Lease Agreement

Lease Agreement - A lease agreement is the contractual basis of a tenancy, under which the landlord agrees to grant the tenant the use of a property and the tenant agrees to pay the agreed rent (Section 535 of the German Civil Code (BGB)).

What must a lease agreement contain, and what regulations apply?

Residential tenancy law is comprehensively regulated in §§ 535-580a BGB and is predominantly mandatory in favor of the tenant - contractual deviations to the detriment of the tenant are invalid in many areas. A legally sound lease agreement must include at least the contracting parties (landlord and tenant with full details), the exact description of the rental property (address, location within the building, living area), the amount of rent (base rent and, if applicable, advance payment of operating costs), as well as the start date of the lease.

A key distinction is between fixed-term and open-ended lease agreements. Open-ended agreements are the norm and can be terminated by the tenant with the statutory notice period of three months. The landlord, on the other hand, needs a valid reason for termination-such as personal use or significant breaches of contract-and must observe notice periods of three to nine months, depending on the lease term. Fixed-term leases (fixed-term rental agreements under § 575 BGB) are only permissible if the landlord provides a valid reason for the fixed term in writing at the time the contract is concluded.

For lease agreements with a term of more than one year, § 550 BGB requires the written form. This means: Both parties must sign the same document. If the written form is not observed, the contract is deemed to have been concluded for an indefinite period and may be terminated with notice no earlier than at the end of the first year following the commencement of occupancy.

The operating costs agreement specifies which apportionable costs the tenant must bear in addition to the base rent. The basis for this is the Operating Costs Ordinance (BetrKV). Unless expressly agreed upon in the lease agreement, operating costs are covered by the rent and cannot be apportioned retroactively. It is customary to either make an advance payment with an annual settlement or pay a flat fee without an obligation to settle.

Rent Increases, Pets, and Subletting

Rent increases for residential properties are strictly regulated by law. For existing tenancies, the rent may be increased up to the local comparative rent, provided that the cap-15% in areas with a tight housing market, otherwise 20% within three years-is not exceeded. Graduated and index-linked lease agreements are special forms that contractually structure increases in advance.

Pet ownership can be regulated in the lease agreement; however, a general ban on all animals is invalid according to the case law of the Federal Court of Justice (BGH). Small animals (hamsters, ornamental fish, budgies) may generally be kept without permission. In the case of dogs and cats, a case-by-case assessment is required, taking into account the interests of all parties involved.

The tenant may request to sublet part of the apartment pursuant to § 553 BGB if there is a legitimate interest-such as financial difficulties or the desire to take in a life partner. However, the complete transfer of the apartment to a third party always requires the landlord’s consent.

Practical Tip for Nuremberg and Franconia

In the Nuremberg metropolitan region, demand for rental apartments remains consistently high, particularly in central locations such as St. Johannis, Gostenhof, Maxfeld, and the Südstadt. We recommend that landlords not limit the lease agreement to the minimum legal requirements, but also clearly include provisions regarding cosmetic repairs, a minor repairs clause (with an effective individual cap currently set at up to 120 euros), and the settlement of operating costs. The Nuremberg rent index serves as a guide for the local comparative rent and should be consulted for every rent increase. Especially for older existing apartments in neighborhoods such as Gleißhammer or Schweinau, careful documentation of the apartment’s condition at handover-ideally with a handover report including photos and meter readings-is the best safeguard against future disputes.

Frequently Asked Questions

Does a lease agreement have to be concluded in writing?

In principle, a lease agreement can also be concluded verbally and is then legally valid. However, the written form is mandatory under Section 550 of the German Civil Code (BGB) if the lease is to be limited to a term of more than one year. We recommend a written contract in any case, as it provides clarity regarding the agreed terms and serves as evidence in the event of a dispute.

What notice periods apply to residential lease agreements?

The tenant may terminate an open-ended lease agreement at any time with three months’ notice to the end of the month (notice must be received by the third business day of the month). For the landlord, the notice period is staggered: three months for a lease term of up to five years, six months for a lease term of up to eight years, and nine months for a lease term of more than eight years. Extraordinary termination without notice is possible in the event of serious breaches of contract.

Can the landlord simply raise the rent?

No, a unilateral rent increase without a legal basis is invalid. The landlord may increase the rent up to the local market rate, but must justify this in writing-for example, by referring to the rent index, an expert opinion, or three comparable apartments. The tenant has a grace period until the end of the month after next and must agree to the increase. If the tenant does not agree, the landlord can sue for consent in court.

Which clauses in the lease are typically invalid?

Case law has declared a number of clauses invalid that still frequently appear in older lease templates. These include: cosmetic repair clauses that prescribe rigid renovation deadlines without regard to the actual condition of the apartment (so-called “deadline clauses”); pro-rata liability clauses that require the tenant to contribute a proportionate share of the costs if they move out before the deadlines expire; minor repair clauses with unreasonably high individual limits (according to case law, a limit of 75-120 euros per repair is customary and valid, whereas higher amounts are not); and a final renovation obligation that requires renovation upon moving out regardless of the actual condition of the apartment. Landlords in Nuremberg and Franconia should have their lease agreement forms reviewed for such invalid clauses-not only out of legal diligence, but also because invalid cosmetic repair clauses result in the tenant owing no cosmetic repairs at all, leaving the landlord to bear the costs.

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