GERMANY LAW AND PRACTICE Contributed by: Wolfram H Krüger, Barbara Rybka, Markus Wollenhaupt and Alexander Zitzl, Linklaters
6.3 Regulation of Rents or Lease Terms Leases are subject to the Civil Code, which regulates basic contractual matters. Within that scope, contracting parties may freely negotiate the contractual provisions, as long as they do not violate any mandatory law, eg, regulations on the maximum rent payable and its increase for residential leases. There is no material ongoing regulation of rents or lease terms that resulted from the COVID-19 pandemic. The moratorium on termination of rental and leasehold agreements due to non- payment of rent established by the government expired on 30 June 2022. 6.4 Typical Terms of a Lease Fixed leases typically run for a period of between five and ten years, and extension options are often agreed. It is possible to negotiate terms of up to 30 years. The landlord is obliged to maintain the premises in the agreed condition – therefore, the landlord must bear all costs for repairs and decora - tion. It is market standard for maintenance and repair work to be undertaken by the tenant at its own cost. In most cases, the landlord remains responsible for structural and major repairs, and the tenant carries out internal repairs and maintenance as well as repairs solely for interior decoration. Case law regards clauses that oblige the ten - ant to repair the roof and structure of the leased premises, to decorate at fixed intervals, to com - ply with unlimited renovation obligations at the end of the term, or to pay for renovation irre - spective of the premises’ actual state at the end of term, to be unfair and invalid.
Triple net leases (in which the tenant agrees to pay all real estate taxes, building insurance and maintenance) are generally not permitted unless individually agreed; eg, in sale-and-leaseback transactions. Rent is mainly paid on a monthly basis. In rare cases quarterly, six-monthly or yearly rents are agreed. Newer leases contain specific provisions for a pandemic situation or another force majeure event in relation to delays in the fit-out works and therefore in the handover of the leased premises. In some cases, parties have negoti - ated material adverse change clauses related to the pandemic. 6.5 Rent Variation In principle, the parties are free to agree on the amount of the rent and its increase under com - mercial tenancy law. The parties generally agree on rent adjustment systems, such as indexation rent, graduated rent or turnover-linked rent. For residential leases, strict limitations apply to a possible rent increase. 6.6 Determination of New Rent It is usual to agree on the rent adjustment system in the lease agreement itself. It is seldom agreed to negotiate a new rental based on the then- applicable average market rent after a certain number of years, or if the tenant has exercised an option right. Generally, commercial rents are adjusted according to changes in the Consumer Price Index ( Verbraucherpreisindex ). A graduat - ed rent will be raised by a specific amount after a certain period. A turnover-linked rent will be adjusted to the change of turnover of the tenant for a certain period; in order to mitigate the risk of falling sales, however, a minimum fixed rent is usually agreed.
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