Mitigating the lack of written form? – Federal government is sceptical about the Bundesrat’s legislative initiative

The legislator wants to remedy the eternal dispute about written form defects of long-term rental contracts. After the Federal Court of Justice recently finally overturned so-called cure clauses in long-term rental agreements (we reported), the Bundesrat took the initiative and decided to reform the regulation in December 2019. Failure to comply with the formal requirements is often used as a loophole in order to be able to get out of an unpleasant lease at an early stage. The draft of a law to revise the written form requirement in tenancy law now provides for limiting the right of termination to the purchaser. This reduces the norm to the protective purpose which the historical legislator had intended it to serve, the draft states. In addition, the right of termination to which only the purchaser is now entitled for the written form infringements prior to his acquisition is to be limited in time to protect the tenant. In this way, it is prevented that the tenant has to expect a termination by the purchaser due to a formal defect that has come to light during the entire remaining agreed contract term. In addition, the termination will become ineffective if the tenant objects to it and agrees to the continuation of the rental agreement on the terms agreed in writing.

The draft law has now been submitted to the Bundestag for resolution. However, the Federal Government rejects the draft. The new regulation would also apply to residential leases. Since an abuse of the regulation is not detectable there is, according to a statement, no need for action. The Federal Government is therefore not in a position to support the Bundesrat bill in this form. The Federal Government would examine whether and with which instruments the planning security for the term of contracts in commercial rental law could instead be improved. So things remain exciting. If no alternative is found by the end of this legislative period, the dispute will enter a new round. Click here for the draft law.

Bye-bye written-form-curing-clause?

German High Court Bundesgerichtshof (BGH) has dismissed so-called written-form-curing-clauses. With this decision BGH ruled on a long-time controversial issue. Common practice intended to hinder early termination of long term leases by deploying curing clauses. Curing clauses are incompatible with section 550 German Civil Code which is mandatory and, therefore, always void. Seen individually, these clauses  cannot hinder a contracting party to terminate a lease on the grounds of a written form issue, BGH held. However, in the subject matter (BGH , decision  dated 27. September 017 , XII ZR 114/16)  the termination was held invalid. A party who terminates an inconvenient lease on the grounds of a subsequent agreement which does not comply with statutory form requirements is in breach of good faith, if  such agreement was only in favor for the terminating party, BGH ruled. As an outlook, it is probably worth having a closer look on the grounds for termination. On the other hand: Does this really give the axe to curing clauses? Visit this website again to read more  soon.

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