With effect from January 1, 2025, the Bureaucracy Relief Act IV (BEG IV) comes into force, which brings with it a significant innovation for the commercial rental market: the abolition of the legal written form requirement for commercial rental agreements.
To date, commercial rental agreements with a term of more than one year have been subject to a strict written form requirement. If this is not adhered to, the rental agreement is deemed to be concluded for an indefinite period. The rental agreement can therefore be terminated with the statutory notice period despite any agreed fixed term.
From the entry into force of BEG IV, commercial rental agreements that are not concluded in text form for a term longer than one year are deemed to be concluded for an indefinite term.
The written form requirement for residential rental agreements with a term of more than one year remains unaffected.
Background to the reform: Facilitation of digital contract conclusions
The reform aims to make it easier to conclude digital contracts, which is to be achieved by reducing formal requirements.
In addition, terminations of commercial rental agreements due to breaches of form should be reduced. Historically, the previous written form requirement was primarily intended to protect the purchaser of a rented property, who assumes the rights and obligations of the previous landlord. The purchaser was thus given the opportunity to withdraw from a rental agreement, the contents of which he did not have complete knowledge of because the rental agreement or an additional agreement was not concluded in writing or did not completely contain all of the essential rental conditions.
However, according to the case law of the Federal Court of Justice, this right of termination did not only apply to the purchaser, but also generally to the parties to the rental agreement. In practice, this meant that landlords and tenants alike were able to terminate rental agreements prematurely, i.e. before the end of an agreed fixed term, due to a breach of the written form. The downgrade to a text form requirement is intended to reduce such cases.
Text form: relief and challenge at the same time
The text form (§ 126b BGB) requires that a declaration be recorded on a durable medium, such as an email, a PDF document or a USB stick. The person explaining must be recognizable. In addition, the end of the declaration and its completeness must be clear, for example by stating the name, a scanned signature, a greeting or the note “This declaration is not signed”.
The simplification of the formal requirements from written form to text form will make it easier and significantly faster to conclude commercial rental agreements, but it also entails uncertainty.
For example, it could become more difficult for a buyer of real estate to reliably record the full contents of a rental agreement. This applies in particular if significant contractual changes have been made via email or other means of communication in text form.
Document unit: Probably still required
The obligation to document unity was originally derived from the written form requirement. This meant that all appendices, addenda and additional agreements had to be linked to the original document of the rental agreement in order to maintain the written form, whereby a “mental connection” was sufficient, for example through explicit references and, if necessary, back-references between the contractual documents.
The legal justification for BEG IV indicates that purchaser protection should also be maintained in connection with the text form, which speaks in favor of retaining the requirement for document unity. This means that even a commercial rental agreement concluded in text form must contain all essential contractual conditions and addenda, additions or additional agreements require a concrete and recognizable link to the rental agreement. Loosely worded emails, extensive, confusing email processes or similar communication between the parties are likely to pose the risk of not making the legally binding agreements clearly identifiable and thus not guaranteeing the desired legal certainty.
Contractual written form clauses: Exclusion of the statutory text form possible
Rental contracts often contain so-called written form clauses, according to which changes to the contract may only be made in writing.
If these are so-called double written form clauses, which expressly stipulate that changes to the written form clause itself may only be made in writing, this formal requirement cannot easily be deviated from.
However, if the double written form clause is a General Terms and Conditions clause, the written form requirement can be deviated from by a primarily valid individual agreement (§ 305b BGB) – also verbally or tacitly, by submitting an informal declaration changing the contract. Such informal declarations previously violated the statutory written form requirement of Sections 550 and 126 of the German Civil Code (BGB), with the result that the rental agreement could be terminated prematurely. With BEG IV, this risk of early termination no longer applies to declarations in text form.
Transitional regulations: Applicability of the text form to new and existing rental agreements
A one-year transition period applies to commercial rental agreements concluded before BEG IV comes into force, during which such old agreements can still be terminated due to deficiencies in the written form. After the transition period has expired, old contracts can only be terminated prematurely due to violations of the written form. However, the parties are free to exclude termination of old contracts due to breaches of the written form in the rental agreement before the end of the transition period.
Conclusion, outlook
The reform of the written form requirement for commercial rental agreements offers landlords and tenants more flexibility and speed when concluding contracts. Electronic conclusions of long-term rental contracts, e.g. by exchanging scanned copies of handwritten signed documents or through (not necessarily qualified) electronic signatures, are now possible in a legally secure manner.
For new contracts, it should be considered to agree on a qualified text form in order to clearly design the legally binding communication for additional and supplementary agreements, for example by agreeing that legally binding contract declarations require a scanned signature or electronic signature or an express reference such as “legally binding “Declaration of contract” must be included.
Buyers of rented property should evaluate the entirety of the rental agreement documentation more carefully and, if necessary, expand the catalog of the seller’s assurances in the property purchase agreement or have the completeness of the rental agreement documentation confirmed by tenants.
