WRITTEN FORM: NEW LAW AGAINST TERMINATIONS

If a rental agreement for residential or commercial space is concluded for a period of more than one year, it is subject to the written form requirement pursuant to § 550 p. 1 BGB. The formal requirement also applies if a short-term contract is accompanied by an extension option clause so that the contract term could extend over 12 months. Section 550 BGB is not applicable to preliminary rental agreements.
The written form for contracts is standardized in § 126 II BGB and requires the listing of all essential parts of the contract, such as the beginning of the contract, the object, the financial conditions and the parties as well as their signature. Annexes to the contract and subsequent agreements must also be provided with the essentialia negotii in order to be clearly assigned to the main rental agreement. If a rental agreement has been duly written in writing, it is presumed to be correct and complete, so that if it is otherwise presumed, the burden of proof lies with the party who wishes to prove otherwise.

However, if the written form requirement is not complied with, the rental agreement is deemed to have been concluded for an “indefinite period” in accordance with § 550 p. 1 BGB. As a result, it is subject to the statutory provisions and can be terminated in accordance with § 542 I in conjunction with § 573c BGB with a statutory period of notice of three to nine months depending on the length of the previous term of the agreement. The notice of termination can only be issued according to § 550 S. 2 BGB at the earliest one year after the transfer of the living space – and in connection with § 578 I BGB of the commercial space – but completely independent of what was originally agreed between the parties to the contract with regard to the duration of the lease. Changes or additions must be handled with caution, because their irregularity of form leads to a lack of written form for the whole contract.

Historically, the background to the strict written form requirement is the protection of the purchaser. In the draft version of the German Civil Code (BGB), it was decided to apply the principle “Purchase does not break rent” according to § 566 BGB, which stipulates that the purchaser of a property enters into the liability of the old landlord towards the current tenant. In compensation for the fact that the acquirer cannot break away from the tenancy, however, he may rely on the contracts submitted to him in the course of the evidential value of the written form.

The desire to a law change of the § 550 BGB arose now by the fact that in practice the written form requirement was used again and again to get rid of unpleasant become contracts, in that tenants or landlords looked for form errors in the contracts and additional agreements. As soon as such was found, the contract was considered as not in written form closed and it could be quit to the contracting party promptly. In particular after the BGH 2017 declared the written form cure clauses in rental agreements to be invalid, the problem became increasingly acute. The protection of purchasers is no longer at the forefront of § 550 BGB. Instead, the normative scope of application has changed into a scene of tenant-landlord disputes.

Particularly in the area of commercial tenancy law, considerable legal uncertainty has developed, as evidenced by the increasing number of revision rulings in the last 20 years. When renting commercial space, it is particularly important for the tenant and landlord to know the duration of the contract period in order to be able to adapt the investments to it. The tenant often considers financial assistance as well as conversion work and the landlord secures regular income for the agreed period. Trust in the existence of the contract is therefore of great importance for both parties.
In the course of this, the state of North Rhine-Westphalia submitted a bill to the Bundesrat, which passed it on to the federal government in 2019. At the beginning of 2020, the draft as well as the federal government’s statement to this effect were sent to the Bundestag. A decision by the parliamentarians is still pending.

BILL OF THE FEDERAL STATE OF NRW AND THE BUNDESRAT
The draft law contains above all a deletion of § 550 BGB and the inclusion of paragraph III in § 566 BGB in the following form:
“(3) If the lease is not concluded in writing for a period of more than one year, the purchaser is entitled to terminate the lease in accordance with the statutory provisions. The termination can only be effected within three months after the purchaser has become aware of the agreement concluded without observing the required written form. It is, however, permissible at the earliest one year after the transfer of the living space. The notice of termination shall become invalid if the tenant objects to it within two weeks of receipt and, by continuing the tenancy, declares his willingness to comply with the agreements made in writing while maintaining the required written form. The notice of termination cannot be based on such violations of the written form that were only made after the acquisition”.
The Bundesrat argues that by the regulation of paragraph III in sentence 1 a reduction of the normative protective purpose to the protection of the acquirer could be achieved, which was historically already intended. Furthermore in sentence 2 it is standardized that the period of notice of the landlord is limited to three months, so that the tenant does not have to count in the long run on a notice on the part of the Erwerber. Sentence 3 clarifies that the notice is permissible in any case at the earliest after one year after housing supply. Sentence 4 creates the possibility for the tenant to object in the case of an ordinary termination by the acquirer due to lack of written form. He can decide to continue the tenancy under the conditions of the agreements made in conformity with the written form. Furthermore, the termination of the acquirer pursuant to sentence 5 may not be based on a lack of written form of agreements made after the acquisition.

Three alternatives have been added to the draft law, which, however, have been expressly described by the Bundesrat as unsatisfactory. The first alternative provides for a deletion of § 550 BGB without replacement and the introduction of a liability of the seller. However, this is rejected, as the purchaser would be deprived of the possibility to inform himself sufficiently about the restrictions of his property right. In addition, the seller is already liable to the purchaser for culpable breaches of duty according to the general rules on damages. The second alternative also considers a deletion of § 550 BGB without replacement. To compensate for this, the introduction of a public register for rental contracts has been proposed. This is to be disapproved with the argument of considerable effort for the public administration as well as for the contracting parties. Finally, the third alternative could be the deletion of the validity of § 550 BGB for the area of commercial rental law. On the other hand, the Bundesrat objected that there would be a fragmentation of tenancy law without any objective reason for the unequal treatment of residential and commercial tenancy law, that also in residential tenancy law the possibility of termination due to lack of written form constitutes a disproportion and that the acquirer’s interest in information would be unreasonably restricted.

STATEMENT OF THE FEDERAL GOVERNMENT
The Federal Government rejects the bill of the Bundesrat in the result. It replies that there are no practical problems with § 550 BGB in the residential tenancy law and therefore there is no need for legislative action for a possible change in this area. Furthermore, she argues that the effects of the proposed change in the law could be considerable, since after the deletion of § 550 only the written form requirement of § 575 I BGB would apply to residential rents, which only provides for the written form requirement when a time limit on the tenancy is established and not for other contractual provisions as § 550 BGB does. In addition it criticizes the fact that with the new bill the tenant would have no possibility of notice with lack of writing at all with the new law, while the landlord could sell the real estate to close persons and could get rid thereby further unpleasant become contracts with tenants. In addition, the landlord-purchaser would have the right to choose whether to continue the informally concluded agreement tacitly or to have it declared invalid. Finally, the German government argues that there could be a general decline in written rental agreements, which could lead to an increase in litigation and disadvantage the weaker parties.

CONCLUSION
Including all the above-mentioned aspects, there is a clear case for a change in the law.

In view of the historical context of § 550 BGB, the reduction of the normative protective purpose to the protection of the acquirer appears to be necessary. In addition, this would also reduce the number of legal disputes in practice, because § 550 BGB could no longer be used by landlords and tenants to give proper and thus usually premature notice of termination to a contractual partner who has become unpopular under the guise of a lack of written form in the rental agreement. Whether without the written form requirement of § 550 BGB the protection of evidence and the protection of landlord and tenant against haste would be lost – which the Federal Government and the Federal Supreme Court have given cause for concern – remains questionable, since the written form of tenancy agreements is already used by nature. If empirically seen a decrease of formally correct rental agreements should be determined nevertheless, a written form requirement for rental agreements could remedy the problem. In any case, the requirement of § 550 BGB obviously does not provide the desired protective effect for agreements made orally or informally, but leaves much more room to trick a contractual partner who is not familiar with the law and legal practice. This argument therefore does not lead to a justification of the current imbalance and, furthermore, has historically not been covered by the protective purpose of § 550 BGB. The limitation of § 550 BGB to residential tenancy law is not to be considered by the purchaser of the real estate to compensate his limited property right, especially with regard to the right and interest in information. Furthermore, a fragmentation of the tenancy law should be avoided.

The standardization of a period of notice of three months “from knowledge” of the lack of the written form for the purchaser appears to be more problematic, because this creates unreasonable uncertainty for the tenant. For the tenant, there is no clear way of proving whether and when the purchaser has acquired “knowledge” of the agreements made verbally or informally – apart from his own reference. This is, however, far removed from practice, as the tenant would thereby give his new landlord the opportunity to have the corresponding agreement declared effective or invalid at his free discretion. Thus the tenant would have to live several years in uncertainty about the existence of his agreements.
Rather therefore a three-month period of notice is meaningful with lack of writing for the Erwerber “starting from acquisition” of the living or trade area. The buyer would have to ask the seller expressly for verbal or informal agreements with the tenant and the seller would be forced to pass on all information in order to protect himself from the challenge of the purchase contract due to fraudulent deception as well as possible claims for damages. Ultimately, it would not be prevented that verbal or informal agreements can be declared invalid by the purchaser against the tenant. However, the risk of invalidity always exists if an agreement between parties does not have a clear evidentiary function. In any case, the regulation would lead to the fact that the tenant would have to endure the uncertainty regarding the possibility of termination in case of a lack of written form only for a foreseeable time. At the same time, this is also sufficient for the historically intended protection of the acquirer, because informing the acquirer about ancillary agreements does not represent an unreasonable burden for him, since he is in any case in the contract negotiations about the purchase with the seller.
In addition, it should also be built in that the tenant can offer the acquirer a cure. If a main rental agreement suffers from a lack of written form, then the tenant’s possibility of objection would not be able to save him from the end of the rental relationship.
The criticism that a landlord could sell a room to persons close to him in order to promptly terminate an unwelcome contractual partner, captures a rather unrealistic or at least rare scenario, since the acquisition involves a land transfer tax as well as some further expenses. Furthermore, this is likely to be considered an immoral transaction.

Dass eine zweiwöchige Widerspruchsfrist des Mieters hinsichtlich der Kündigung durch den Erwerber gilt, ist gutzuheißen. Es besteht somit nämlich keine verfrühte außervertragliche Kündigungs-möglichkeit, wenn der Mieter sich mit den Vereinbarungen, die schriftformkonform getroffen wurden, zufrieden erklärt. Das ist auch im Sinne des Erwerberschutzes, da dieser lediglich vor Unklarheiten des Mietverhältnisses, in das er gemäß § 566 BGB eintritt, geschützt werden soll. Ferner verhindert die Widerspruchsfrist, dass eine formwidrige Nebenabrede direkt zur Unwirksamkeit des ganzen Vertrages führen kann, so wie es vorher möglich war.

Die Regelung über den frühestmöglichsten Kündigungszeitpunkt, welcher auf den ersten Tag nach Ablauf eines Jahres nach Überlassung des Mietraumes terminiert ist, erscheint fair.

Genauso gibt es keine Einwände gegen das Kündigungsverbots wegen Schriftformmangels durch den Erwerber bezüglich einer formwidrigen Vereinbarung, die nach dem Erwerb des Wohn- oder Gewerberaumes getroffen wurde.