Lease

Lease - A lease is a contractual relationship in which the lessor grants the lessee the use of a property or a right to derive benefits from it in exchange for the payment of rent. It is governed by Sections 581 through 597 of the German Civil Code (BGB) and differs from a lease primarily in the additional right to derive income (fruits) from the leased property.

Distinction from a Lease and Types of Contracts

The key difference between a leasehold and a lease lies in the scope of use. In a lease agreement, the lessee merely receives the right to use the property-such as living in an apartment. In a leasehold agreement, the right to derive benefits is added: The lessee may generate economic income from the property. A farmer who leases a field may keep the harvest. A restaurateur who leases a restaurant may generate revenue from the business.

The law distinguishes between several forms of lease. The agricultural lease (Sections 585-597 of the German Civil Code) applies to land used for agricultural purposes and is subject to special protective provisions, including notice periods of at least one year prior to the end of the lease year and the possibility of a judicial extension. The commercial lease covers the transfer of business premises, including fixtures and equipment-typically for restaurants, hotels, gas stations, or repair shops. In this case, the tenant protection provisions of residential tenancy law do not apply; instead, the general lease regulations apply. In the case of a restaurant lease, a fully equipped restaurant business is leased, often with fixtures and fittings (kitchen, furniture, tableware), which the lessee is obligated to maintain in proper condition under the inventory obligation.

The lease rent is freely agreed upon between the parties. Unlike in residential tenancy law, there is no rent cap and no rent index. The contract terms are largely flexible, which entails both opportunities and risks. In the case of agricultural lease agreements, however, an adjustment of the lease rent may be demanded under § 593 BGB if circumstances have changed significantly since the contract was concluded.

The notice periods vary depending on the type of lease. For agricultural leases, the statutory notice periods under §§ 594 et seq. BGB apply (no later than the third business day of the lease year for termination at the end of the following lease year). In the case of commercial leases, in the absence of specific provisions, the general rules of Sections 581(2) and 580a of the BGB apply, provided the contract is not already for a fixed term.

Leasing with Inventory and Liability

In the case of leases with inventory-common for restaurants and agricultural operations-the lessee is provided not only with the premises but also with the business inventory. The lessee is obligated to maintain the inventory in the condition in which it was taken over and to replace items that have become worn out or unusable (Section 582 BGB). Newly purchased items become the property of the lessor upon handover. Upon termination of the lease, an inventory comparison is conducted: If the value of the existing inventory does not match the takeover value, the lessee must make up the shortfall-conversely, the lessee may demand compensation for any increase in value.

We recommend always creating a detailed inventory list with value specifications and documenting the condition with photographs when concluding and terminating a lease agreement with inventory.

Practical Tip for Nuremberg and the Metropolitan Region

In the Nuremberg metropolitan region, lease agreements play a significant role primarily in the restaurant industry in the Old Town and for agricultural land in the Nürnberger Land, Knoblauchsland, and the municipalities around Erlangen and Fürth. Owners wishing to lease a restaurant property should pay particular attention not only to the lease rent but also to clear inventory provisions, an obligation to operate the business (the tenant must actually run the business), and provisions regarding structural alterations. For agricultural lease agreements, we recommend consulting the Agricultural Advisory Service of the Office for Food, Agriculture, and Forestry (AELF) in Fürth-Uffenheim, which is also responsible for the greater Nuremberg area.

Frequently Asked Questions

When is it a lease agreement and when is it a rental agreement?

What matters is not the name of the contract, but its actual content. If the user is granted not only the right to use the property but also the right to derive income from it-for example, by operating a business in the premises provided, including the inventory-it is a lease agreement. By contrast, the mere transfer of empty commercial premises is generally a lease agreement, even if the parties refer to it as a “lease.”

Does tenant protection also apply to leaseholders?

No. The protective provisions of residential tenancy law-such as protection against termination, rent control, or rent caps-do not apply to lease agreements. Tenants are protected only by the general lease provisions. In the case of agricultural leases, however, there are special protective provisions, such as the option to apply to the agricultural court for an extension of the lease if termination would constitute undue hardship (Section 595 of the German Civil Code).

Who bears the maintenance costs in a lease agreement?

In principle, the lessor is obligated to maintain the leased property in a condition suitable for its contractual use (Section 581(2) in conjunction with Section 535(1) of the German Civil Code (BGB)). In practice, however, maintenance obligations are often contractually transferred to the tenant, particularly in the case of commercial leases. We recommend clearly and specifically defining the responsibilities for maintenance and repairs in the lease agreement to avoid future disputes.

How is the lease rent adjusted in a land lease?

Unlike residential tenancy law, where rent indices and rent caps apply, land leases are subject to a more flexible adjustment mechanism. Under Section 593 of the German Civil Code (BGB), either party may demand a change in the lease rent if circumstances have changed significantly since the contract was concluded-for example, due to substantial price changes for crops, sharply increased farming costs, or a change in soil quality. The adjustment is made at the court’s discretion and can be enforced in court if necessary. In the Nuremberg area, particularly in the Knoblauchsland and the Franconian Nuremberg region, lease rates for prime farmland are now being negotiated at 400 to over 700 euros per hectare per year-a significant increase compared to previous years, which is putting pressure on existing lease agreements. The Office for Food, Agriculture, and Forestry (AELF) in Fürth-Uffenheim regularly publishes guidelines for local standard lease rates in the region.

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