Fixed-term tenancy agreements are becoming increasingly popular with landlords, as they do not need a reason to be able to terminate the tenant's contract because the term has expired. This gives landlords a certain degree of protection against rental nomads. However, fixed-term tenancy agreements can also have advantages for the tenant.
The fixed-term tenancy agreement is regulated in Section 575 BGB. When the tenancy agreement is concluded, a deadline is set that determines the duration of the tenancy. Accordingly, such a tenancy agreement is limited to a very specific period. Such tenancy agreements must be concluded in writing in accordance with Section 126 BGB, as all agreements between the landlord and tenant are best recorded in writing. This often saves unpleasant legal disputes and eliminates discrepancies. This regulation applies in particular to all fixed-term tenancy agreements with a term of more than one year, § 550 BGB. The legislator has not set an upper time limit for determining the fixed term. Accordingly, any period of time is permissible, even a term of more than ten years. Until 2001, the upper limit was five years. In accordance with Section 575 (2) BGB, the tenant can request information from the landlord at the earliest four months before the expiry of the fixed-term tenancy agreement as to whether the reason given for the fixed term when the agreement was concluded is still valid. The landlord must provide the tenant with information within one month. If there is no response from the landlord after one month, the tenant can remain in the rented property for a correspondingly longer period. If the reason for the time limit occurs later than planned, both contracting parties can agree in accordance with Section 575 (3) BGB that the tenancy will be extended by this period.
Following the entry into force of the Tenancy Law Amendment Act, a fixed-term tenancy agreement can only be entered into for a specific period if the landlord also states specific reasons for the fixed term - for example, planned owner occupation. This is known as a qualified fixed-term tenancy agreement. If you as a tenant or landlord have signed a tenancy agreement that contains a specific term and was concluded after 1 September 2001, it must contain a reason for a fixed term. If it does not, this tenancy agreement is automatically deemed to be for an indefinite period and can be terminated with due notice. However, caution is again required here, as this does not directly mean that it can be cancelled at any time. A mutual waiver of cancellation takes the place of the ineffective time limit. This means that termination is possible at the earliest at the end of the agreed rental period, which in the opinion of the judges corresponds to the will of both contracting parties (BGH, judgement of 11 December 2013, case no. VIII ZR 235/12).
Reasons for limitation and form:
The reasons for the time limit must be clear and specific and must be set out in writing and at the latest when the contract is concluded - whether directly in the tenancy agreement or as an addendum to the tenancy agreement is left to the contractual partner. Accordingly, simply "personal use" is not sufficient as a reason; rather, the reason must relate to the individual case and be specified. It is always advisable to include the specific date on which the tenancy ends in the contract. This avoids various interpretations that could lead to disputes. In addition, the landlord may not change the specified reason for the fixed term. There must be a precise reason for the fixed term from the outset. The German Civil Code contains three reasons on which the landlord can rely without hesitation when setting a time limit on the tenancy agreement. This would be if he wishes to use the rented property himself after the tenancy or if renovation or even demolition is planned in the future or if he wishes to let the property as a company flat. The landlord cannot and may not invoke other reasons in the case of fixed-term tenancy agreements.
Own use
The landlord may therefore limit the rental agreement in accordance with Section 575 Paragraph 1 Number 1 BGB if he intends to use the rental property for himself, his family members or members of his household for a certain period of time. It is also sufficient if the tenant only wishes to use the rental property as a second or weekend home. This option of a fixed-term tenancy agreement is far simpler and more convenient than cancelling the tenancy at a later date due to personal requirements. It is therefore highly recommended.
Renovation work/demolition
In addition, the landlord may extend the tenancy agreement in accordance with Section 575(1)(2) BGB if major renovation work is due or a conversion or demolition of the building is planned. However, he may only do so under the condition that the construction work would make it considerably more difficult if the tenancy were still in place. In this case, it is sufficient if the landlord has the intention to remodel. For this reason, time limits on tenancy agreements are very common in practice, as commercial landlords, for example, are not permitted to set a time limit on the agreement due to owner occupation.
Utilisation as company flat
The next and final possible reason for a fixed-term tenancy agreement is use as a company flat in accordance with Section 575(1)(3) of the German Civil Code (BGB) - a rather rare occurrence in practice. Nevertheless, it does happen from time to time that the landlord needs the rented property for a caretaker or a contractor, for example.
A contract can only be concluded prematurely if both the landlord and tenant agree to the termination of the tenancy and conclude a mutually agreed cancellation agreement. Otherwise, the fixed-term tenancy is terminated without notice if the contractually agreed point in time occurs, the landlord has provided information about the reason for the fixed term in good time and the reason for the fixed term is still valid and continues to exist. The burden of proof and the burden of presentation regarding the reason lies with the landlord in accordance with Section 575 Paragraph 3 Sentence 3 BGB. However, if there is a disagreement between the contracting parties, the burden of proof and presentation lies with the party invoking an unclear provision.
Exclusion of ordinary cancellation:
The exclusion of the ordinary right of termination in the tenancy agreement must be distinguished from the fixed-term tenancy agreement. According to the case law of the BGH, an exclusion of the ordinary right of termination is not a fixed-term tenancy agreement, but on the contrary an open-ended tenancy agreement. According to § 557a BGB, the tenant can be unilaterally obliged to waive his right to terminate the lease for a maximum of four years (BGH 19.11.2008 Ref. VIII ZR 30/08).
Advantages of a fixed-term tenancy:
One clear advantage is that it is not possible to increase the rent just like that. The landlord can increase the rent up to the standard local comparative rent, but only if this is stipulated in the temporary tenancy agreement. If there is no such provision in the contract, only the rent stipulated in the contract can be demanded.
Another advantage is the lack of termination for personal use. The landlord cannot suddenly terminate the tenant's tenancy agreement for personal use.
Disadvantages of a fixed-term tenancy:
There is no ordinary termination for fixed-term rental agreements, as this is excluded. This means that there are no cancellation options. Neither for the tenant nor for the landlord. The tenancy agreement runs until the specified time window, so both parties are bound for a longer period of time. However, life circumstances can change unpredictably, for example if you urgently need a larger flat. If you are unable to reach an agreement with the landlord on a cancellation contract, you can resort to the option of subletting or subletting. After all, you can't just give notice of cancellation.
In the case of a fixed-term tenancy, tenants cannot invoke the special provisions on protection against dismissal, meaning that there is no protection against dismissal. However, the landlord cannot suddenly terminate the tenant prematurely due to personal requirements, as a fixed-term tenancy agreement expires without a legitimate interest and not prematurely.
The landlord can only give the tenant extraordinary notice of termination if there is a special reason. This may be the case if the tenant does not pay their rent for months. There may also be a special reason if there are demonstrable health hazards emanating from the flat that are damaging the tenant's health. It is also possible to terminate a fixed-term tenancy agreement prematurely if there is a case of personal hardship - for example a move to a retirement home or an unavoidable professional transfer.
Furthermore, there is no social clause for the tenant, so that they can neither invoke the social clause when the time limit expires nor object to the termination of the tenancy in the event of hardship, Section 574 BGB.
The most important things at a glance:
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- Fixed-term tenancy agreements can only be concluded if they can be justified on one of the three grounds listed above and the tenant is informed of these in writing before or at the time of conclusion.
- There is no maximum time limit for a fixed-term tenancy agreement, so any period can generally be specified and should also be communicated in detail.
- Neither the tenant nor the landlord may give ordinary notice of termination during the fixed-term tenancy agreement.
- You should take a closer look at the advantages and disadvantages so that you don't end up in a tight spot later on. There are considerable disadvantages to fixed-term tenancy agreements, especially for tenants.
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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. Important Notice: The content of this article has been created to the best of our knowledge and understanding. However, due to the complexity and constant changes in the subject matter, we must exclude any liability and warranty.
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Lawyers in Cologne provide advice and representation in tenancy law.
