Buying does not terminate a lease of a property (Lexikon)

Who buys a rented property not only takes over walls and land register entry — they automatically take over every ongoing tenancy agreement. The principle “purchase does not terminate rent” is enshrined in § 566 BGB and belongs to the most important regulations for investors entering the existing market. For buyers, this means: existing lease agreements, seasonal rent increases, index clauses and even oral side agreements remain fully effective — including all rights and obligations of the previous tenant. This article shows with concrete numerical examples how the regulation affects return, purchase price and negotiation room — and when as an investor you should go ahead or hold back.

What does “purchase does not terminate rent” mean specifically according to § 566 BGB?

The regulation states: If rented residential property is sold after being handed over to the tenant, the buyer becomes entitled to the rights and obligations from the existing tenancy agreement. The tenant therefore does not need to sign a new contract, and the buyer automatically becomes the landlord — at the moment of transfer of ownership in the land register, not already at the notarized purchase agreement.

• Contract takes effect automatically — no new lease agreement required
• All conditions remain — rent amount, security deposit, side agreements
• Notice periods remain unchanged — even long notice restrictions
• Owner-occupancy possible — but only from the time of land register entry
• Tenant protection takes priority — social clause § 574 BGB applies
• Security deposit transfers — buyer is liable even without handover

Practically speaking, this means the existing rental agreement is taken over with all its weaknesses or strengths. Someone who buys an apartment with a cold rent of 6.80 €/m² in Munich-Schwabing, while the market average is at 22 €/m², cannot close this gap through a new rental — as long as the tenant remains. The level of cold rent is therefore not just a snapshot, but a long-term return factor.

What impact does this regulation have on the return?

The economic consequence is significant: investors are not buying the theoretical market value, but the real cash flow. If an inherited existing rent is clearly below market level, the gross return drops noticeably — accordingly, the purchase price should be negotiated downwards. Let’s look at three realistic scenarios for an 80-m² apartment with a purchase price of 320,000 €:

The difference between an old lease and market rent can cost 4,700 € in cash flow per year — over ten years almost 47,000 €. That’s exactly why you should calculate the gross yield before purchase and at the same time calculate the net yield to realistically include all operating costs. Calculating the purchase price factor also provides a quick plausibility check.

When does the buyer legally enter the lease agreement?

A common misconception: Many buyers believe that with the notary’s certification, they automatically become landlords. In reality, the contract becomes effective only with the land register entry — and there are often 6–12 weeks in between. Until then, the seller remains the formal landlord; all rent payments, reminders, and notices go through him.

Tip from practice: The purchase contract should include a transfer of rent payments from the day of the benefit-liability change and a power of attorney to act on behalf of the tenant — otherwise, there will be weeks where you pay but are not allowed to act.

The benefit-liability change — usually with the payment of the purchase price — economically determines who receives rent and bears the costs from which day onward. The maintenance reserve is often calculated precisely on the cut-off date. As described in the guide to Buy an apartment building, these transition regulations are the biggest potential for disputes in existing properties with multiple tenants.

What special cases and pitfalls should investors be aware of?

§ 566 BGB is not the end of the story — there are a number of special situations that are often overlooked during the purchase process and can become costly later on.

• Notice period restriction § 577a BGB — up to 10 years in the case of conversion
• Owner’s need § 573 BGB — earliest after the land register entry
• Rent deposit — buyer is liable even without handover (§ 566a BGB)
• Pre-allocations — advance rents are often invalid
• Rent reductions — ongoing defects carry over
• Season and index rents — remain valid with all adjustments

Especially the lockout period after the conversion of rental apartments into condominiums is tricky: In urban areas like Berlin, Hamburg, or Munich, it can last up to 10 years — the buyer cannot move in themselves or terminate the lease due to personal need during this time. Anyone who wants to buy their first property that has been converted should check the registration of the apartment ownership — the date determines the lockout period.

How to correctly negotiate the purchase price with existing tenants?

The legal obligation under the lease agreement is simultaneously your strongest negotiation argument. Every euro of subletting per year significantly reduces the real income value — and the seller is usually aware of this as well. Structure your negotiation around three levers:

1. Rent comparison — document the difference to the market rent in € per year
2. Rent increase potential — calculate how many years until the cap limit (15–20 %) is reached
3. Probability of termination — Realistically assess age, rental period, and social clause

Example: If the existing rent of 350 € is below market rate, that means 4,200 € per year. With a targeted gross yield of 4 %, this corresponds to a purchase price reduction of 105,000 €. Even if you only achieve half of that — 50,000 € less purchase price is realistic. Don’t forget the calculate purchase-related costs: land transfer tax, notary, and real estate agent add 8–12 % to the purchase price depending on the federal state. A precise cash flow calculator shows whether the investment is viable despite the existing rent.

What does this mean when selling a rented property?

As a seller, you also benefit indirectly — if you actively shape the rental situation. A rented apartment typically achieves 15–30 % less selling price than a move-in ready unit, because owner-occupiers as a buyer group are no longer available. Those who adjust to market rent in good time, introduce index rents or amicably terminate the lease can significantly increase the selling price. Details on the process, taxes and strategy can be found in the guide Sell property as well as on interest-optimized financing in the article Real estate financing.

Decision aid: Buying an existing rented property — yes or no?

Not every rented property is a good investment, but neither is every old lease agreement a deal-breaker. This rule of thumb helps with a quick assessment:

Ultimately, your investment strategy is decisive: Whoever is looking for real estate as an Investment and has a holding perspective of 15+ years can also withstand suboptimal existing rents — rent adjustments and a later sale after calculating the speculation period can boost the return. Whoever, on the other hand, plans short-term personal use should avoid rented properties with long lockout periods.

Can the buyer terminate the rental contract after the purchase?

In general, yes — but only under the same conditions as the previous landlord. A valid termination requires a justified reason under § 573 BGB, such as personal use or significant breach of contract. The statutory notice periods of 3, 6, or 9 months apply depending on the length of the tenancy. In converted condominiums, the additional waiting period under § 577a BGB comes into play, which in many major cities can last up to 10 years. A termination “due to change of ownership” does not exist — this is the core of the rule that purchase does not interrupt tenancy.

Does the new owner have to take over the security deposit?

Yes, even if the seller has never handed over the deposit to the buyer. According to § 566a BGB, the buyer is liable for the refund of the deposit, even if they have never received it financially. For this reason, the deposit should be separately itemized in the purchase agreement and deducted from the purchase price or explicitly transferred. Have the seller confirm in writing the deposit account, any interest, and the form of investment — otherwise you will pay the deposit twice when moving out.

Gilt “Kauf bricht nicht Miete” auch bei Gewerbemietverträgen?

Yes, § 566 BGB also applies to commercial space leases under § 578 BGB. However, commercial lease agreements are typically longer-term and often include special termination rights, option rights, or non-competition clauses that the buyer fully assumes. In an apartment building with a retail unit on the ground floor, this can mean a 10-year contract with a fixed rent — rent increases are then excluded. Therefore, a careful due diligence of all lease agreements is even more important for commercial properties than for pure residential space, ideally accompanied by a look at the lease agreement.

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