BGH weighs in on terminating commercial lease agreements with immediate effect

The tenant has the right to terminate a commercial lease agreement with immediate effect if there are serious grounds for doing so. According to Germany’s Federal Court of Justice (BGH), this includes an incorrect service charge statement (case ref.: XII ZR 11/20).

We at the commercial law firm MTR Rechtsanwälte note that both the tenant and the landlord are entitled to summarily terminate a commercial lease with immediate effect if there are serious grounds that justify this course of action and continuing the lease has become objectively unreasonable for one of the contractual parties.

The case in question, which ultimately reached the BGH, concerned a tenant who had been leasing a store in a shopping mall. The landlord had been forced to employ additional fire watch guards because the fire alarm was not working properly, and the former opted to include the costs associated with this in the service charge statement, as well as the costs for furnishing a food court. This move was opposed by the tenant, who subsequently terminated the lease on account of the incorrect service charge statement.

However, the termination was pronounced invalid by Berlin’s Court of Appeals, the Kammergericht Berlin. The Court noted that while the landlord had indeed wrongly passed on the costs for furnishing the food court and for the fire watch guards to the tenant, and although this error was unambiguous and had resulted in the tenant being overcharged to the tune of seven figures altogether, this did not constitute grounds for terminating the lease with immediate effect. This is because the tenant had failed to demonstrate that the landlord had acted deliberately or with intent to deceive.

The Federal Court of Justice, on the other hand, arrived at a different conclusion in its ruling from October 6, 2021, overturning the decision of the Kammergericht Berlin. The BGH held that there are serious grounds justifying summary termination with immediate effect if, having regard to all the particulars of a given case – in particular, any culpability on the part of the contracting parties – and giving due consideration to the interests of both parties, it would no longer be reasonable to expect the terminating party to continue the lease, even until the ordinary notice period for termination has expired or the lease ends for any other reason. Property-related offenses to the detriment of the tenant represent one such scenario, according to the Court.

The Karlsruhe judges went on to state that dishonesty on the part of the landlord, e.g., intentionally preparing service charge statements incorrectly, can therefore justify the tenant terminating the lease with immediate effect. This is particularly true if the landlord continues to cleave unreasonably to the incorrect accounting despite being confronted by the tenant accordingly.

Lawyers versed in commercial law as it relates to tenancies and leases can provide counsel.