The Eighth Civil Senate of the Federal Court of Justice (BGH), which is responsible, inter alia, for residential tenancy law, was tasked with determining the conditions under which the termination of tenancy agreements, pursuant to Section 573 (2) No. 3 of the German Civil Code (BGB), is permissible for the economic exploitation of residential property.
The defendants rented apartments in a multi-family dwelling acquired by the plaintiff in 2005. The plaintiff intends to demolish the building, constructed in 1914 and in urgent need of renovation, to erect a larger building with six condominiums for sale. The plaintiff obtained the necessary building and monument protection permits for the demolition of the existing residential building, as well as the building permit for the planned project, and terminated all tenancy agreements effective January 31, 2006. The Local Court dismissed the eviction lawsuits. Upon the plaintiff's appeals, the Regional Court ordered the defendants to vacate their rented apartments. The defendants' subsequent appeals on points of law were unsuccessful.
The Federal Court of Justice ruled that the plaintiff was entitled to terminate the tenancy agreements.
The construction measures planned by the plaintiff constitute an appropriate economic exploitation of the property in accordance with Section 573 (2) No. 3 of the German Civil Code (BGB), as they are based on reasonable and comprehensible considerations. A renovation would necessitate high-cost investments in the existing building, which is in need of repair, despite its relatively short remaining useful life. Furthermore, the already approved new construction will create a significant amount of additional living space.
Furthermore, the continuation of the tenancy agreements would cause the plaintiff significant disadvantages, as stipulated by law for a landlord's termination. In assessing whether significant disadvantages are to be assumed, a balance must be struck between the tenant's interest in retaining the tenancy and the landlord's interest in exploiting the property, taking into account the circumstances of the individual case. If the plaintiff were obliged to continue the tenancy agreements, she would only have the option of a "minimal renovation," even though the building's condition necessitates either a comprehensive renovation, required for modern amenities, or demolition followed by new construction. According to the findings of the appellate court, carrying out even the most urgent measures would involve considerable costs without extending the building's useful life. Given the economic risks associated with such a "minimal renovation," the owner cannot be denied the interest in undertaking a permanent renewal promptly, rather than waiting for the complete depletion of the building's substance. If the tenancy agreements were to continue, the plaintiff would also not have the option of comprehensively renovating the building, as the necessary gutting would also require the tenants to vacate. Finally, a termination for the purpose of demolishing a building and subsequent reconstruction does not contradict the legislator's intent; rather, this possibility is cited in the legislative materials as an exemplary case for a termination based on exploitation. In view of these circumstances, the appellate court's assessment that a continuation of the tenancy agreements would lead to significant disadvantages for the plaintiff within the meaning of Section 573 (2) No. 3 BGB reveals no legal errors.
Judgment of the Federal Court of Justice of January 28, 2009, File no.: VIII ZR 7/08
Lower Courts:
Local Court Heidelberg – Judgment of July 3, 2007 – 61 C 581/05
Regional Court Heidelberg – Judgment of november 30, 2007 – 5 S 86/07
Judgment of the Federal Court of Justice of January 28, 2009, File no.: VIII ZR 8/08
Lower Courts:
Local Court Heidelberg – Judgment of July 3, 2007 – 61 C 584/05
Regional Court Heidelberg – Judgment of november 30, 2007 – 5 S 89/07
Judgment of the Federal Court of Justice of January 28, 2009, File no.: VIII ZR 9/08
Lower Courts:
Local Court Heidelberg – Judgment of July 3, 2007 – 61 C 582/05
Regional Court Heidelberg – Judgment of november 30, 2007 – 5 S 87/07
Source: Press release of the Federal Court of Justice No. 19/2009 of January 28, 2009
Goldberg Rechtsanwälte
Attorney Michael Ullrich, LL.M. (Information Law)
Email: info@goldberg.de
