Terminating rent contract for personal use

As a lawyer specialising in tenancy law, I am often asked by clients to enforce notices of termination for their properties because the owner wants to occupy the property himself or I have to defend tenants against such actions. In times where living space is scarce, such terminations of rent contracts are highly controversial and more difficult to enforce than is often claimed. Even if rent contracts are as a rule terminated when a landlord sues for personal use, by acting intelligently, landlords can considerably increase their chances of getting the apartment back within a manageable period of time and can reduce their risk in terms of costs. In the following article, I would like to explain what you should know as a landlord if you intend to terminate your tenant’s rent contract for reasons of personal use.

1.What does a legal dispute arising from a landlord’s claim to use the property himself generally look like in practice?

In my experience, landlords often fail to realise how long it may take to enforce a termination due to personal use when there is resistance on the part of the tenant. In order to explain what steps will increase your own chances, I would first like to explain what legal disputes of this kind often look like in practice:

a) Federal Court of Justice (BGH) jurisdiction

Many people seem to know that, according to the jurisdiction of the Federal Court of Justice, the requirements for terminating rent contracts for personal use are now quite low. You have to bear in mind, however, that there is a difference between the quite simple process of terminating a rent contract and the often ensuing, not quite so simple legal dispute.

My experience with terminations for personal use has been that the termination does actually lead to termination of the tenancy agreement in most cases. However, it is also usual for tenants to defend themselves against the termination, and the tenant can extend the procedure enormously by doing so. Therefore, as a landlord, you should do what is possible to simplify the procedure. To do this, however, it is important that you try and see the matter from the point of view of the tenant and from the point of view of judges.

b) The tenant’s view

As a landlord, you should be aware what it means to a tenant to have his rent contract terminated so that the landlord can use the apartment himself, especially in areas where there is a shortage of residential space.

First of all, the special thing about terminating a rent contract for personal use is that the tenant has “done nothing wrong”. Unlike nearly all other terminations under residential tenancy law, the tenant has not violated his contractual obligations. Although termination for personal use is very much feared by tenants, they are nevertheless shocked when it actually happens to them.

Because of the feeling of injustice this causes and because there are of course some black sheep who pretend they want to use their apartment themselves, both tenants and judges often suspect that citing personal use is just a trick. They suspect that the landlord actually wants to make more money from the apartment. A property can usually be sold for a higher price if it is vacant, or it can be rented out afterwards for a higher rent.

Above all, termination due to personal use will mean a financial worsening for the tenant in the majority of cases, because he will generally have to pay a higher rent after moving. If the tenancy agreement has not been concluded relatively recently, it is highly unlikely that the tenant will be able to rent an apartment in a comparable location at a similar rent. From the tenant’s point of view, it can therefore make sense to postpone vacating the apartment for as long as possible. By holding things up, the tenant can retain the lower rent for a longer period of time.

This will often make financial sense for tenants, as they are either covered by their legal expenses insurance or they are eligible for legal aid. The legal dispute itself is therefore often not associated with any major financial risk for tenants.

c) Time horizon

Therefore, if there is a considerable risk that the tenant will fight against the termination, you should be aware of the consequences. This includes, in particular, keeping in mind how much time it will take to enforce the termination if the tenant resists it. In cases of a legal dispute, you should expect the following times at the least:

Period of notice for termination: 3 to 12 months

Depending on the wording of the rental agreement and how long the tenant has been living in the apartment, you (actually) have to wait for the period of notice to expire before you can file an action for eviction.

• This time can be shortened, however. The courts allow actions for future eviction pursuant to Art. 259 Code of Civil Procedure (ZPO). This presupposes that you have reason to believe that the tenant will not vacate in time. You are right to fear this may be the case at the latest if the tenant objects to the termination for reasons of hardship. However, the tenant often does not wait until the period of notice he is allocated has expired (2 months before expiration of the period of notice for termination, Art. 574b (2) clause 1 German Civil Code (BGB)). In many cases, the termination is objected to quite promptly following notification of it.

First instance before the Local Court: 9 to 15 months

The time required for first instance proceedings is often underestimated. It should be noted that – as a rule – the first step is an appointment for a hearing. In this hearing, the court first attempts to settle the legal dispute. This is followed by at least one appointment in which evidence that the landlord actually needs the apartment for personal use is presented. As a rule, this is followed by gathering evidence of the tenant’s hardship, if this was the reason for his objection to the termination.

• More and more often, tenants are claiming the risk of a considerable deterioration to their health due to eviction. In such cases, expert opinions are required as evidence. Expert opinions of this kind not only take time, they are also quite expensive.

• In Berlin, the intensity with which an examination of this kind to disprove the tenant’s hardship is carried out differs considerably from local court to local court and depending on the chamber of appeal at the regional court. In order to be able to correctly assess the chances of terminating a tenancy agreement, it is therefore necessary in Berlin to be familiar with the jurisdiction of the chambers of appeal in cases of residential tenancy law as well as the regional court’s schedule of responsibilities.

If the landlord proves his own need for occupancy and the tenant proves that he is indeed a hardship case, the court will make its decision at its own discretion about whether the interests of the landlord or those of the tenant take priority.

Appealing before the regional court: at least 5 to 6 months

If a decision is made in the first instance by judgement, there is usually also an appeal. This takes – in the best case scenario – 5 to 6 months. According to the Code of Civil Procedure (ZPO), the losing party at first instance has three months after service of the reasoned judgment from the court of first instance – including the mandatory extension of the time limit for filing an appeal – to give grounds for appeal.

In the real best-case scenario, the court of appeal is convinced, after the grounds of appeal have been established, that the judgment of the first instance is lawful. However, the court must still provide reasons for its decision to the tenant and give him the opportunity to comment. If the local court has made a mistake – which is not as seldom as you might think – a decision will be delayed even further.

Period of notice to vacate the property: 3 to 6 months

Upon issuance of the final decision, the tenant is also granted a period for vacating the apartment pursuant to Art. 721 (1) clause 1 ZPO. This is generally 3 to 6 months, but can be extended to 12 months, also through later applications.

Eviction by the court bailiff: 2 to 3 months

If the tenant really does fight “to the very end”, it may be necessary to commission the court bailiff with the eviction.

d) After these rather unpleasant facts, something more positive

Before you become too desperate about what I have said above, I would like to stress the following again: The majority of all legal disputes concerning the termination of a tenancy agreement due to the landlord’s personal use ultimately do lead to the tenancy agreement being terminated. The majority of all cases are settled either within the notice period or in the first hearing before the local court.

2. What conclusions should one draw from this?

If you take the following advice to heart, you will increase your chances of getting your apartment as soon as possible and paying as little as possible for this.

a) Take out legal expenses insurance

Before you reveal to the tenant in any way that you might want to terminate the rent contract for personal use, you should take out legal expenses insurance yourself as a landlord.

• If the tenant declares to you before taking out the insurance or within the three-month waiting period that he will defend himself against the termination proceedings, this makes the legal protection case a pre-contractual one and it is no longer covered by your insurance.

With legal expenses insurance protecting you, the dispute can be approached in a much more relaxed manner – at least with regard to the cost-related risks (for information on how the cost-related risks are calculated, see below).

It is therefore important that legal expenses insurance be taken out at an early stage. After taking out the insurance, it takes another three months until the insurance takes effect, i.e. until the risk is insured. This waiting period can be used to prepare the termination of the rent contract.

• Check the insurance conditions before taking out the policy! Some legal-expenses insurers have started to explicitly extend the waiting period for notices of termination due to personal use.

b) Give detailed reasons for the termination

The requirements for termination due to personal use are very low. Nevertheless, in your letter to the tenant notifying him that you are terminating the rent contract because you need the apartment for personal use, it is a big mistake to restrict the wording of your letter merely to the necessary formalities.

If you provide a detailed and comprehensibly justified explanation concerning the termination of the rent contract from the outset, this shows the tenant that you actually do need the apartment. This can at least reduce suspicions – also on the part of the court – that the termination is for financial reasons alone.

• Please stick to the facts, though. As stated above, litigation can take a long time. It is not uncommon for changes in your life planning to occur during this time, and these should also be communicated. This is usually unproblematic if you stick to the truth. By doing that, you can then tell a comprehensible, coherent “story”.

Above all, however, when evaluating the “landlord’s interests against the tenant’s reasons for hardship”, the courts will only consider interests in favour of the landlord that have already been named in the notice of termination. Frequently, the landlord only explains in the notice of termination who is to move into the apartment. In this case, all that is taken into consideration in the court decision is the landlord’s interest in using his own property. This increases the risk that the court will see the tenant’s grounds for hardship as taking priority.

Therefore, in addition to explaining who should move into the apartment, you should also explain their current living situation and what advantages are associated with moving into the new apartment (shorter distance to work/training place, proximity to relatives, termination of your own apartment, family planning, etc.).

c) Already offer a settlement with the termination

As explained above, the bulk of all litigation is concluded with a settlement. That is why I recommend that, in the declaration of termination, an initial proposal be made for such a settlement. In my view, this makes sense in order to prove that the apartment is really needed and to lay an appropriate foundation for later proceedings.

• First of all, you should think about what the apartment is “worth” to you. The landlord or the person who is supposed to move into the apartment will generally have much higher costs for his own rent for the time during which a legal dispute takes place. In addition, it is not really possible to plan when you can move into the apartment if it comes to a legal dispute.

With an offer, for example, you can (1) offer an amount that covers the tenant’s move and minor inconveniences, (2) agree to a reduced period of notice that only benefits the tenant to make it easier for the tenant to find a new apartment, (3) offer a waiver of decorative repairs; a large part of the clauses in this respect are ineffective anyway and as a rule you or the person moving in will want to redecorate the apartment anyway, and/or (4) if the tenant only has a short period of notice for termination, offer an appropriate extension of this notice period.

d) Try to obtain a declaration from the tenant concerning the termination early on

Especially if the period for termination according to Art. 573c BGB or the rent contract is more than three months, you should try to elicit a declaration concerning the termination from the tenant following your notification of termination. As already stated, you can sue for future eviction if the tenant objects to the notice of termination and you run the risk that he will not vacate the apartment upon expiry of the period of notice. If it therefore becomes necessary to enforce the termination in court, the aforementioned period can be shortened in this way.

e) Demand the rent for the new tenancy as soon as the period of notice for termination has expired

As explained above, it will usually make financial sense for the tenant to extend the procedure. The tenant can thus keep the lower rent without the litigation posing a financial risk to him.

As a landlord, you can counter this by requesting the tenant to pay the new rent at the end of the period of notice. Upon expiry of the period of notice, the tenant does not owe the rent any more, but does owe compensation for use pursuant to Art. 546a (1) BGB. The tenancy has ended, meaning that no more the rent is owed. However, the tenant does owe compensation for continued use of the apartment.

The special feature of the compensation for use is that it can be far higher than the original rent, since according to the jurisdiction of the Federal Court of Justice, landlords can also demand the new rent as compensation for use. The rent for new rental is the rent that can be achieved on the market for new rentals. At this point, in order to build up sufficient pressure, you do not have to stay in line with the rent permitted according to the rent freeze. As the 67th Chamber of the Berlin Regional Court has ruled that the rent freeze is unconstitutional from its point of view, you can argue that compensation for use should be demanded at a level that would be customary if there was no rent freeze.

The tenant thus faces the risk of having to pay to the landlord everything he has saved by causing a delay.

Ultimately, in negotiations about a settlement of the tenant’s claim, this possible claim arising from compensation for use can be set against this claim in order to reduce any flat-rate removal costs to be paid to the tenant.

3. The risk of the costs for court proceedings

Finally, I would like to briefly explain how the risk-of-litigation costs for legal disputes before the courts concerning the termination for personal use are calculated. For this purpose, I recommend that you use one of the litigation cost calculators provided on the Internet (e.g. the one provided by Roland Rechtsschutzversicherung).

Unless otherwise agreed between you and your lawyer, the costs of a legal dispute are calculated in accordance with the German Lawyers’ Fees Act (RVG).

• Please note that the costs according to the RVG are the minimum costs at the latest when a legal dispute takes place. According to the Professional Code of Conduct for Lawyers (BRAO), a lawyer may not deviate downwards from these costs, Art. 49b (1) clause 1 BRAO.

In order to be able to calculate the costs according to the RVG, the amount in dispute must first be determined, and the costs for lawyers and courts are then determined in line with this.

a) The dispute amount for the eviction proceedings

The basic dispute amount for an eviction lawsuit is 12 times the monthly net cold rent. If a gross rent has been agreed between you and your tenant (i.e. no separate advance payment or lump sum on the operating costs), the amount in dispute is calculated on the basis of 12 times the gross monthly rent.

If the net cold rent thus amounts to € 1,000.00, the value in dispute of the eviction lawsuit will initially be € 12,000.00.

If there are several landlords and/or several tenants or people living in the apartment, the fees for the lawyers increase. This is taken into account by the litigation cost calculator acc. to the number of clients/respondents, which you can adjust.

b) Further costs of a legal dispute

The litigation cost calculator does not take into account the costs of taking evidence. If only witnesses are heard, costs of about 100.00 € per witness are generally incurred. These costs can increase greatly, of course, if a witness has to travel from further away.

If the court has to request that an expert opinion be drawn up, this means further substantial costs. This is necessary, for example, if the tenant claims that there is a risk of a considerable deterioration to his health due to being evicted. If an expert opinion is required from a medical expert, you can generally expect to pay a four-digit sum.

c) The dispute amount for payment and assessment of the compensation for use

If you follow my recommendation to demand the new rent from the tenant at the end of the period of notice, this will further increase the dispute amount of the lawsuit. As a rule, you will then have to file two additional applications in the lawsuit. The first is to request that the tenant pay the compensation for use already accrued at the time of the application. Secondly, you must request that the court determine that the tenant is obliged to pay this amount until the eviction.

The dispute amount for the first application is easy to calculate. This is the difference between the old rent and the new rental that you have requested. This difference is multiplied by the number of months that have started since the rent contract was terminated at the time the application is submitted.

For example: the old rent is 1,000.00 € and the new rent is 1,500.00 €, and the tenancy has been terminated on 31 December 2019. If the application is filed on 15 April 2019, the dispute amount in the first application will be 2,000.00 €.

2,000.00 € = 500.00 € a month (difference between the old rent and the rent for the new rental) x 4 months (months begun including January 2019)

How the dispute amount is calculated in order to determine the compensation for use is not laid down in law and is therefore (naturally) a matter of controversy. The opinions range from 6 times the difference between the old rent and the new rent to 42 times the difference. As we are calculating your risk here, you should assume 42 times the difference at this point for all eventualities. In our example, the value in dispute is therefore 21,000.00 €.

21,000.00 € = 42 x 500.00 €

If the requests for payment and determination of the compensation for use are submitted together with the request for eviction, the dispute amounts will add up. In our example, the total dispute amount would therefore be € 35,000.00.

35,000.00 € = 12,000.00 € (dispute amount for the eviction) + 2,000.00 € (dispute amount for the payment of the compensation for use) + 21,000.00 € (determining the compensation for use).

d) Dispute amount for a settlement

If you reach an agreement with your tenant, further problematic issues are generally settled in such an agreement. For example, as the tenant’s lawyer, I would demand that the amount of compensation for use be fixed at the level of the old rent until the date of eviction. I would want to make sure that the landlord does not retrieve the flat-rate removal costs I negotiated at the end. Frequently, agreements are then made to waive the performance of decorative repairs, concerning the deposit or concerning the operating cost statements still to be drawn up. These agreements can also further increase the dispute amount.

You can calculate the possible costs of a settlement by trying to estimate the (further) dispute amount (for information about the dispute amount of the compensation for use see above, the dispute amount for a regulation concerning decorative repairs depends on the size and condition of the apartment). Enter this changed amount in the litigation cost calculator and tick the box for the settlement fee according to VV1000 (for a pre-trial settlement) or VV1003f (for a first instance settlement or appeal).

e) Who bears the costs?

Pursuant to Art. 91 (1) clause 1 ZPO, the losing party is ordered to pay the costs of the proceedings. If you only sue for eviction and win, the tenant must therefore reimburse you for the court costs of the lawyer and the advance on court costs to be paid by you for the court of first instance.

However, if your tenant is financially needy and has no legal expenses insurance, there is a possibility that you will not be able to recover your costs. A successful assertion of the costs presupposes that the tenant has income or assets above the seizure limit.

If the legal dispute is settled out of court or in court by settlement, it is usually agreed that the tenant and landlord bear the costs of their lawyers themselves and that the court costs are shared equally by the parties. You therefore do not have to bear the costs of the respective other party.

4. Conclusion

A legal dispute over a termination for personal use can be very time-consuming and costly. My advice is: “Hope for the best, be prepared for the worst”. If it becomes necessary to enforce the eviction in court, you increase your chances of being successful in the end. At the same time, you significantly strengthen your negotiating position in order to achieve the best result for you in settlement proceedings.

I am only too happy to advise you on all matters pertaining to a termination for personal use and on your chances asserting this successfully.

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You will find a summary of different decisions concerning terminations of a rent contract due to personal use here.

“For the purposes of easier readability the texts are written using the male pronoun. The texts are, of course, addressed at and include all genders.”