents residential space as a legal entity does so for economic reasons, not out of a personal need for housing. Therefore, commercial tenancy law applies.
Since this decision, the question has become more important rather than less. The formal requirements for residential and commercial space are now diverging, the rent control cap remains in place until 2029, and judicial jurisdiction has shifted. The switch between the two regulatory worlds is set when the contract is concluded – and can be cleanly set there with a few precise sentences.
If you would like to have a contract reviewed before you sign or terminate it, you can reach us at 0221 80187670 or by e-mail to info@mth-partner.de.
Important Note: The content of this article has been prepared to the best of our knowledge and belief. However, due to the complexity and constant evolution of the subject matter, we must exclude liability and warranty. The content of this post has been created to the best of our knowledge and understanding. However, the complexity and constant evolution of the subject matter make it necessary to exclude liability and warranties. This post does not replace individual legal advice.
