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Created on Monday, 19 January 2009 09:23

Last Updated on Friday, 28 December 2012 18:55

Business Rents for Residential Purposes

A global company rented a house for one of its managing directors. Which set of rules apply when the apartments are to be vacated? Those for office spaces or those for private tenants? As is surely known, it is the private tenants who enjoy a higher standard of "protection" vis a vis the landlord? The BGHBundesgerichtshof Federal Court of Justice– highest court for civil, commercial and criminal proceedings) answered this question with its judgment of July 16, 2008 (re VIII ZR 282/07).

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When the house was rented, the parties agreed that the managing director of the global company would live and run the company from that house. The landlord cancelled the contract with letter of December 11, 2006 effective June 30, 2007. However, the tenant, i.e. the company, gave notice with letter of January 31, 2007 effective April 30, 2007. The parties argued whether §573c I BGBBürgerliches Gesetzbuch (Civil Code) (renting for residential purposes) or §580a II BGB (business renting) applied.

When a juristic person rents a house to be partially used for business and partially for living purposes, this contract is for business purposes. The period to give notice will be determined by §580a II BGB. The Federal Court of Law's precedents determined that whether a building is used for living or for business purposes will be determined with the purpose of its use. A company can never rent a building for its own living purposes as the law would demand. It even does not matter whether the legal representative, the managing director, is to live in the house.