BGH, Decision of Mai 9, 2012 – XII ZR 79/10

At the time of conclusion of longterm lease agreements, the parties cannot foresee the rent development that exceeds inflation for the future with sufficient certainty. Either the landlord prices in this circumstance, which is not entirely calculable for him, with significant premiums, or he leases below the customary market price after a certain contract term due to the long-term commitment. For the commercial leasing area, the German Federal Court of Justice (BGH) has now provided the parties with a solution for this problem, thereby enabling them to react flexibly to price developments through pre-formulated price adjustment clauses.

HEAD NOTE

A clause in a commercial lease agreement, which grants a performance determination right to the landlord insofar as to determine the additional or lesser amount to be paid by the tenant, if the customary local or adequate rent changes, in his due discretion (Section 315 of the German Civil Code (BGB)), stands up to a review of the content pursuant to Section 307 paragraph 1 BGB stand.

FACTS

The plaintiff demands from the defendant – a sailing club – payment of rent under an agreement for the use of a pier as well as water areas on a federal water way against charge.

The agreement contained, inter alia, the following pre-formulated clause:

“Section 5 […] (4) The [plaintiff] examines after the expiration of three years each, for the first time as of January 1, 1999, whether the usage charge is still locally customary or otherwise adequate. In the case of a change, it determines the additional or lesser amount to be paid in its due discretion (Section 315 BGB) and informs the user of the amount of the usage charge to be paid in the future.”

The defendant refused to accept a unilateral price increase by the landlord, since Section 5 paragraph 4 of the agreement was void.

CONTENT AND SUBJECT OF THE DECISION

The German Federal Court of Justice (“BGH”) considers Section 5 paragraph 4 of the lease agreement effective.

A violation of Section 307 paragraph 1 sentence 2 BGB did not exist in the absence of an unreasonable discrimination. Section 5 paragraph 4 of the agreement constituted a performance reservation clause for indexing purposes, which was to be reviewed as general business terms based on Section 307 paragraph 1 sentence 1 BGB. It was accordingly decisive, whether the defendant was discriminated against contrary to the requirement of good faith. This was not the case.

A violation of the so-called transparency requirement – i.e. the duty to present general business teas clearly and transparent as possible – did not exist. Both the time and the reason for the price adjustment became sufficiently clear from Section 5 paragraph 4 of the agreement. The plaintiff has the right to adjust the rent at a predetermined point in time, if it is no longer locally customary or otherwise adequate. For the interpretation of the term of the locally customary rent, the BGH took recourse to Section 546a paragraph 1 BGB, which also uses this term. It is thus used by the code itself and is sufficiently determinable. Furthermore, the second alternative in the form of the “adequate rent” was also sufficiently determined, since that meant the rent, which is usually demanded and paid for comparable objects in the case of the conclusion of a new contract. By referring to Section 315 BGB, it was also ensured that the scope of the plaintiff is determined, since Section 315 BGB used the term “equity” [meaning “equitable”]. It was thereby ensured that the plaintiff demanded only customary market prices. Finally, Section 5 paragraph 4 of the agreement was not ineffective due to other reasons in the sense of Section 307 paragraph 1 sentence 1 BGB. Adjustment clauses were generally a suitable and recognized instrument to preserve price and performance. If the landlord should have the possibility however, to increase his profit unilaterally at the expense of the tenant, such a clause would not stand up to Section 307 paragraph 1 sentence 1 BGB. This was not the case here, since the exercise of the performance determination right was contingent upon the stated reference parameters and since it was limited by the characteristic of equity in the sense of Section 315 paragraph 1 BGB. Finally, the clause also provided for a reduction of the rent so that the interests of the tenant were also taken into account. However, it ensued from the reference to Section 315 paragraph 1 BGB that the landlord was also under a duty to reduce the rent, if necessary.

IMPACT ON DAY-TO-DAY BUSINESS

For the area of commercial leasing law, the BGH made a solution possible, which is both practical and “just”. If, as in the present case, the clause takes the interests of both parties into account and if the criteria as well as the time of the adjustment possibility are sufficiently determined, the rather strict general business terms law will not prevent such a clause. Even if both parties profit from such an adjustment clause in theory, an adjustment will most likely lead to an increase of the rent in the great majority of cases. As a result, landlords in the area of commercial leasing law now have an instrument at their disposal, with which they can ensure that they will participate in future price developments beyond the indexing. This should also be considered at the time of acquisition of real properties, since it may have a significant effect on future income.