Anyone renting office space, retail premises, or a warehouse is operating in a different legal universe than when renting residential accommodation. Commercial tenancy law knows neither rent control nor Protection against dismissal — for this, a freedom of contract which holds both opportunities and risks.
Since January 2025, one of the most important formal requirements has also fundamentally changed. This article explains what matters in commercial rental agreements – from the contract form to the rent amount and termination.
Note: This post is for general guidance only and does not constitute individual legal advice. Commercial lease agreements are complex documents where the contractual terms can determine financial consequences in the six-figure range. Have your contract reviewed by a [professional] before signing. Solicitor for tenancy law Check.
New from 2025: Text format instead of written form (BEG IV)
The most important change first. Until the end of 2024, commercial lease agreements with a term of more than one year had to be concluded in writing (§ 550 BGB a.F.) – meaning: handwritten signatures of both parties on the same document. If the written form was missing, the contract was considered indefinite and could be terminated at any time with statutory notice. For years, this was a legal minefield.
As of 1 January 2025, for new commercial leases, the Text form — so a contract conclusion by email. But: For old contracts, there was a transitional period. Since 1 January 2026 This is sufficient in text form for all commercial lease agreements concluded before 2025. A violation of form in an old contract can therefore no longer be used as a reason for termination since 2026, as long as the text form is maintained.
What does that mean in practice? Anyone who concludes a commercial lease for five years by e-mail will have validly concluded it for a fixed term since 2025. And landlords who have previously threatened a lack of written form to terminate long-term contracts prematurely have lost this tool.
What is a Commercial Lease Agreement?
A commercial lease agreement governs the rental of premises used for business activities rather than residential purposes. Typical commercial premises include offices, retail spaces, medical practices, workshops, catering areas, and warehouses.
There is no standalone „commercial tenancy law“ in Germany. The legal basis is formed by the general tenancy provisions of §§ 535 et seq. of the German Civil Code (BGB). However – and this is the crucial point – the special tenant protection provisions of §§ 549–577a BGB only apply to commercial premises to a very limited extent (§ 578 Abs. 2 BGB). This means: no owner-occupier clause, no rent brake, no rent index, no grace period for payment, no staggered notice periods.
Instead, the Freedom of contract. The legislator treats commercial tenants and landlords as parties on an equal footing. What is stated in the contract is binding – with a few exceptions.
Residential vs. Commercial: The key differences
| Subject | Residential tenancy agreement | Commercial lease |
|---|---|---|
| Tenant protection | Extensive statutory protection (§§ 549–577a BGB) | Limited legal protection; freedom of contract |
| Rent amount | Rent Index, Rent Brake, Cap | Freely negotiable, no upper limit |
| Security deposit | Max. 3 net cold rent (§ 551 BGB) | No legal limit |
| Contract duration | Fixed-term contracts only under strict conditions (§ 575 German Civil Code) | Extension freely possible, up to 30 years |
| Notice period (indefinite) | 3–9 months, depending on the rental period | 6 months to the end of the quarter (§ 580a para. 2 BGB) |
| Grounds for termination (landlord) | Only with a legitimate interest (§ 573 BGB) | No reason required |
| Grace period payment for late payment | Yes — termination for cause can be cured (§ 569 Abs. 3 BGB) | No – termination remains effective |
| Operating costs | Only costs under Section 2 of the Operating Costs Ordinance (BetrKV) are eligible for apportionment. | Freely negotiable, including administration costs etc. |
| Maintenance | Landlord's obligation generally | Largely transferable to tenants |
| Rent reduction | Non-contractually excludable | Contractually limitable or excludable |
| Contract Form (from 2025/2026) | Written form for fixed-term contracts (§ 575 BGB) | Text form is sufficient (since BEG IV) |
| Value Added Tax | Not relevant | Landlords can opt under Section 9 of the German VAT Act (19 %) |
Rent amount: What rental models are there?
In commercial tenancy law, there is no rent brake or rent index. The rent amount is purely a matter of negotiation. For this purpose, there are various rental models that are used differently in practice:
Fixed rent — a fixed monthly amount for the entire contract duration. Offers planning security for the tenant, but does not take inflation into account.
Index rent — the rent is linked to the consumer price index and adjusted annually. In periods of high inflation, this can lead to significant increases. The Federal Minister of Justice has announced that she intends to examine a legal limit for index-linked rents in 2026 — the specific details are still pending.
Graduated rent — the rent increases are agreed in advance (e.g. +3 % per year). This provides predictability for both sides.
Turnover rent — the rent is based in whole or in part on the tenant's turnover. Often used in retail, especially in shopping centres. Usually structured as a minimum rent plus a turnover share.
Operating costs: What can be passed on?
In residential tenancy law, only costs listed in § 2 of the Operating Costs Ordinance may be passed on to the tenant. In commercial tenancy law, it's different: here, in principle, all costs be transferred to the tenant — including administrative costs, security service costs, maintenance reserves, and even proportional insurance premiums. The prerequisite is that the types of costs are transparently and concretely named in the contract.
This is a critical point for tenants. Anyone who signs a contract without carefully reading the operating costs clause can quickly find themselves facing service charges that make up a significant portion of the overall burden.
Deposit: No legal maximum
For residential properties, the deposit is limited to three net cold rents (§ 551 BGB). For commercial properties, this limit does not apply. In practice, three to six months' rent is common. The type of deposit – cash deposit, bank guarantee, deposit insurance – can also be freely agreed upon.
Likewise, the legal right to pay in instalments is also missing. The landlord can demand the full deposit before the tenancy begins. It is particularly worthwhile to negotiate in this case.
Termination of the Commercial Lease Agreement
Permanent contracts
The statutory notice period for unlimited commercial lease agreements is six months to the end of the quarter (§ 580a para. 2 German Civil Code). This is an important detail: the notice of termination does not simply take effect after six months, but at the end of the next quarter after the notice period has expired. If the tenancy is to end on 30 September, the notice of termination must be received by the third working day of April at the latest (= start of the preceding quarter minus 6 months).
And unlike in residential tenancy law, the landlord no reason for termination. He can terminate it at any time without needing to provide a reason such as personal use or breach of duty.
Fixed-term contracts
Fixed-term commercial leases are the norm. Lease terms of 5, 10, or even 15 years are common. During the term, the contract generally cannot be terminated for ordinary reasons – neither by the tenant nor by the landlord. Early termination is only possible if a special termination clause has been agreed upon or if there is an important reason for extraordinary termination (§ 543 BGB).
Immediate termination - no grace period
In the event of payment arrears of two months' rent, the landlord can also terminate the commercial lease without notice (§ 543 Abs. 2 Nr. 3 BGB). However — and this is one of the most significant differences to residential tenancy law: the so-called grace period payment under § 569 Abs. 3 Nr. 2 BGB applies not for commercial premises. Anyone who pays outstanding amounts after termination does not thereby cure the termination. It remains effective.
For commercial tenants, this means: Paying rent on time is of vital importance. Anyone who gets into payment difficulties should immediately seek dialogue with the landlord — before the termination is declared.
Maintenance: Building fabric or all down to the tenant?
In residential tenancy law, the landlord is generally responsible for maintenance. In commercial tenancy law, the maintenance obligation can largely be transferred to the tenant – both for the rented premises themselves and, under certain conditions, for communal areas and building services.
In practice, a distinction is made between so-called Roof and Eaves Clause (the landlord remains responsible for the roof and load-bearing walls, the tenant for everything else) and the complete transfer. But here too there are limits: If a standard form contract (not an individually negotiated contract) is used, maintenance clauses are subject to standard form contract control according to §§ 305 ff. BGB. Clauses without a cost limit or with an unreasonable transfer of risk may be invalid.
Competitive protection: Often forgotten, practically crucial
Anyone renting a retail unit in a multi-tenant building wants to be sure that the landlord doesn't rent to a direct competitor in the same building. This protection is called Protection against competition.
To a certain extent, competition protection inherent in the contract also applies without an express agreement — the BGH derives it from the landlord's duty to grant the use of the property in accordance with the contract. But: In practice, statutory protection is rarely sufficient. Anyone who wants to be sure needs an express contractual clause that clearly defines the spatial and substantive scope of competition protection.
VAT option (§ 9 UStG)
Rental income from commercial properties is generally exempt from VAT. However, the landlord can opt for VAT opt — that means he calculates % VAT on the rent. In return, he can claim input tax on construction and maintenance costs himself.
This has consequences for the tenant: If the tenant is himself entitled to deduct input tax (e.g. as a retailer or craftsman), the VAT is a straightforward item – economically neutral. However, if the tenant uses the premises for VAT-exempt services – for example, as a doctor or alternative practitioner – the rent effectively becomes 19% % more expensive.
The VAT option must be agreed upon in the rental agreement. If it is missing, the rent is VAT-exempt.
General Terms and Conditions Control: Not everything in a standard form contract is legally binding
Freedom of contract in commercial tenancy law has limits – namely, where the contract is not individually negotiated but is provided as a standard form contract by the landlord. In such cases, the provisions on general terms and conditions (§§ 305 et seq. BGB) apply.
Typical clauses that regularly fail in standard terms and conditions control:
- Maintenance obligations without a cost limit (case law generally accepts 5–10 % of the annual net rent as a limit)
- Blanket transfer of all redecoration obligations without a time limit
- One-sided rent adjustment clauses without limitation
- Complete Exclusion of the Right to Reduce Rent in Standard Form Contracts
For tenants, this means: even if the contract says something, it doesn't have to be valid. A legal review uncovers ineffective clauses – often with significant financial implications.
The following points absolutely must be covered in a commercial lease agreement: * **Parties:** Full legal names and addresses of the landlord and tenant. * **Premises:** A precise description of the rented property, including address, floor, and specific areas (e.g., parking spaces, storage rooms). * **Purpose of Lease:** A clear statement of how the property will be used (e.g., for retail, office space, warehousing). This is crucial for zoning and insurance purposes. * **Lease Term:** The start and end dates of the lease. Specify if it's a fixed-term lease or a lease with indefinite duration. * **Rent:** The amount of rent, including any value added tax (VAT) if applicable. * **Rent Adjustments:** How and when rent will be reviewed and potentially increased (e.g., index-linked, fixed percentage increases at specific intervals). * **Additional Costs (Nebenkosten):** Which additional costs the tenant is responsible for (e.g., heating, water, waste disposal, property taxes, insurance) and how these are calculated and paid. * **Deposit/Security:** The amount of the security deposit, how it will be held, and the conditions for its return. * **Maintenance and Repairs:** Clearly define the responsibilities of both the landlord and tenant regarding maintenance and repairs. This often distinguishes between minor repairs (tenant) and structural repairs (landlord). * **Alterations and Fit-outs:** Conditions for the tenant to make alterations or fit-outs to the property, including the need for landlord consent and who bears the costs. Also, what happens to these alterations at the end of the lease. * **Insurance:** The types of insurance each party must hold (e.g., building insurance for the landlord, contents and liability insurance for the tenant). * **Termination Clauses:** Conditions under which either party can terminate the lease, including notice periods for ordinary termination and grounds for extraordinary termination (e.g., breach of contract). * **Subletting:** Whether subletting is permitted, and under what conditions. * **Return of Premises:** The condition in which the property must be returned at the end of the lease. * **Governing Law and Jurisdiction:** Which country's laws apply and in which court disputes will be settled. * **Handover Protocol (Übergabeprotokoll):** While not always part of the main lease document, it's essential to have a protocol that details the condition of the property at the start of the lease, including meter readings.
A good commercial lease agreement clarifies at least the following points:
- Contracting parties — full designation including company name, authorised representatives, commercial register number
- Property for rent — detailed description (location, area, amenities, condition), ideally with a floor plan
- Purpose of use — what commercial use is permitted? An overly strict definition of purpose can become problematic if the business model changes
- Rental period and option to renew — Term, extension options, special termination rights
- Rent level and rent adjustment — Fixed rent, index-linked, phased? Which index? What adjustment intervals?
- Operating costs — complete list of all apportionable cost types
- Security deposit — Height, shape, payment date
- Maintenance and repair — clear division of responsibilities
- Protection against competition — applies where relevant: scope in terms of space and subject matter
- Value Added Tax — Landlord’s option, tenant’s entitlement to deduct input tax
- Subletting — is it permitted, and if so, under what conditions?
- Return — Condition at end of contract, dismantling obligations, handover protocol
Frequently asked questions about commercial rental agreements
Muss ein Gewerbemietvertrag schriftlich abgeschlossen werden?
No longer mandatory from 1 January 2025. With the BEG IV, text form is sufficient – including email. This also applies to existing contracts from 1 January 2026. However, a written contract is still recommended for evidential reasons.
What is the notice period for a commercial lease agreement?
Six months to the end of the quarter (§ 580a para. 2 BGB). Unlike with residential property, the notice period does not extend with the duration of the tenancy. And the landlord does not need a reason for termination.
Is there an upper limit for the security deposit?
No. The three-month limit specified in Section 551 of the German Civil Code (BGB) applies only to residential property. For commercial properties, three to six months' rent is customary, with higher deposits being negotiable.
Can the rent be freely agreed upon?
Yes. Neither rent control nor rent index applies to commercial rentals. Common models: fixed rent, index rent, tiered rent, turnover rent.
Can the tenant reduce the rent due to defects?
Essentially yes (§ 536 BGB). However, unlike residential property, the right to a rent reduction can be contractually restricted or excluded in a commercial lease.
What is a non-compete clause?
A contractual clause that obliges the landlord not to take in a tenant with a competing business in the same property. Even without an express clause, there is a certain inherent contractual protection.
Does value added tax need to be paid on commercial rent?
Only if the landlord opts for value added tax under Section 9 of the VAT Act. Then 19 % will be added to the rent. This is financially neutral for tenants entitled to deduct input tax, but not for tax-exempt freelancers (doctors, therapists).
Can an immediate termination due to payment arrears be rectified by subsequent payment?
No. The grace period payment under § 569 (3) of the German Civil Code (BGB) only applies to residential leases. In commercial lease law, the immediate termination remains valid, even if the arrears are paid afterwards.
Have a commercial lease agreement checked before you sign
A commercial lease generally binds you for years. And unlike with residential tenancy law, you cannot rely on tenant protection regulations – what is written in the contract applies. This is because a court will not amend the contract in your favour simply because a clause places an economic burden on you.
This is exactly why a legal review before signing is worthwhile. Call us Lawyer Helmer Tieben under an 0221 - 80187670 or write to info@mth-partner.de. We review your commercial lease agreement and highlight risks before they become problems.
More about our rental law services in Cologne → | Arrange an appointment
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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. The content of this post has been created to the best of our knowledge and current understanding. The complexity and constantly changing legal situation necessitate the exclusion of liability and warranty. For your specific situation, please consult a solicitor.
