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Re-letting retail space: lead time, leases, refurbishment

Options, protection against competition, fit-out and text form: what owners should consider when re-letting shop and supermarket space in Germany.

When a lease for a supermarket or shop unit is coming to an end, owners enter a demanding phase. Vacancy costs rent and often weakens the other tenants at a location as well. Successful re-letting therefore starts long before the tenant moves out.

Lead time: keep deadlines in view early

Every plan starts with a complete overview of lease expiry dates, notice periods and option rights. Renewal options arise solely from the lease; what matters are the exercise periods and formal requirements agreed there. Only once it is clear whether the tenant will exercise an option can reliable planning begin. An early conversation with the existing tenant shows whether a renewal or a change in floor area might be an option.

Care is needed once the lease term has expired: if the tenant continues to use the premises, the tenancy is extended for an indefinite period under section 545 of the German Civil Code (Bürgerliches Gesetzbuch, BGB) unless either party objects within two weeks. For the landlord, this period begins when it learns that use is continuing. Once the lease has ended, the tenant is obliged to return the premises (section 546 BGB).

Product range and protection against competition

When choosing a new tenant, what counts is not only creditworthiness and rent but also the product range. According to the case law of the Federal Court of Justice (Bundesgerichtshof, BGH), a landlord of commercial premises owes a degree of protection against competition within the same property even without an express clause. This implied protection against competition (vertragsimmanenter Konkurrenzschutz) derives from the landlord’s duty to provide the premises in a condition suitable for the contractual use (section 535 BGB). Whether and to what extent it applies depends on the individual case.

Leases often contain their own non-competition or product range clauses. Before any new letting, the leases of all tenants at the site should therefore be reviewed. Standard-form leases call for caution: in 2020 the BGH ruled that excluding protection against competition in combination with an obligation to operate (Betriebspflicht) and a narrow product range restriction (Sortimentsbindung) unreasonably disadvantages the tenant.

Planning law also plays a role. Under section 11(3) of the Land Use Ordinance (Baunutzungsverordnung, BauNVO), shopping centres and large-scale retail businesses with significant effects are, in principle, only permitted in core areas or in special areas designated for that purpose. Such effects are generally presumed where the floor area exceeds 1,200 m². Provisions of the local development plan (Bebauungsplan) may also stand in the way of a new use.

Refurbishment and handover

New tenants often have their own requirements for shop fitting, building services and layout. It should be clarified early on who plans, pays for and obtains approval for which works. If the use changes, a building regulation procedure may be required. In Baden-Württemberg, for example, a change of use is exempt from procedure only if the new use is not subject to different or more extensive requirements than the previous one. Escape routes and parking spaces are frequent points of review. For the handover, a protocol recording condition, meter readings and keys is advisable.

Form: text form instead of written form

Since 1 January 2025, text form (Textform) has been sufficient for commercial leases with a term of more than one year, replacing the previous written form requirement (Schriftform). The basis is the Fourth Bureaucracy Relief Act (Viertes Bürokratieentlastungsgesetz), which amended section 578 BGB. If the form is not observed, the lease is deemed to have been concluded for an indefinite period and can therefore be terminated early with ordinary notice. For leases entered into before 2025, a transitional rule applied up to and including 1 January 2026; amendments agreed from 2025 onwards were already subject to the new law.

Under section 126b BGB, text form means a legible declaration on a durable medium that names the person making it. A handwritten signature is no longer required. This does not make the lease informal: all material agreements, including later addenda, should be documented completely and clearly in one place.

Checklist

  • Lease expiry, notice and option deadlines are recorded and diarised.
  • An early conversation with the existing tenant has taken place.
  • Non-competition and product range clauses of all tenants at the site have been reviewed.
  • The development plan and planning permission status have been reviewed.
  • Fit-out works, costs and approvals are allocated in the lease.
  • The lease and all addenda are fully documented in text form.

If you have questions about re-letting your premises, please get in touch: ST 77 property management.

This article provides general information only and does not constitute legal advice in individual cases.

Sources

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