A more than ten percent deviation in the actual size of the rental space from the size cited in the commercial tenancy agreement may justify a reduction in rent, according to Germany’s Federal Supreme Court (BGH).
Rent reduction is possible under German commercial tenancy law if the actual size of the commercial space is smaller thanwhat was contractually agreed. That being said, it is important to note the extent of the discrepancy. A reduction in rent may be justified if the rented commercial space is more than ten percent smaller than the area agreed in the tenancy agreement. If the difference is less than ten percent, the BGH has ruled that the tenant must be able to show that the smaller size interferes with their ability to use the rental object as contractually stipulated, reports MTR Legal Rechtsanwälte, a commercial law firm whose team of experts includes specialists in real estate and commercial tenancy law.
While the tenancy agreement in the case heard by the BGHspecified a rental area of approximately 300 square meters, renovation work resulted in a roughly ten percent reduction in the size of this space. The tenant, a ballet school, responded by seeking a court declaration acknowledging its right to reduce the gross rent by ten percent because the smaller space meant that it could not teach as many students.
The school’s legal action was unsuccessful. Despite recognizing that the reduced rental space amounted to a defect in the rental object, Munich’s higher regional court – the OLG München – nevertheless held that this did not entitle the plaintiff to reduce the rent. The court reasoned that a discrepancy of less than ten percent meant that the plaintiff needed to be able to demonstrate a real impact to the suitability of the rental object to facilitate its intended use as laid out in the commercial tenancy agreement. However, it was noted by the court that the plaintiff had specifically failed to establish that the smaller area had actually led to a drop in revenue.
The OLG München’s ruling was subsequently upheld by the BGH on appeal, with the latter finding that the tenant had only argued in the abstract that the smaller space entailed a loss of potential income without pointing to specifics. The court went on to clarify that a reduction in rent is certainly possible if the actual size of the space is more than ten percent smaller than the size stipulated in the tenancy agreement. This, the court stated, gives rise to the assumption that the use of the rental object as envisaged in the agreement is significantly compromised.
MTR Legal Rechtsanwälte advises on matters pertaining to real estate law and commercial tenancy law.
