Fourth Bureaucracy Reduction Act Took Effect on January 1, 2025
On January 1, 2025, the Fourth Bureaucracy Reduction Act (BEG IV) came into force, bringing significant changes to commercial leasing law. For commercial leases, the requirement for written form has been abolished; simple text form is now sufficient. This marks a significant simplification, as text form does not require a handwritten signature.
The BEG IV introduces various measures, including shorter retention periods in commercial and tax law, promotion of digitalization, reduction of reporting and information obligations, and other simplifications. Among these is the elimination of the requirement for written form in several areas, with simple text form deemed adequate, according to MTR Legal Rechtsanwälte, a law firm advising on topics such as real estate law.
Elimination of Written Form Requirement for Commercial Leases
BEG IV aims to advance digitalization, which includes eliminating the requirement for written form in certain areas. Text form, as opposed to written form, does not necessitate a handwritten signature on paper, accelerating digital processes and facilitating practical handling. Given that email is already a common communication tool in business, contracts can now be concluded via email if text form suffices, as is the case for commercial leases. Text form also allows for communication via fax or electronic documents, such as PDFs.
Text Form: A Readable Declaration on a Durable Medium
Text form is regulated in Section 126b of the German Civil Code (BGB). Where text form is required, a “readable declaration identifying the person making the declaration must be provided on a durable medium.” A durable medium is any medium that allows the recipient to store the message in a way that ensures access for an adequate period and preserves its content unchanged.
Previously, under Section 550 BGB, a lease for a term exceeding one year that was not concluded in written form was considered indefinite and could be terminated in accordance with statutory notice periods. This principle now applies to text form: if a lease exceeding one year is not concluded in text form, it is considered indefinite.
Efficient and Less Bureaucratic Contract Conclusion
For landlords and tenants, particularly in the commercial sector, this change enables faster and less burdensome contract conclusions since physical documents no longer need to be exchanged and signed. However, for leases concluded before January 1, 2025, the requirement for written form remains.
Another benefit is the reduction in legal disputes, as breaches of the written form requirement were often a source of conflict in commercial leasing law.
Avoiding Legal Uncertainty
While the elimination of the written form requirement simplifies processes, it may also create legal uncertainties for landlords and tenants. Lease agreements should therefore be drafted as precisely as possible to ensure clarity in legal relationships and avoid disputes. All terms should be clearly and unequivocally articulated.
This is especially important as commercial lease law allows for extensive contractual freedom, enabling parties to agree on their rights and obligations independently. As such, defining the lease term, termination rights, or rent adjustments carries significant weight in commercial leases.
Additionally, parties should consider that the lack of a handwritten signature may make it more challenging to prove the authenticity of contractual agreements.
MTR Legal Rechtsanwälte has extensive experience in real estate law and can support you in drafting contracts and other matters related to commercial leasing.
Feel free to contact us!
