03.06.2021 | KPMG Law Insights

Transfer on the third working day is sufficient, but only in residential tenancy law

Transfer on the third working day is sufficient, but only in residential tenancy law

If a tenant issues the transfer order for the rent by the third working day of a month, this is sufficient for timely payment. However, this does not apply in the area of commercial tenancy law.


Ruling of the BGH of October 5, 2016

In a recently published ruling, the German Federal Court of Justice (BGH) decided that it is sufficient for the timeliness of the rent payment if the tenant issues the payment order to his payment service provider by the third working day of a month (BGH, ruling of October 5, 2016, VIII ZR 222/15). This judgment related to a residential tenancy. In contrast, in the area of commercial tenancy law, against the background of Directive 2011/7/EU of the European Parliament and of the Council of 16 February 2011 on combating late payment (hereinafter “Late Payment Directive“), it is decisive that the rent is credited to the landlord’s account on the day in question.

Initial case

For several consecutive months, a tenant paid her rent in cash to her payment service provider, Deutsche Post AG, no later than the third working day of the month and at the same time issued a transfer order. The rent was not received by the landlord until after the third working day, whereupon the landlord terminated the lease without notice, or in the alternative with notice, due to late rent payments. The termination was made with reference to § 4 of the lease, which stated, among other things, that the rent was to be paid “monthly in advance, at the latest on the third working day of the month to the landlord…” and that the timeliness of the rent payment depended “not on the dispatch, but on the receipt of the money”.

Reasons for Judgment

The BGH considered the notices to be invalid because the tenant had always paid the rent on time, at the latest on the third working day of the month. According to § 556b para. 1 BGB, it was decisive that the tenant had performed the act of performance (transfer order) in each case up to this point in time. However, a later receipt of the rent by the landlord is not relevant.

In the opinion of the BGH, no other assessment results from the aforementioned rental agreement provision either. The form clause is in accordance with § 307 para. 1 sentence 1 BGB due to unreasonable disadvantage of the tenant invalid, because it deviates from § 556b paragraph. 1 BGB imposed on the tenant the risk of payment delays in remittance transactions caused by the payment service provider.


§ 556b BGB
In its reasoning for the ruling, the BGH further states that the rent pursuant to § 556b para. 1 BGB must be paid at the beginning, at the latest by the third working day of the period according to which it is assessed. This corresponds to the first part of the clause in § 4 of the lease agreement, according to which the rent must be paid to the landlord no later than the third working day. The term discharging is to be understood as a synonym for paying and also the legislative materials to § 556b para. 1 BGB do not contain any indication that the receipt of the rent on the landlord’s account shall be decisive for the timeliness of the rent payment.

Late Payment Policy

Contrary to the view of individual courts of instance, the BGH does not believe that the Late Payment Directive changes this assessment.

For example, in its ruling of April 28, 2015, 9 S 109/14, the Regional Court of Lüneburg derived from the Payment Directive and the case law of the European Court of Justice on the subject that the rental debt must be regarded as a (modified) debt to be discharged at creditor’s domicile and that the residential rent must be credited to the landlord’s account by the third working day of the month. The BGH considers this derivation to be erroneous, among other reasons, because rental agreements with consumers do not fall within the scope of the Directive. This is intended to combat late payment in business transactions and is therefore limited in its application to payment transactions between companies.

Effects of the ruling on commercial leases

In the area of commercial tenancy law, on the other hand, the scope of application of the Payments Directive is opened up because payment transactions between companies are affected. In this area, the European Court of Justice has ruled that the point in time that is relevant for assessing whether a payment by bank transfer is to be regarded as having been made on time is the time at which the amount owed is credited to the creditor’s account (ECJ, judgment of April 3, 2008, C-306/06, [2008] ECR I-1923, para. 28). Accordingly, unless otherwise agreed in the case of commercial leases, the rent must have been received by the landlord’s bank or credited to his account by the third working day of the month.

However, in the event of default, the debtor is not subject to the consequences of default under the Late Payment Directive if he is not responsible for the default, cf. Art. 3 para. 1(b), second half of the Late Payment Directive. Accordingly, even under the Late Payments Directive, the debtor may not be held responsible for delays in remittance transactions that are within the control of the banks involved. A prerequisite for this, however, is that the delay in payment is not a consequence of the tenant’s conduct and that the tenant has carefully taken into account the time limits usually required for the execution of the bank transfer (ECJ, judgment of April 3, 2008, C-306/06, loc. cit., para. 30)

Form Contractual Provisions Concerning the Time of Rent Payment in Commercial Lease Agreements

Many sample commercial leases contain clauses that base the timeliness of rent payment on the receipt of the money in the landlord’s account. Even against the background of the previously cited ruling of the Federal Court of Justice (BGH), there are no objections to the validity of such clauses, because the scope of application of the Payment Directive is opened in the area of commercial tenancy law.

In order to take into account the fact that, according to the Late Payment Directive, the commercial tenant is not responsible for delays in the transfer of funds if the reason for the delay lies in the area of the banks involved, the aforementioned clause according to which the timeliness of the payment of rent depends on the receipt of the money in the landlord’s account should be restricted to the effect that this cannot apply if the tenant is not responsible for the delay. The burden of proof provision to the detriment of the tenant contained herein is not likely to be unreasonably disadvantageous.

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