Fixed-term lease

Fixed-Term Lease - A fixed-term lease (fixed-term rental agreement) is a lease entered into for a predetermined period and automatically terminates at the end of the agreed term without requiring notice of termination. Since the 2001 reform of tenancy law, a fixed-term residential lease is only permissible as a qualified fixed-term lease under § 575 of the German Civil Code (BGB)-the landlord must specify a legally recognized reason for the fixed term upon conclusion of the contract.

Permissible Grounds for a Fixed Term

The law lists three exhaustive grounds for a fixed term in § 575(1) BGB:

1. Personal Use: The landlord plans to use the apartment himself, for family members, or for members of his household after the lease term expires. This is the most common ground in practice. The landlord must name the person for whom the property is needed upon signing the lease and describe the specific intended use.
2. Construction work: Demolition, remodeling, or major renovation work is planned after the lease term ends, which would be significantly more difficult if the tenancy continued. Mere renovation work that could be done even while the apartment is occupied is not sufficient.
3. Company housing: The apartment is to be rented to an employee of the landlord-for example, if the landlord intends the apartment for a future employee who will be hired at a later date.

The reason for the fixed term must be communicated to the tenant in writing upon conclusion of the contract. If the justification is missing or is not valid, the contract is deemed to have been concluded for an indefinite term-the fixed term is automatically invalid. The tenant then enjoys full protection against termination as if it were an indefinite lease.

Rights of the Tenant

The tenant of a fixed-term lease has special rights:

• Right to information: No earlier than four months before the fixed term expires, the tenant may request information from the landlord as to whether the reason for the fixed term still exists. The landlord must respond within one month. If the landlord fails to respond or does not respond in a timely manner, the tenant may demand an extension for an indefinite period.
• Right to Extension: If the reason for the fixed term no longer exists upon expiration (e.g., the planned renovation does not take place or the landlord’s personal need has ceased), the tenant is entitled to an extension of the lease for an indefinite period pursuant to § 575(3) BGB.
• Protection against termination: Full protection against termination applies during the term-ordinary termination by the landlord is excluded. The right to extraordinary termination in cases of serious breach of contract (Section 543 of the German Civil Code) naturally remains in effect.
• Compensation: If the landlord falsely claims the reason for the fixed term and it turns out after the term has expired that there was no genuine need for personal use, the tenant may claim compensation-for example, for moving costs, real estate agent fees, and additional costs for a more expensive replacement apartment.

Fixed-Term Leases and Rent Control

In areas with a tight housing market-which includes Nuremberg under the Bavarian Tenant Protection Ordinance-rent control applies: The rent for new leases may not exceed the local comparative rent by more than 10 percent. This regulation also applies to fixed-term leases. Entering into a fixed-term lease does not affect the applicability of the rent cap. Landlords who exceed this limit risk having to refund excess rent retroactively for up to 30 months.

Practical Tip for Property Owners in Nuremberg and Franconia

We recommend that landlords in the Nuremberg metropolitan area only enter into a fixed-term lease if there is a genuine and serious reason for the fixed term. A mere declaration of intent to assert personal use “at some point” is not sufficient. Formulate the reason for the fixed term in the lease as specifically as possible-for example: “The landlord plans to use the apartment starting April 1, 2028, for her daughter Anna Müller, who will then begin her studies at FAU Erlangen-Nuremberg.” A general or vague justification such as “planned personal use” renders the fixed-term clause invalid. We also recommend having the fixed-term lease reviewed by a specialist attorney for tenancy law before signing-in Nuremberg, this consultation can be obtained through the German Tenants’ Association or the Bar Association.

Frequently Asked Questions

What happens if the reason for the fixed term no longer applies?

If the reason ceases to apply before the fixed term expires-for example, because the planned renovation does not take place or the person entitled to personal use dies or moves out-the tenant has a legal right to extension for an indefinite period under Section 575(3) of the German Civil Code (BGB). The landlord must immediately inform the tenant of the cessation of the reason for the fixed term. If the landlord fails to do so and the tenant asserts claims for damages, the landlord is liable for all damages resulting from the tenant’s justified reliance on the contract’s termination-in particular, moving and rental costs.

Can the tenant terminate the lease before the fixed term expires?

Yes, the tenant may terminate a fixed-term lease with the statutory notice period of three months - the right to ordinary termination cannot be contractually denied to the tenant (Section 575(4) of the German Civil Code (BGB)). The landlord, on the other hand, cannot terminate the lease with notice during the agreed term-they are bound by the fixed term. In contrast: In the case of an indefinite lease, the landlord may generally terminate the lease with statutory notice periods if there is a valid reason (personal use, economic exploitation, breach of duty).

Is a simple fixed-term lease still possible?

No, since the 2001 reform of tenancy law, the simple fixed-term lease (without a qualified reason) is no longer permitted for residential space. A lease that is limited in duration without specifying one of the three statutory reasons is deemed by law to have been concluded for an indefinite period. The fixed-term clause is invalid-the tenant cannot waive statutory protections. For commercial leases, a fixed term without a specific reason remains possible; in this case, the commercial tenant does not enjoy protections comparable to those of a residential tenant.

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