22 Nov BGH invalidates written form cure clauses in lease agreements

By judgement of 27 September 2017 (case no. XII ZR 114/16) the Federal Court of Justice (BGH) declared so-called written form cure clauses generally invalid, no matter if they were agreed in general terms or negotiated individually.

Background of the decision is § 550 German Civil Code, according to which long-term lease agreements require written form. If the written form is not complied with the lease agreement has an indefinite term and can be terminated early with a statutory notice period. Since compliance with the written form may become difficult in practice (e.g. for side agreements) the market practice in the past often used so-called written form cure clauses pursuant to which both parties undertook in the lease agreement to cure possible form defects and not to terminate the lease agreement by reason of such defects. As the court cut the ground from under this practice the legal due diligence on compliance with the written form requirements is once again becoming more important.