The Federal Court of Justice (Bundesgerichtshof) has issued a decision on the prerequisites for a termination of a tenancy pursuant to Section 573 (2) no. 3 BGB.
The plaintiffs are the undivided owners of a single-family house in the former GDR, which was rented to the defendant in 1953 under state administration. The plaintiffs entered into the tenancy after the end of the state administration at the end of 1992. They terminated the tenancy agreement by letter of 16 July 2007 on the grounds that they intended to sell the rented property, which was in need of refurbishment and was making losses, for the purpose of the settlement of the community of heirs. The intended settlement of the community of heirs could only be achieved by sale, which in the foreseeable future would only be possible in unrented condition. The Local Court dismissed the plaintiffs' action for eviction. The Regional Court dismissed the plaintiffs' appeal.
The plaintiffs' appeal against this was successful. The VIII Civil Senate, which is also responsible for residential tenancy law, reaffirmed its case law. Civil Senate of the Federal Court of Justice, which is also responsible for residential tenancy law, reaffirmed its case law that in assessing whether the owner suffers significant disadvantages as a result of the continuation of a tenancy agreement and is therefore entitled to terminate the tenancy pursuant to Section 573 (2) no. 3 BGB, the tenant's fundamental interest in remaining in the previous flat as the centre of his or her life must also be taken into account and all circumstances of the individual case must be weighed. Contrary to what the Court of Appeal meant, a substantial disadvantage cannot be denied merely because the plaintiffs as heirs had already acquired the property in a rented and unprofitable condition and no substantial deterioration had occurred since the plaintiffs' actual entry into the tenancy at the end of the state administration. This would amount to holding the owners of formerly state-administered flats to the conditions that existed when the administration was terminated, even after its termination, and to expecting them to accept permanent losses without a possibility of realisation; this is incompatible with the fundamental right to property (Article 14 (1) of the Basic Law).
The senate referred the case back to the court of appeal. The court of appeal will have to make the necessary findings on the unprofitability of the property alleged by the plaintiffs, on the amount of the reduced proceeds in the case of a sale in the rented condition or on the unsaleability in the rented condition and, if applicable, on the reasons for hardship asserted by the first defendant.
Judgment of the BGH of 8 June 2011 - VIII ZR 226/09
Lower courts:
AG Potsdam - Judgment of 9 October 2008 - 24 C 264/08
Potsdam Regional Court - Judgment of 23 July 2009 - 11 S 230/08
Source: Press release of the BGH
Goldberg Attorneys at Law 2011
Attorney at Law Michael Ullrich, LL.M. (Information Law)
