Effects of a contractually agreed exclusion of termination for personal use in the acquisition of residential property through foreclosure auction
The regulation of termination for personal use in tenancy law is a central question of tenant protection and owner interests. Especially when a tenancy agreement excludes regular termination for the purpose of personal use through a corresponding individual or form agreement, there is often uncertainty about the scope of such agreements in the event of a transfer of ownership. A recent decision by the Federal Court of Justice (judgment of January 8, 2024, Az. VIII ZR 76/20) has examined this issue in depth in the context of acquisition through foreclosure.
Background and legal framework
Statutory termination grounds and contractual modifications
The German Civil Code (BGB) stipulates that a landlord can generally terminate a tenancy agreement if they have a legitimate interest – particularly personal use (§ 573 para. 2 no. 2 BGB) – that can be credibly demonstrated. However, landlords and tenants often agree in the lease contract to exclude termination for personal use, whether indefinitely or for a specified period. This serves to increase the tenant’s security in planning and continuous use of the rented premises.
In contrast, § 57a ZVG (Foreclosure Auction Act) provides that the acquirer of a property in a foreclosure auction has a special termination right that is not dependent on the presence of a legitimate interest. This opens up significantly broader legal possibilities for contract termination by the buyer.
Special position of acquisition through foreclosure auction
The legislative purpose of § 57a ZVG is to increase the attractiveness and practicality of foreclosures: buyers should not be hindered by existing tenancy agreements, especially if they acquire the property for personal use. The special termination right exists even if the original rental contract included an exclusion of termination, including for personal use reasons. This statutory provision is based on considerations of legal certainty and the avoidance of devaluation of the property in the auction scenario.
On the decision of the Federal Court of Justice
Facts and controversial legal situation
In the underlying case, any regular termination in the tenancy agreement between the previous owner and the tenant – including those for reasons of personal use – was contractually excluded. During the foreclosure auction, the new owner acquired the property and terminated the tenancy relationship citing § 57a ZVG.
The tenant argued that the exclusion of termination for personal use anchored in the tenancy agreement also binds the purchaser. In particular, the termination restriction agreed upon for tenant protection considerations should not be overridden by a statutory special termination right.
Legal assessment and reasons for the decision
The Federal Court of Justice clarified that the statutory special termination right of § 57a ZVG remains fundamentally unaffected by individual contractual restrictions or exclusions. A contractual restriction of regular termination – also specifically for personal use – does not apply to the acquirer of a property in the context of a foreclosure auction.
This legal view relies particularly on the fact that § 57a ZVG represents a mandatory special norm that grants the buyer, in the event of an auction, a special termination right against all contractual agreements to ensure effective legal protection and the real marketability of the acquisition object.
According to the Federal Court of Justice, this is also not an undue disadvantage to the tenant according to § 307 BGB, as the legislator has specifically created an extended termination possibility for the particular constellation of foreclosure acquisition. Tenant protection reaches its limit in this special legal exception.
Doctrinal classification and relevance for the design of tenancy agreements
Distinction: Regular, extraordinary, and special termination rights
It is important to carefully differentiate between a regular termination according to tenancy law provisions of the BGB (e.g. for personal use or economic utilization), an extraordinary termination for a good cause, and the statutory special termination in the case of an auction. The ability to limit or exclude regular termination by contract is generally left to the parties’ will. However, in the context of foreclosure acquisition, it becomes moot because the law prioritizes the interests of the buyer.
Significance for investors and companies
The decision of the Federal Court of Justice provides additional planning security for investors, companies, and affluent private individuals intending to acquire residential properties through foreclosure auctions. The acquisition remains marketable irrespective of tenancy restrictions. Nevertheless, owners and potential tenants of a property should be clearly aware that tenant protection agreements regarding regular termination can be overridden by the statutory special provision of § 57a ZVG. In light of this, increased sensitivity to the implications of a potential acquisition through foreclosure is advisable for both the protection status and future usability of the property.
Conclusion and outlook
The Federal Court of Justice has made an important clarification for real estate practice with its recent decision: the purchaser of a residential property through foreclosure can utilize their statutory special termination right regardless of a contractually agreed exclusion of termination. The decision underscores the need to critically examine tenancy agreement regulations and their limits in the event of a transfer of ownership and to appropriately consider them in the context of foreclosures. Accordingly, all parties should carefully analyze the specific framework conditions in upcoming transactions.
For in-depth questions regarding the acquisition of residential properties, existing tenancy relationships, and the impact of contractual agreements in the context of foreclosures, it is advisable to rely on well-founded legal expertise in real estate law. More information can be found under the topicLegal advice in real estate law.
