Text form instead of written form - What are the consequences of the Fourth Bureaucracy Relief Act for commercial leases?

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On September 26, 2024, the Bundestag passed the Fourth Bureaucracy Relief Act, and the Bundesrat approved the law on October 18, 2024. We explain what parties to commercial leases should know about the upcoming changes.

Initial situation: Written form requirement in commercial leases

If commercial leases are agreed or subsequently amended, the written form requirement under Sections 578, 550, 126 BGB must always be observed. To this end, the essential contents of the tenancy, such as the contracting parties, the subject matter of the tenancy, the amount of rent and the term, must be set out in a document signed by both parties in their own hand. If, on the other hand, essential points of the contract are agreed verbally or by e-mail or are practically lived in deviation from the contract, the tenancy agreement is deemed to have been concluded for an indefinite period despite the agreed fixed term and can therefore be terminated in accordance with the statutory notice periods. The notice periods are between six and nine months, depending on the individual case.

Landlords of commercial premises in particular are therefore confronted with the risk that the commercially significant term of the contract will be drastically shortened by termination in writing. The Federal Court of Justice has also abolished the answer that used to be widespread in the practice of drafting rental agreements, namely, to counteract defects in the written form by means of written form clauses. Checking compliance with the written form always plays a particularly important role in the purchase test.

Text form instead of written form according to the Fourth Bureaucracy Relief Act

As part of its efforts to reduce bureaucracy, the German government presented the draft of a Fourth Act to Reduce Bureaucracy (BEG-IV) back in May 2024. Following amendments proposed by the Legal Affairs Committee on September 26, 2024, the draft was passed by the Bundestag and has been approved by the Bundesrat in the meantime.

For commercial tenancy agreements, the draft bill stipulates in particular that tenancy agreements concluded for longer than one year should only be deemed to have been concluded for an indefinite period if the tenancy agreement was not concluded (at least) in text form. Section 126b BGB requires the text form to include:

• a legible explanation
• in which the person making the declaration is named,
• delivered on a durable (unalterable storable) data carrier.

A declaration in text form can therefore be made in the form of emails, text messages or other digital communication. This means that long-term commercial leases could even be concluded and/or amended by email or messenger message in future once the statutory amendment comes into force or after the statutory transitional periods have expired, without there necessarily being a risk of premature termination due to a lack of written form. Nevertheless, caution is still required: Previously, all annexes and addenda had to make clear reference to the rental agreement (and any previous addenda). The co-contractual deed also had to contain all the essential agreements between the parties. The standards for this have been defined by case law over the years. It is uncertain whether the criteria developed by case law still apply to the text form.  

Consequences of a text form requirement

Whether the move from the written form requirement to the text form requirement therefore will relieve the burden on the contracting parties of commercial leases and thus reduce bureaucracy appears questionable for the time being. This is because long-term commercial leases could also previously be concluded digitally by means of a qualified electronic signature if the electronic form was agreed. Furthermore, the legal changes and the transitional provisions are likely to result in previously unresolved legal issues and therefore new uncertainties in connection with the need for commercial leases to be in writing. In addition, the written form requirement - in accordance with its protective purpose - has protected purchasers from unpleasant surprises and encouraged the parties to document the contractual relationship precisely. Against this background, we would not be surprised if the parties voluntarily impose a written form requirement, at least for larger single tenant leases.

The real estate team at Chatham Partners specializes in advising on and negotiating commercial leases and real estate transactions and will be happy to advise you.

We would like to thank Fabian Tobianski for his valuable support in preparing this article.