Practical case of tenancy law: inheritance division, § 566 BGB ("purchase does not break rent") and the limits of personal use cancellation

Anyone who takes over an inherited rental flat as part of an inheritance settlement often considers themselves to be the "new landlord" - with all rights, including the right to terminate the tenancy for personal use. This case from Cologne Local Court shows how deceptive this assumption can be: Section 566 of the German Civil Code ("purchase does not cancel rent") does not help here, and clever wording in the notarised deed ("transfer of benefits and encumbrances") is no substitute for a power of termination. This is an important piece of practical tenancy law for communities of heirs and tenants.

The case in brief

A 3-room flat (approx. 81 square metres) was rented out by the plaintiff's father - as usufructuary - to the tenants who later became defendants in 2016. After his death in 2017, the tenancy fell to the community of heirs (plaintiff and two sisters). In 2018, the heirs arranged a partial inheritance settlement: the flat was allocated to the plaintiff; the deed stated that possession, benefits and encumbrances were transferred to him, the tenancies were known and would be taken over.

In 2019, the plaintiff asked the tenants to pay the rent to his account in future; he also communicated utility bills and a rent increase himself. In 2022, he gave notice of termination of personal use - in his own name only: His 19-year-old daughter wanted to move to Cologne for her education. The tenants objected. The plaintiff filed an action for eviction.

Court Decision

The Cologne Local Court dismissed the action. Result: No eviction, costs borne by the plaintiff. Core: The plaintiff was not the sole landlord and was not authorised to terminate the lease in his own name. Neither Section 566 BGB nor the contractual transfer of possession/use/encumbrances made the cancellation effective.

Why the court ruled as it did (clearly explained)

1) Majority of landlords remains majority - even after a dispute

Upon the death of the usufructuary, all heirs became joint landlords. As long as the parties to the contract do not change this by mutual agreement, this remains the case. Acquisition of ownership through settlement does not automatically make the acquirer the sole landlord. A change in the landlord status requires the consent of all parties involved - including the tenants.

2) § 566 BGB ("purchase does not break rent") does not apply here

§ Section 566 BGB applies in the event of a sale to a third party. However, the division of the estate is not a sale to a third party, but an internal distribution. In addition, Section 566 BGB serves to protect the tenant: the tenant should retain possession despite the change of ownership. In this case, the plaintiff was already a landlord as a co-heir - additional protection is not necessary; an (analogous) application would even weaken the tenant (fewer debtors on the landlord's side).

3) "Uses and encumbrances" ≠ Right of cancellation

The allocation of rent claims, settlements and risks regulated in the deed relates to economic effects. This is not an authorisation to exercise rights (such as termination of tenancy) in one's own name. The following applies to termination where there are several landlords: all sign - or someone is expressly authorised or empowered to terminate in their own name.

4) No tacit contractual amendment

The fact that the tenants transferred money to the plaintiff, accepted utility bills and agreed to a rent increase does not mean that they agreed to a change of landlord. From their point of view, they were simply fulfilling their obligations - nothing more.

What does this mean for you? Practical consequences & tips

For heirs/landlords in the community of heirs

• Plan the landlord role properly: If one person is to act alone in future, clear agreements are required - authorisation to represent all landlords or an authorisation to terminate the lease in their own name. This authorisation should be formulated explicitly (and preferably notarised) and include all rights under tenancy law (termination, rent increase, notice of modernisation).

• Settlement ≠ Party decision: The settlement of the estate regulates the internal relationship of the heirs and the assignment in rem. The debt relationships with tenants remain unaffected as long as tenants do not consent.

• Form of the cancellation: If there is a majority of landlords, all of them must sign the notice of termination for personal use or the power of attorney/authorisation must be clearly stated in the letter (e.g. "i. V. for..." or reference to authorisation to terminate in one's own name).

• Documentation is everything: Enclose copies of powers of attorney/authorisations with the letter of termination and name them in the text. This will prevent any disputes about legitimisation.

For tenants

• Check the sender's side: Is there only one person as the person giving notice, although you know that a community of heirs was originally the landlord? Ask and request power of attorney/authorisation.

• Payment method is not consent: Changing the rent payment account or communicating about operating costs does not automatically make the addressee the sole landlord.

• Utilise the options to object: There are protective rights in the event of a personal use cancellation (e.g. hardship case according to § 574 BGB). Observe deadlines and seek legal advice.

For notaries and property managers

• Shape instead of hope: Add a precise authorisation clause for the acquirer to the settlement deeds, which explicitly states the rights to take action. Note that Section 566 BGB does not automatically apply in the event of a settlement.

• Ensure the flow of information: Inform tenants transparently about changes - who is the owner, who is the landlord, who is authorised?

Conclusion

The Cologne case is a wake-up call: ownership and landlord status are not congruent in tenancy law. Anyone who wants to act after a property division must have power of attorney or authorisation in hand - otherwise the termination for personal use already fails due to the form. Conversely, for tenants this means taking a close look at who is giving notice and with what authorisation. The guiding principle that you should take with you: "Section 566 BGB does not help in the event of a dispute - and 'uses and encumbrances' do not replace an authorisation to terminate."