Tenancy law: Landlord and tenant rights

Tenancy law is a central element of the German legal system and affects many people in their daily lives. In this article, we take a comprehensive look at tenancy law, including the rights of landlords and tenants, important legal regulations and current court rulings that you should be aware of.

As an experienced law firm, we are happy to assist you in providing an understandable and informed introduction to landlord and tenant law.

Table of contents

1. Introduction to tenancy law
2. Basics of tenancy law
3. Landlord’s rights
4. Tenants’ rights
5. Termination of tenancies
6. Rent reduction and remedying defects
7. Cosmetic repairs and maintenance
8. Rent debts and eviction actions
9. Rent deposit
10. Current court decisions and their effects
11. Concluding remarks

Introduction to tenancy law

First of all, it is important to understand the legal framework of tenancy law. Tenancy law is a part of civil law and is regulated in the German Civil Code (BGB), in particular in §§ 535 to 580a BGB. These norms regulate the basic rights and obligations of landlords and tenants and form the basis for tenancy agreements.

Tenancy law is also subject to a variety of special laws, such as:

The Mietpreisbremse (rent brake): this regulation (§§ 556d-556g BGB) limits the permissible rent when newly renting flats in areas with a tight housing market. The rent here may not be more than 10% above the local comparable rent.

The Residential Mediation Act (WohnVermittG): This law regulates, among other things, the commission claims of estate agents when brokering housing and the so-called “Bestellerprinzip” (whoever commissions the estate agent must also pay him).

The Heating Costs Ordinance (HeizkostenV): This ordinance regulates the consumption-based billing of heating costs in tenancies.

In addition to the statutory regulations, case law and the practice of the courts also play an important role in understanding tenancy law. The Federal Supreme Court (BGH) in particular has further developed and specified tenancy law in numerous decisions. Some current examples of landmark rulings are:

• BGH, ruling of 22.08.2018, Ref. VIII ZR 277/16: The BGH ruled that a landlord cannot terminate a tenant without further ado because of an unlawful subletting relationship if the tenant had previously tolerated the subletting for years.
• BGH, judgement of 15.05.2019, Ref. VIII ZR 21/19: In this decision, the BGH clarified that cosmetic repairs are generally the responsibility of the landlord, but can be contractually transferred to the tenant. However, the provisions on this must be effective and not unreasonably disadvantage the tenant.
• BGH, judgement of 28.02.2018, Ref. VIII ZR 157/17: In this judgement, the BGH ruled that a form-based agreement in the rental contract which obliges the tenant to paint the flat in “neutral, light and opaque colours” upon moving out, irrespective of the condition of the walls, is invalid. Such a provision unreasonably disadvantages the tenant and violates the requirement of transparency.
• BGH, judgement of 18.12.2019, Ref. VIII ZR 62/19: Here, the BGH clarified that the landlord of a flat must inform the tenant of his right to hardship (Section 555d of the German Civil Code (BGB)) in the case of a modernisation measure that leads to a rent increase even before the work begins. Otherwise, the tenant can later refuse a rent increase due to significant hardship.

These rulings illustrate how important it is to keep up to date with current case law in tenancy law. In the course of this article, we will discuss other important court decisions and their impact on tenancy law.

In the following sections, we will now discuss the various aspects of tenancy law, starting with the rights and obligations of landlords and tenants, termination and rent reduction, and ending with cosmetic repairs and rent debts. By imparting this basic knowledge, we would like to help you to better understand your rights and obligations under tenancy law and to successfully resolve possible conflicts with your contractual partner.

Basics of tenancy law

Tenancy law is regulated in the German Civil Code (BGB) and covers different types of tenancy, such as residential tenancy, commercial tenancy and lease. However, the focus of this article is on residential tenancy law, which regulates the relationship between landlords and tenants of residential premises.

a) Establishment of the tenancy relationship: A tenancy relationship is established by the conclusion of a tenancy agreement (§ 535 BGB). This is a bilateral contract in which the landlord undertakes to grant the tenant the use of the rented property and the tenant undertakes to pay the rent in return.

b) Form of the rental agreement: In principle, a rental agreement can be concluded orally or in writing. However, it is advisable to have it in writing in order to avoid later disputes and to agree on certain provisions, such as a time limit or cosmetic repairs, in a legally secure manner (§ 550 BGB).

c) Main components of the tenancy agreement: A tenancy agreement should contain the following information:

• • the parties (landlord and tenant),
  • the rental object (flat, room, garage, etc.),
  • the rent and service charges,
  • the amount of the deposit (if agreed),
  • the duration of the tenancy (unlimited or limited),
  • Regulations on cosmetic repairs and maintenance,
  • Notice periods and reasons for termination,
  • and, if applicable, house rules.

d) Term of the tenancy: A tenancy agreement can be concluded for a limited or unlimited period. In the case of a fixed term, however, there must be an objective reason (§ 575 BGB), such as own need, renovation work or the intended use of the flat by the landlord himself.

Statutory regulations in tenancy law

There are numerous legal regulations in tenancy law that provide protection and security for the parties. These include:

1. The Mietpreisbremse (§§ 556d-556g BGB): Limits the permissible rent for new leases in areas with a tight housing market.
2. The buyer principle (§§ 2, 3 WohnVermittG): Regulates that the person who commissions the estate agent must also pay the agent’s commission.
3. The Heating Costs Ordinance (HeizkostenV): Prescribes the consumption-based billing of heating costs in tenancies.

Current court rulings in tenancy law

Case law, especially by the Federal Court of Justice (BGH), has a great influence on tenancy law and shapes the interpretation of laws and regulations. Some current court decisions of particular importance are:

BGH, judgement of 10.10.2017, Ref. VIII ZR 79/16: In this judgement, the BGH clarified that a so-called “preclusion period” for the assertion of rental defects in the rental agreement is inadmissible. Such a provision unreasonably disadvantages the tenant and is therefore invalid.

BGH, judgement of 08.01.2020, case no. VIII ZR 21/19: The BGH has ruled that a clause in the rental agreement requiring the tenant to hand over the rented premises “broom-clean” upon moving out is permissible. The broom-clean clause is clear and understandable and does not constitute an unreasonable disadvantage for the tenant.

BGH, judgement of 27.06.2018, Ref. VIII ZR 263/17: In this ruling, the BGH clarified that the modernisation of a bathroom by the landlord, which leads to a significant improvement in the residential value, justifies a rent increase, even if the modernisation costs are partly covered by public subsidies.

These rulings show how important it is to keep up to date with current case law in landlord and tenant law and, if necessary, to seek legal advice in order to be able to optimally exercise one’s rights and obligations as a landlord or tenant.

Landlord’s rights

As a landlord, you have a variety of rights to help you properly manage and protect your property. Here are some of the most important rights landlords have under German tenancy law:

Selection of the tenant: Landlords are basically free to select their tenants. They can take into account criteria such as creditworthiness, professional and personal references or family size. However, landlords are not allowed to discriminate on the basis of gender, ethnic origin, religion, disability or sexual orientation when selecting a tenant (Section 19 of the General Equal Treatment Act).

Drafting the tenancy agreement: Landlords can draft the tenancy agreement according to their own wishes and ideas, as long as they adhere to the legal regulations. For example, they can determine the amount of rent, the security of tenure or the duration of the tenancy agreement. But there are also legal requirements that must be complied with, such as the rent brake or the regulations on ordinary termination.

Setting the rent: Landlords are basically free to determine the amount of rent. However, there are legal regulations that limit the amount of rent, such as the Mietpreisbremse (Section 556d BGB) or the Kappungsgrenze (Section 558 (3) BGB). When newly renting flats, the rent may not be more than 10 % above the local comparable rent.

Rent increases: Landlords have the right to increase the rent within the limits of the law. A rent increase is permissible, for example, if the local comparative rent has increased (Section 558 BGB), if the landlord has carried out modernisation measures (Section 559 BGB) or in the case of graduated or index-linked rents (Sections 557a, 557b BGB).

Entering the rentedproperty: Landlords have the right to enter the rented flat or the rented commercial property in order to carry out necessary maintenance or repair work, to organise the handover of the flat when moving in or out or to inspect the flat if they have a justified interest. However, the landlord must respect the tenant’s privacy and give reasonable notice of the visit (§ 536c BGB).

Right of termination: Landlords have the right to terminate the tenancy under certain conditions. Ordinary termination is possible, for example, if the landlord notifies own need (§ 573 BGB) or if the tenant has violated his contractual obligations (§ 573a BGB). Extraordinary notice of termination can be given if the tenant is in arrears with two consecutive rents (§ 543 BGB).

Eviction action: If the tenant does not leave the flat despite a legally valid notice of termination, the landlord can file an eviction action to forcibly remove the tenant from the flat.

Recent court rulings: Landlords should inform themselves about current court rulings that affect their rights. For example, the Federal Supreme Court (BGH) ruled in 2019 that a form-based transfer of operating costs to the tenant is invalid if the operating costs are not specifically named (Ref. VIII ZR 245/18).

In 2020, the BGH also ruled that a modernisation rent increase is permissible even if the modernisation only results in minor energy improvements (Ref. VIII ZR 78/19).

Overall, it can be seen that landlords have numerous rights under German tenancy law that enable them to effectively manage and protect their properties. However, these rights are also bound by legal requirements and must be exercised in accordance with tenants’ rights.

Tenants’ rights

Tenant rights are extensively regulated in German tenancy law in order to protect the tenant from unreasonable disadvantages and to ensure a regulated relationship between tenant and landlord. The following is a detailed list and explanation of the most important tenant rights, including legal provisions and recent court rulings:

a) Rental agreement: tenants have the right to a written rental agreement that regulates all essential terms of the tenancy, such as rent, ancillary costs, rental period and notice periods. Tenants should make sure that the lease does not contain any invalid clauses that unreasonably restrict their rights.

b) Use of the rental property: Tenants have the right to use the rental property in accordance with the contract and to live undisturbed in their premises. This also means that landlords may enter the apartment only after prior notice and with a legitimate concern.

c) Notification of defects and rectification of defects: Tenants have the right to notify the landlord of defects and damage to the leased property that require repair. The landlord is obliged to remove these defects within a reasonable period of time. If the landlord fails to comply with this obligation, the tenant may, under certain circumstances, claim a rent reduction or remedy the defects himself and demand reimbursement of the costs from the landlord.

d) Rent reduction: Tenants have the right to reduce the rent if the rental object can only be used to a limited extent due to defects or damage. The amount of the rent reduction depends on the severity of the defect and should be discussed with a lawyer or tenants’ association in case of doubt.

e) Protection against termination: Tenants enjoy comprehensive protection against termination under German tenancy law. Landlords can only terminate the tenancy for good cause or in the case of justified own need. In both cases, landlords must comply with the statutory notice periods and give reasons for the termination in writing.

f) Right of objection: Tenants have the right to object to a termination of the tenancy if they are unreasonably hard hit by the termination, for example due to age, illness or pregnancy. In such cases, the tenancy may be continued under certain circumstances.

g) Keeping pets: Tenants generally have the right to keep pets in their apartment as long as this does not violate contractual regulations or house rules and does not cause unreasonable nuisance to landlord or neighbors.

Current court rulings and their impact on tenants’ rights:

1. Federal Court of Justice, ruling dated 05.06.2019, Ref. VIII ZR 180/18: The Federal Court of Justice (BGH) has clarified that tenants do not have to carry out cosmetic repairs in the event of an invalid final renovation clause in the rental agreement even if they have taken over the apartment renovated.
2. Federal Court of Justice (BGH), ruling dated March 14, 2017, Case No. VIII ZR 44/16: The BGH has ruled that an agreement in a form obliging the tenant to carry out cosmetic repairs if the rented premises are “colored” is invalid.

Termination of tenancy

The termination of a tenancy is an important aspect of tenancy law, as it marks the end of the contractual relationship between landlord and tenant. There are different grounds for termination and different requirements that must be met. In the following, we will explain the different types of termination and their legal framework.

Ordinary termination

Legal notice periods apply to ordinary termination. For the tenant, the notice period is always three months, regardless of the duration of the tenancy. For the landlord, the period is extended on a staggered basis, depending on the duration of the tenancy.

Up to five years the notice period is also three months, between five and eight years five months and from eight years even six months.

In order for the landlord to give ordinary notice of termination, there must be justified reasons, such as own need, economic exploitation or a sustained disturbance of the tenancy by the tenant.

Extraordinary termination

Extraordinary termination without notice can take place if one of the contracting parties has a justified interest in the immediate termination of the tenancy. This may be the case, for example, in the event of repeated unpunctual payment of rent, significant breaches of contract or significant disturbance of domestic peace.

In certain cases, e.g. if the tenant is in default of payment or if the rented property poses a health risk, extraordinary termination with statutory notice is also possible.

The notice of termination must be in writing and signed in person by the terminating contracting party or its representative. Notice of termination by e-mail or fax is not sufficient.

Reduction of rent and removal of defects

Defects in the rented property can significantly affect the tenancy. It is important that both landlord and tenant know their rights and obligations in connection with defects and their removal. In this section, we cover the topic of rent reduction and defect removal in detail.

Notification of defects

Obligation of the tenant (§ 536c BGB): The tenant is obliged to inform the landlord immediately about defects in the rented property so that the landlord has the opportunity to remedy the defect.

Form of notification: The notification of defects should be made in writing in order to have a proof. However, a verbal notification is also effective, but it should be possible to prove this in the event of a dispute.

Rent reduction

Conditions (§ 536 BGB): The tenant has the right to reduce the rent if the rented property has a defect which considerably impairs the use according to the contract. A rent reduction is not possible if the tenant is responsible for the defect or was aware of the defect when concluding the tenancy agreement.

Amount of the rent reduction: The amount of the rent reduction depends on the extent of the impairment of the contractual use. A blanket calculation is not possible, as the reduction depends on the circumstances in each individual case. However, there are numerous court decisions that can serve as a guide.

Remedy of defects

Obligation of the landlord (§ 535 BGB): The landlord is obliged to remedy the defect in the rented property without delay, provided the tenant has notified him of the defect.

Setting a deadline and self-performance (Section 536a BGB): If the tenant unsuccessfully sets the landlord a reasonable deadline to remedy the defect, the tenant may remedy the defect himself and demand reimbursement of the costs incurred from the landlord.

Cosmetic repairs and maintenance

Cosmetic repairs and maintenance measures are important aspects of tenancy law, as they affect both landlord and tenant. Below you will find a detailed list and explanation of the legal provisions and current court rulings on cosmetic repairs and maintenance:

Schönheitsreparaturen

Cosmetic repairs include measures to keep the living space in a proper condition, such as wallpapering, painting or varnishing walls, ceilings, radiators, doors and windows. In principle, the landlord is responsible for cosmetic repairs, but these duties can be transferred to the tenant in the tenancy agreement, provided the regulations are effective.

Effectiveness of cosmetic repair clauses

For a cosmetic repair clause in a lease to be effective, it must not unreasonably disadvantage the tenant. For example, rigid time schedules, quota compensation clauses or final renovation clauses are ineffective. However, an effective provision can ensure an appropriate balancing of the interests of landlord and tenant.

Maintenance and repair

Landlords are generally responsible for the maintenance and repair of the rented property. This includes the repair of defects and damage that are not due to the tenant’s conduct in accordance with the contract. However, the tenant has a duty to tolerate the work and must allow the landlord or authorised tradesmen into the flat to carry out the work.

Notification of defects and rectification of defects

The tenant is obliged to inform the landlord of any defects that occur so that the landlord has the opportunity to remedy the defects. The landlord shall remedy the defects within a reasonable period of time. If the landlord does not fulfil this obligation, the tenant may be entitled to a rent reduction or to remedy the defects himself.

Minor repairs

Minor repairs are repairs of minor damage that are due to the normal use of the rented property. The landlord can agree in the tenancy agreement that the tenant bears the costs for minor repairs up to a certain amount (usually up to 100 euros) and an annual upper limit.

Current court rulings and their effects on cosmetic repairs and maintenance:

• Federal Supreme Court, judgement of 18.03.2015, Ref. VIII ZR 185/14: The Federal Supreme Court has ruled that a clause obliging the tenant to carry out cosmetic repairs is invalid if the flat was unrenovated at the time of handover and the tenant did not receive an appropriate compensation payment from the landlord.
• Federal Court of Justice (BGH), judgement of 22 August 2018, Ref. VIII ZR 277/16: The Federal Court of Justice (BGH) has clarified that landlords must present and justify a concrete desire to use the property when justifying their own need for themselves or relatives in order to successfully enforce a notice of termination for own need.

Rent arrears and eviction actions

For landlords and tenants, rent arrears and the associated eviction proceedings in tenancy law are significant, as they can have serious consequences for the financial situation and personal well-being. Below you will find a detailed overview and explanation of the legal regulations and the latest case law on rent arrears and eviction proceedings:

Rent debts arise when the tenant does not pay the agreed rent or does not pay it in full. In addition to the monthly rent, rent debts can also result from ancillary costs, additional payments or other payments agreed in the tenancy agreement.

• Reminder and default: If the tenant does not pay his rent on time, the landlord can issue a reminder and put the tenant in default. From the time of default, the landlord may charge interest on arrears and claim any dunning and legal fees from the defaulting tenant.
• Termination for default: A landlord has the right to terminate the tenancy without notice if the tenant is in arrears with at least two months’ rent (Section 543 (2) no. 3 BGB). Termination without notice is also possible if the tenant is in arrears with an amount that reaches the amount of two months’ rent within a period of two consecutive dates.
• Action for eviction: If the tenant does not voluntarily vacate the flat despite giving notice, the landlord can file an action for eviction with the competent district court. The eviction action should only be used as a last resort and usually requires the assistance of a lawyer.
• Enforcement of the eviction: If the landlord has obtained an eviction title (e.g. through a court settlement or an eviction judgement), he can arrange for the eviction of the flat by a bailiff. In doing so, the tenant may incur considerable costs, which he has to reimburse to the landlord.

Debt counselling and social assistance

Tenants who get into financial difficulties and can no longer pay their rent should contact a debt counselling service or the relevant social welfare office at an early stage. These can help solve financial problems, arrange instalment payment arrangements or, in individual cases, grant social benefits to secure accommodation.

Eviction protection

In certain cases, the tenant can apply for eviction protection in order to avert or delay an eviction. This is possible, for example, if the tenant would be particularly hard hit by the eviction (e.g. due to old age, illness or pregnancy) or if the eviction would constitute undue hardship. An application for protection against eviction must be filed with the competent district court and is usually associated with an extension of the deadline.

Rent deposit

The rent deposit serves as security for the landlord to cover any claims arising from the tenancy. Below you will find a detailed list and explanation of the legal provisions and current court rulings on the rent deposit:

1. Amount of the rent deposit: According to § 551 of the German Civil Code (BGB), the rent deposit may amount to a maximum of three months’ rent. It should be noted that ancillary costs are not included.

2. Investment of the rent deposit: The landlord is obliged to invest the rent deposit separately from his assets, e.g. in a savings account or a deposit savings book. The investment must have a customary interest rate in order to secure interest income for the tenant.

3. Use of the rent deposit: The rent deposit may only be used for claims of the landlord arising from the tenancy, for example, for outstanding rent payments, claims for damages or the removal of defects for which the tenant is responsible.

4. Repayment of the rent deposit: After termination of the tenancy and return of the rented property, the landlord must repay the rent deposit to the tenant, less any justified claims. There is usually a reasonable period of about three to six months for this, in order to give the landlord the opportunity to assert any claims.

5. Offsetting and assignment: As a rule, the tenant has no right to offset the rent deposit against current rent payments or to assign it to third parties, unless the landlord expressly agrees to this.

Current court rulings and their effects

Below you will find a detailed list and explanation of current court decisions that have an impact on various aspects of tenancy law and affect both landlords and tenants:

Federal Court of Justice, ruling of 15.11.2017, Ref. VIII ZR 261/16: The Federal Court of Justice (BGH) ruled that a termination without notice due to late payment becomes invalid if the tenant pays the rent debt in full within the grace period (Section 569 (3) No. 2 BGB). This also applies if the payment is made by the job centre. This ruling offers tenants a “second chance” and prevents rent debts from inevitably leading to the termination of the tenancy.

Federal Supreme Court, ruling of 18.01.2017, Ref. VIII ZR 233/15: The Federal Supreme Court has ruled that landlords must repay the rent deposit even if they have not properly invested the deposit separately from their assets. The landlord’s repayment obligation remains in place in this case and protects the tenants’ rights.

Federal Court of Justice (Bundesgerichtshof), ruling of 26 September 2018, Ref. VIII ZR 212/17: The Federal Court of Justice (Bundesgerichtshof) has ruled that a landlord may not pass on to the tenant the costs of remedying a defect in the rented property that is due to inadequate maintenance. This ruling underlines the landlord’s maintenance obligation and protects tenants from unjustified cost transfers.

These and other court rulings illustrate the complexity of tenancy law and the importance for landlords and tenants to inform themselves about current case law and legal regulations.

As the Herfurtner law firm, we are happy to assist you in this regard and support you in all questions relating to tenancy law and the effects of current court rulings on your rights and obligations.

Conclusion

Tenancy law is a complex and multi-layered area of law that affects both landlords and tenants in their everyday lives. The statutory regulations and case law aim to ensure a fair balance of interests between both parties and to avoid unreasonable disadvantages.

Landlords have numerous rights and obligations, such as the selection of the tenant, the determination of the tenancy agreement, the implementation of maintenance measures and the termination of tenancies. Tenants, on the other hand, are entitled to a written tenancy agreement, the undisturbed use of the rented property, protection against unjustified terminations and the return of the rent deposit.

Recent court rulings illustrate the dynamic nature of tenancy law and the need for landlords and tenants to keep abreast of the latest developments and legal regulations. In this regard, cooperation with an experienced law firm, such as the Herfurtner law firm, is of great advantage in order to clarify legal issues relating to tenancy law competently and properly.

Wolfgang Herfurtner | Lawyer | Managing Director | Shareholder

Arthur Wilms | Lawyer | Associate

Current articles from the legal field of tenancy law