The lease term is how long a lease lasts. The start of the rental must be stipulated in order to determine the term. The parties can choose any calendar day for this. A regulation whereby the lease begins on the handover of the rental property is also possible. This is often agreed for project developments, where the exact completion date is not yet known.1
The duration of the lease can be set for an indefinite period. In this case, the lease can be terminated by either party in accordance with the legal requirements and notice periods. It is also possible to set a limited term (temporary lease). In such event neither of the parties can terminate the lease.2 However, in residential leases a fixed term is only valid if the owner wants to use the apartment for himself, his family or household members, or he wants to demolish or renovate the apartment. The landlord must state his respective reasons in accordance with section 575 of the Bürgerliches Gesetzbuch (BGB – German Civil Code) when concluding the lease. Residential leases are usually concluded indefinitely to give both parties planning security.
By contrast, for commercial leases it is common to agree a fixed term (e.g. 10 years). The lease ends automatically at the end of its term, unless agreed otherwise. There are frequently regulations whereby the lease is extended automatically after the fixed term ends. In such event the lease continues to run indefinitely. Either party can then terminate the lease within the statutory or contractual notice period. It is also common in commercial leases for the tenant to have renewal options. Here the tenant has the unilateral right to prolong the lease by a further predetermined period after the fixed term.3
Under the principle of contract freedom, it is also possible to agree a minimum term. Regular termination with notice is not possible during this period. However, a minimum lease term of more than four years is not valid for residential leases.4
In addition to minimum terms, there are also maximum statutory terms on leases. Leases concluded for longer than 30 years can automatically be terminated after 30 years in compliance with the statutory notice period (section 544 sentence 1 BGB). Termination is only excluded if the lease was concluded for the lifetime of the landlord or the tenant.5