Interest on late payments

Late Payment Interest - Late payment interest is interest set by law that a debtor must pay if they fail to settle a monetary claim by the due date. In the real estate sector, late payment interest typically applies to late payment of the purchase price, rent arrears, and late payment of maintenance fees. The statutory default interest rate is 5 percentage points above the base rate for consumers and 9 percentage points above the base rate for businesses (Sections 288, 247 BGB).

Conditions for Default

Default occurs when the debtor fails to perform a due obligation after receiving a reminder (Section 286 BGB). A reminder is not required if:

• a calendar-based performance deadline has been agreed upon (e.g., “rent due by the 3rd business day of the month”) - in which case default occurs automatically upon expiration of the deadline
• the debtor seriously and definitively refuses to perform
• 30 days have passed since the due date and receipt of an invoice or an equivalent payment request (for consumers, only if the invoice expressly states this)

For lease agreements, the following applies: Rent is due no later than the 3rd business day of the month (Section 556b BGB). Starting on the 4th business day, the tenant is automatically in default if the lease agreement contains a corresponding provision-without any further reminder.

Default Interest in Real Estate Transactions

In the event of a delayed payment of the purchase price, the buyer owes the seller default interest starting from the day the notary’s notice of due date expires. In notarized purchase agreements, a default interest rate of 5 percent above the base rate is often agreed upon; in some contracts, a flat rate of 8 percent is also specified. With typical purchase prices in the Nuremberg metropolitan area ranging between 300,000 and 600,000 euros, default interest can add up to significant amounts even with just a few weeks of delay.

In the case of rent arrears, the landlord may charge interest starting from the day the payment is overdue. Additionally, the landlord may demand compensation for the actual damages incurred due to the delay-such as collection costs, attorney’s fees, and lost interest income on the outstanding amount.

In the case of delinquent maintenance fees under the WEG, the delinquent owner owes late payment interest to the community. The WEG has a direct interest in a consistent dunning process because the community must pre-finance the missing contributions elsewhere-if necessary, through higher special assessments. We recommend that property management companies in Nuremberg establish a clearly structured dunning procedure with defined escalation levels.

Late Payment Interest and Condominium Law

The WEG has specific options for enforcing maintenance fee debts: It can initiate judicial collection proceedings against delinquent owners and obtain an enforcement order. According to Section 10(1)(2) of the German Enforcement Code (ZVG), claims for maintenance fees enjoy a statutory priority in foreclosure proceedings-they are satisfied before subordinate real estate liens (limited to current and overdue amounts from the last two years). This privilege significantly strengthens the homeowners’ association’s position against owners unwilling to pay.

Practical Tip for Owners in Nuremberg

We recommend that landlords in the Nuremberg metropolitan area issue timely and systematic reminders for rent arrears. A first written reminder should be sent no later than five days after the due date, and a second one with a specific deadline after another ten days. Carefully document all incoming payments, reminders, and correspondence with the tenant-in the event of a dispute, you as the landlord bear the burden of proof.

If the arrears amount to two months’ rent or more, you may issue a termination without notice (Section 543(2)(3) of the German Civil Code (BGB)). At the same time, we always recommend issuing a regular notice of termination as well-as a safeguard in case the termination without notice is remedied by the tenant’s subsequent payment. We advise landlords in Nuremberg on the legally compliant implementation of reminder procedures and terminations.

Frequently Asked Questions

What is the current rate of default interest?

The statutory default interest rate is 5 percentage points above the base rate for consumers (Section 288(1) BGB) and 9 percentage points for businesses (Section 288(2) BGB). The base rate is set every six months by the Deutsche Bundesbank and has been well above zero again since 2022-most recently around 3.37 percent. This results in a late payment interest rate of approximately 8.37 percent per year for consumers and approximately 12.37 percent per year for businesses. A different late payment interest rate may be agreed upon in the notarized purchase agreement; however, this must be reasonable.

As a landlord, can I demand higher default interest?

No, the statutory default interest rate is a minimum entitlement-beyond that, the landlord may only demand compensation for the specific, proven damages resulting from the delay (Section 288(4) BGB). A contractual agreement for higher default interest in general terms and conditions (standard lease agreements) is generally invalid because it unreasonably disadvantages the tenant. In individually negotiated contracts between businesses-such as commercial leases-a higher interest rate may be validly agreed upon.

When can I terminate the lease due to rent arrears?

Termination without notice due to late payment is possible if the tenant is in arrears on two consecutive due dates with a significant portion of the rent, or if the total arrears reach or exceed two months’ rent (Section 543(2)(3) of the German Civil Code (BGB)). The tenant may remedy the termination without notice by making full back payment within two months of service of the eviction suit-however, this applies only once within a two-year period. In parallel with the termination without notice, a notice of termination with notice should always be issued as well, so that the termination remains legally effective even if remedied by back payment.

Default Interest in the Context of a Notarized Purchase Agreement

In real estate transactions, the provision regarding default interest plays a special role: The notarized purchase agreement typically contains a precise due date clause stipulating that the purchase price must be paid within a specified period once certain conditions are met (clearance certificate from the tax office, registration of the priority notice of conveyance, cancellation of existing real property liens). If the buyer fails to pay within this period, they automatically fall into default and owe default interest. In the Nuremberg metropolitan area, agreed-upon purchase prices typically range between 300,000 and 800,000 euros-with a late payment interest rate of 5 percentage points above the base rate, even a four-week delay results in interest payments of 1,000 to 3,000 euros.

For sellers in Nuremberg, we recommend reading the notary’s notice of due date carefully and informing the buyer of the expected payment date well in advance. Buyers should request financing approval from their bank in a timely manner so that the purchase price payment does not fall into arrears due to internal bank delays-banks typically require two to five business days to disburse a construction loan after receiving all documents.

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