Federal Court of Justice, 22 January 2014, Ref.: XII ZR 68/10
Many tenancy agreements contain a so-called "written form cancellation clause". This states that tenants and landlords must take all actions and make all declarations necessary to fulfil the statutory written form requirement and not terminate the tenancy agreement prematurely on the grounds of non-compliance with the statutory written form requirement.
Whether such a written form cancellation clause can be made legally effective by individual contract is not uniformly assessed in case law and in the literature.
Failure to comply with the statutory written form requirement may be of significance in relation to the question of the notice period, among other things.
In the above-mentioned judgement, the Federal Court of Justice had to deal with a breach of written form and its consequences in the context of an action for eviction.
Facts of the Case The plaintiff made a claim against the defendant for eviction and surrender of rented premises.
On 20 September 2005, the defendant concluded a written rental agreement with the insolvency administrator for the assets of the plaintiff's legal predecessor for a retail space in order to operate a pharmacy there. A fixed rental period from 1 January 2006 to 31 December 2015 was agreed.
Section 24 no. 6 of the rental agreement provided for this:
"... Subsequent amendments and additions to this contract must be made in writing. The parties to the tenancy agreement are aware of the special statutory written form requirements of §§ 550, 126 BGB. They hereby mutually undertake, at the request of either party at any time, to take all actions and make all declarations necessary to fulfil the statutory written form requirement and not to terminate the tenancy agreement prematurely on the grounds of non-compliance with the statutory written form requirement. This applies not only to the conclusion of the original agreement/main agreement, but also to addenda, amendment and supplementary agreements."
Subsequently, the defendant requested a contract modification in a letter dated 10 November 2005, which was intended to grant him an additional right of termination as of 31 December 2008.
In a letter dated 22 December 2005, the insolvency administrator finally confirmed the agreements made to the defendant. Among other things, an agreement was confirmed that the rental period stated in § 2 Para. 1 of the written rental agreement would be agreed anew for the period from 1 March 2006 to 28 February 2012, whereby the defendant was entitled to extend the rental agreement three times by five years each time, and that the plaintiff's legal predecessor had agreed to carry out structural alterations at its own expense.
The plaintiff was entered in the land register as the new owner of the property on 31 January 2008. In a letter dated 8 April 2008, she gave the defendant notice of ordinary termination of the tenancy with effect from 31 December 2008, referring to the failure to comply with the written form of the tenancy agreement.
The regional court initially appealed to dismissed the action for eviction and restitution. On the plaintiff's appeal, the Higher Regional Court amended the contested judgement and upheld the action. With the appeal allowed by the Senate, the defendant is pursuing its claim for dismissal before the Federal Court of Justice.
Federal Court of Justice: The BGH followed the opinion of the Higher Regional Court and dismissed the defendant's appeal. The tenancy of the parties was terminated by the ordinary termination of the plaintiff on 8 April 2008 in accordance with §§ 542 para. 1, 550, 578 para. 1, 2, 580a para. 2 BGB as of 31 December 2008.
In accordance with Section 543 (1) of the German Civil Code (BGB), the Federal Court of Justice ruled that only tenancies for which the date of termination was not specified in the contract could be terminated by ordinary termination.
However, tenancy agreements that have not been concluded in writing for longer than one year are valid for an indefinite period of time in accordance with Section 550 sentence 1 BGB. Pursuant to Section 550 sentence 2 BGB, such a contract can be terminated at the end of one year after the rental property has been made available with the notice period provided for in Section 580a (2) BGB, namely no later than the third working day of a calendar quarter to the end of the next calendar quarter.
The requirements of Section 550 (1) BGB were also met in the present case. The rental agreement had not (or no longer) been concluded in written form. The verbally agreed amendments had only been confirmed in writing by the insolvency administrator without this letter of confirmation having been signed by the defendant.
The plaintiff had also not breached good faith when it had invoked the fact that the rental agreement could have been terminated ordinarily for failure to comply with the written form. The premature ordinary termination was not contrary to good faith because the plaintiff would have been obliged to fulfil the written form. Such an obligation did not exist for the plaintiff.
The contracting parties had agreed a written form cancellation clause in § 24 No. 6 of the rental agreement. This also applies to the purchaser.
The plaintiff had entered into the rights and obligations arising from the tenancy by acquiring the property in accordance with Section 566 (1) BGB. The cure clause would also apply to the purchaser of the property, as there is no restriction that it should only apply to the relationship between the original contracting parties.
The tenant would therefore also have to fulfil the obligation to first work towards curing the formal defect and could only terminate the formally invalid tenancy agreement after corresponding efforts had remained unsuccessful.
This would, however, result in the situation from which Section 550 BGB is intended to protect the purchaser of the property. The plaintiff as the purchaser could therefore not be accused of acting in breach of trust if it terminated the tenancy agreement due to a lack of written form despite a cure clause contained in the tenancy agreement.
§ Section 550 BGB is primarily intended to ensure that a subsequent purchaser of the property, who enters into a tenancy agreement concluded for more than one year on the part of the landlord by operation of law, can see the terms of the tenancy agreement from the written tenancy agreement.
In addition, Section 550 BGB serves to ensure that long-term agreements can also be proven between the original contracting parties and to protect them from entering into long-term commitments without due consideration.
The purchaser should be protected from entering into a tenancy agreement whose economic conditions turn out to be different than expected and therefore financially calculated, for example as a result of a rent reduction. If this is nevertheless the case as a result of formally invalid, e.g. only verbal agreements, the purchaser has the option of cancelling the rental agreement prematurely by ordinary termination.
This possibility would be taken away from him if he were obliged to ensure the long-term existence of the tenancy as a result of the cure clause. According to the legal concept, the purchaser should not only be referred to claims for damages in such a case, but should also be entitled to an ordinary right of termination.
In individual cases, however, it may have to be considered on the basis of the purchaser's knowledge whether it would be an abuse of rights if he invoked the formal defect. In the present case, however, a breach of trust based on this was ruled out.
Source: Federal Court of Justice
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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