How to get your office lease right

Unlike for residential properties, German commercial property contracts do not provide any protection for the tenant. Landlords are rather free in how to formulate the content and conditions of a lease. Therefore, it makes sense to put some effort into reading a contract carefully and being actively engaged in the process. Especially as the terms of a lease usually run for several years.

We have put together some of the most crucial points you need to look at in order to be able to properly examine a contract. Here goes:

The Lease term

When it comes to short term leases the prevailing market terms are 2 to 3 years. Such short term contracts offer more flexibility and work very well for startups that plan to grow very quickly. However, if you come across a very good long term offer it might be worthwhile considering it. Sub-leasing is the key (see below)!

Alternatively, you can also set up a so called “befristeter Vertrag”, a short term contract, and combine it with an “Optionsregelung”, a clause that grants you the right to extend the lease for X amount of times over a period of X years (depending on what you signed), while the conditions remain the same.

Subletting

There are three scenarios when subletting makes a lot of sense: when you aim to grow quickly (if you intend to “grow into a space”); when your company is organised in a very dynamic way and the number of staff keeps changing; or if you have to reduce staff.

Prerequisite for subletting is a written agreement by your landlord. If you intend to sublet at some point, we highly recommend to add this option to the contract right at the start. If it is not stated in the initial contract, you can still request it at a later point too. However, if a landlord refuses to put a subletting clause into the contract the chances of him/her granting you that right afterwards are not very high. So if you think about renting a bigger space this is very crucial point to negotiate.

The “Nachmieter-Regelung”

Another essential clause you should ensure is in your contract is the so called “Nachmieter-Regelung”. An agreement that allows you to give notice before the end of the term if you provide the landlord a “suitable” tenant to take over the contract. Suitable usually means someone with company or space-usage structure who fulfills the general requirements.

If the tenant you propose does not seem suitable for the space your landlord can still reject them. However, the landlord needs to provide justified reasons for why he/she does not accept them.

The Deposit

Traditionally, the tenant has to pay a deposit for a space. Again, unlike in residential tenancy law, there are no regulation in commercial leasing in terms of how much deposit a landlord can ask for. This is subject to negotiations.

We recommend to include a written agreement in the contract that exactly states where the money is being deposited. Usually it makes sense to put it into a third-party account (“offenes Treuhandkonto”). This way the deposit is safe from the bank’s right of lien if the landlord has to file for bankruptcy.

Do you have any specific questions regarding an office? Just get in touch!

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