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Landlords can Cancel Tenancies to Demolish Houses

In total contrast to the almost impossible possibility to end a rental contract with a tenant, the BGH decided on January 28 ,2009 in three parallel cases (re VIII ZR 7/08, VIII ZR 8/08, VIII ZR 9/08) when a landlord can present the above argument to cancel a rental contract.

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The tenants were living in an apartment house. The landlord, an investor, planned to tear down the house, which was built in 1914 as it and had become pretty much rundown. He wanted to build a larger building on the same land and afterwards sell it. He obtained the permit to tear down the house even though it was under protection as a historic monument. Then the investor cancelled all rental contracts effective January 31, 2006.

All three tenants disagreed and so the investor went to court. The Federal Court of Justice gave the landlord the point and the tenants were to leave the premises within four months.

The lessor planned a reasonable building activity on the real estate following ยง573 II no. 3 BGB, because the plan went through a reasonable and comprehensible decision process. The expert in construction matters, whom the court had heard, estimated that renovating would be very costly and would increase the usage but insignificantly. Further the investor would achieve with renovation a return on investment of only 2.5% and without renovation 16%. Besides, the already permitted construction would create a great range of new living space.

In addition to the above mentioned, the landlord would, with continuation of the lease contracts, be placed under the statutorily required considerable disadvantages. In order to determine "considerable disadvantages", the interests of the landlord in exploitation and the tenant in holding the apartment are to be weighed. If the lessor were obliged to continue the leases, he would be only able to renovate to a minimal degree even though the building demands comprehensive repairs to bring it up to modern standards. Furthermore, the comprehensive repairs would demand that the tenants be temporarily relocated in order to renovate the building to its core anyway.