Lease Agreement

A lease agreement is a contract under the law of obligations whereby the lessor grants the lessee the use of a property and the right to derive benefits from it-that is, to use it for economic purposes and generate profits-in exchange for payment (rent). It differs from a rental agreement in that the lessee is permitted not only to use the property but also to exploit it economically. In the real estate sector, lease agreements are primarily used for restaurants and hotels, agricultural land, garden plots, parking spaces, and hereditary building rights.

Difference Between a Lease and a Rental

The key difference between a leasehold and a rental agreement lies in the right to derive benefits: A tenant may only use the rented property (e.g., live or work in it). A lessee may additionally derive benefits from the property-i.e., generate profits from its operation (e.g., revenue from a leased restaurant or income from leased farmland). Legally, lease agreements are governed by Sections 581-597 of the German Civil Code (BGB). Specific regulations apply to certain types of leases: agricultural leases under Sections 585-597 BGB, and business leases under general contract law.

This distinction also has tax implications: Under a lease agreement, the lessor generally generates income from renting and leasing (Section 21 of the German Income Tax Act (EStG)), but may also generate business income from commercial lease properties-depending on whether the lessor engages in business activities. For the lessee, the lease is deductible as a business expense. This distinction is not always clear-cut in practice and should be reviewed with a tax advisor.

Typical Applications in the Real Estate Industry

In practice, lease agreements in the Nuremberg metropolitan region are particularly common for: restaurants and hotels (leased building including operating license), kiosks, gas stations, and retail businesses on leased land, allotment garden plots (Federal Allotment Garden Act, BKleingG), agricultural land in Franconian Switzerland or the Nuremberg area, as well as advertising spaces and cell tower sites on rooftops. In the case of hereditary building rights, the property is leased and developed for 99 years-a special case of leasehold law.

In the restaurant industry in particular, the careful drafting of the lease agreement is critical to the business’s survival: The lessee makes significant investments in furnishings, kitchen equipment, and fixtures. Without clear contractual provisions regarding the disposition of these investments at the end of the lease, substantial financial losses may result. We recommend always having lease agreements for restaurant properties reviewed by an attorney specializing in restaurant law.

Contract Contents and Legal Specifics

A legally sound lease agreement contains: a precise description of the leased property, rent and payment terms, term and termination provisions, maintenance obligations (often more extensive for the lessee than for a tenant), provisions regarding subleasing and assignment of the contract, as well as provisions for the termination and return of the leased property. For restaurant and hotel lease agreements, special clauses regarding inventory, business transfer, and the assumption of concessions are required. We always recommend having a lease agreement reviewed by an attorney specializing in lease and tenancy law before signing.

Maintenance obligations are often broader in lease agreements than in rental agreements: The lessee is frequently obligated to fully maintain the leased property-including major repairs, which in a rental agreement typically fall to the landlord. This far-reaching obligation must be taken into account when calculating the lease’s profitability.

Practical Tip for Property Owners in Nuremberg and Franconia

Property owners in Nuremberg who lease commercial real estate or restaurant spaces should ensure that the lease agreement clearly stipulates who is responsible for maintenance and renovation-and which fixtures installed by the lessee may remain on the premises or be removed at the end of the agreement. The absence of provisions regarding the removal of fixtures (e.g., restaurant kitchens, counters, cold storage rooms) regularly leads to costly disputes. We assist you in drafting and reviewing lease agreements for your property in the metropolitan region.

When searching for a suitable tenant for a commercial property in Nuremberg, we assist with both the buyer and tenant search. Credit checks, market price assessments for the lease rent, and the involvement of experienced attorneys for contract drafting are integral parts of our consulting services.

Frequently Asked Questions

Does a lease agreement have to be concluded in writing?

Generally not-a lease agreement can also be concluded verbally. However, for evidentiary purposes, the written form is strongly recommended. For agricultural lease agreements exceeding two years, the written form is required under Section 585a of the German Civil Code (BGB); otherwise, the agreement is deemed to be concluded for an indefinite term.

What are the notice periods for lease agreements?

The statutory notice periods for open-ended lease agreements are six months prior to the end of a lease year (Section 594a of the German Civil Code (BGB)). For agricultural lease agreements, special notice periods apply pursuant to Section 594a of the German Civil Code (BGB). Different notice periods may be agreed upon in the contract, provided the law permits this.

Can the tenant sublet the leased property?

Only if the lease agreement expressly permits it. Without the lessor’s permission, subleasing is prohibited and may justify extraordinary termination of the lease agreement.

What is the difference between leasehold rent and rent?

Rent and leasehold rent are calculated based on the same economic factors: location, size, condition, and market conditions. The key difference lies not in the price itself, but in the nature of the right of use and the obligations of the parties. Leasehold rents for commercial properties are often agreed upon as a percentage of the tenant’s revenue-a percentage of the tenant’s sales-which ensures the landlord a share in the business’s success.

Can a lease agreement be terminated early if the tenant fails to pay?

If the tenant falls significantly behind on lease payments, this entitles the landlord to terminate the lease agreement for cause. For agricultural lease agreements, the special protective provisions of § 594e of the German Civil Code (BGB) apply, which tie termination for cause to strict conditions. For commercial lease agreements, general contract law applies: If the tenant is more than one quarter’s rent in arrears and the termination requires a reasonable grace period, the landlord may terminate the agreement without notice. We recommend explicitly including provisions in the lease agreement regarding termination for late payment and clearly defining payment deadlines.

Farm Leases in the Nuremberg Area: Current Market Situation

In the surrounding areas of the Nuremberg metropolitan region-in the Knoblauchsland, the Schwabach agricultural plain, and parts of the Roth district-agricultural leases are a significant issue. In these areas, farmland is increasingly owned by non-agricultural landowners who lease the land to active farmers. Lease rates for farmland in the Nuremberg metropolitan region range from 150 to 600 euros per hectare per year, depending on soil quality and location. By comparison: In prime locations on the Franconian loess soils north of Nuremberg, lease rates of over 700 euros per hectare are occasionally achieved. When concluding a contract, owners of agricultural land should ensure that the parcels are correctly identified (parcel numbers), that there is an adjustment clause for the lease rent, and that there are clear provisions for returning the land in proper condition.

Back to the Real Estate Glossary.