29. Sep 16

Commercial law of tenancy and lease: Significant changes require written form

Proper written form should always be observed when it comes to commercial tenancy and lease agreements. Oral agreements may not be effective in cases where there is doubt, as demonstrated by a recent ruling of the Oberlandesgericht (OLG) Dresden [Higher Regional Court of Dresden].

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: It is particularly important in cases involving commercial tenancy and lease agreements that they always be made in writing. Any substantial changes to the tenancy or leasing arrangements need to be in writing as a matter of course. In addition to the leased or rented property, this also concerns e.g. rent, the rental or lease period and the parties to the contract. While it is possible to orally conclude ancillary agreements to the written tenancy or lease agreement, those concerned may be in for a shock later. That much is clear from a ruling of the OLG Dresden (Az.: 5 U 1057/15).

In the instant case, a restaurateur had concluded a written lease agreement with the property owner. This set out in writing how a 320 square meter area could be used for development. The parties had also reached an oral agreement, according to which the lessee was allowed to make use of other sections of the site. He duly took advantage of this and set up a beer garden. The area used in doing so ultimately increased to 900 square meters. The use of this extra area did not lead to any problems whatsoever between the parties.

However, this all changed when the property was sold. The new owner demanded deconstruction back to the area agreed in the lease agreement. The parties reached an agreement. After several formal warnings proved fruitless, the new lessor finally decided to terminate the lease agreement. The lessee was unsuccessful in his attempts to take action against the termination. The OLG Dresden held that the expansion of the area used represented a significant change and therefore needed to have been made in writing. That this extension was material in nature was said to be clear from the fact that it exceeded the area agreed in the contract several times over. The OLG went on to say that because written form had not be observed, the termination of the lease agreement had been carried out properly.

In order to prevent legal disputes at a later date, one ought to set out in writing in the tenancy or lease agreement not only the key arrangements but also all other details relevant to the overall agreement. Lawyers who are versed in the field of commercial tenancy and lease law can offer advice and review tenancy and lease agreements.

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