Many a landlord has already had to make the experience: his account is regularly debited with the property costs for real estate tax, insurance, cleaning, garbage collection, etc., but his tenant does not pay the ancillary costs or only pays them in part. However, even if the tenant is in arrears with additional payments for a longer period of time, the landlord may not terminate the tenant’s lease for this reason, according to prevailing opinion, even if the lease agreement refers to the extraordinary right of termination for default of payment pursuant to Section 543 (1) of the German Civil Code (Bürgerliches Gesetzbuch). 2 No. 3 letter b BGB.
Incidental costs no periodic payment obligation
The reason: Receivables from service charge settlements are not considered periodic payment obligations in the sense of a monthly rent payment. This was recently confirmed by the Federal Court of Justice. So what can the landlord do?
Should a tenant exceptionally fail to make a payment obligation in his regular payments, the tenant could set off the payment against the service charge arrears. In practice, however, this is unlikely to happen frequently, because even without an explicit reference, a regular payment is considered to be payment of the rent owed and cannot simply be “reallocated” by the landlord.
Payment protection through timely action
To avoid getting into the situation of having to sue for additional charges, a landlord should include a provision at the beginning of the lease that at first glance has nothing to do with additional charges: He should agree with the tenant in the contract that a rental security deposited as a guarantee or pledge can also be claimed during the rental period and also for disputed claims arising from the rental relationship. Without this additional provision, this would not be possible, but in this way the landlord has a means of enforcing outstanding service charge back payments against a defaulting commercial tenant, even out of court.
© 2023 KPMG Law Rechtsanwaltsgesellschaft mbH, associated with KPMG AG Wirtschaftsprüfungsgesellschaft, a public limited company under German law and a member of the global KPMG organisation of independent member firms affiliated with KPMG International Limited, a Private English Company Limited by Guarantee. All rights reserved. For more details on the structure of KPMG’s global organisation, please visit https://home.kpmg/governance.
KPMG International does not provide services to clients. No member firm is authorised to bind or contract KPMG International or any other member firm to any third party, just as KPMG International is not authorised to bind or contract any other member firm.