Commercial Late Fees and Default Interest in Bavaria, Germany

When a commercial tenant in Bavaria fails to pay rent on time, the consequences are significantly more severe than for residential tenants. German commercial law imposes higher default interest rates, automatic compensation, and - most critically - denies commercial tenants the residential "cure right" that allows payment of arrears to reverse a termination.

When Default Occurs

Commercial rent is typically due by the 3rd business day of each month (per lease terms mirroring § 556b BGB)

Default occurs automatically once this deadline passes without payment - no formal reminder or demand letter is required (§ 286 BGB).

1. Default Interest: 9 Percentage Points Above Base Rate

For business-to-business transactions (which include commercial landlord-tenant relationships), § 288(2) BGB provides an elevated default interest rate:

• The base rate is published by the Deutsche Bundesbank and updated semi-annually (January 1 and July 1)
• Interest is calculated day-by-day on the exact overdue amount
• In periods of higher interest rates, this creates substantial financial pressure on the defaulting tenant

2. The €40 Flat-Rate Compensation Under § 288(5) BGB, the defaulting commercial tenant automatically owes the landlord a flat-rate compensation of €40 per default event - without any reminder or demand:

• This covers the landlord's internal administrative costs
• It is automatic and does not require proof of actual costs
• However, it must be offset against any later attorney or court costs if the case escalates

3. Contractual Late Fee Clauses While contractual late fee clauses are more common in commercial leases than residential ones, they must still comply with Germany's standard terms law (AGB-Recht):

• Reasonable flat fees per reminder (€5-10) are generally enforceable
• Excessive or punitive fee structures may be challenged
• The statutory framework (9% interest + €40 flat rate) is usually more effective and legally secure than contractual alternatives

4. Immediate Termination - No Cure Right The most powerful consequence of commercial rent arrears is the right to extraordinary termination under § 543 BGB:

• Two consecutive months of full or significant partial non-payment, OR
• Accumulated arrears totaling two months' rent

The Critical Difference: No Cure Right

This means that once a valid termination letter reaches the commercial tenant, the lease is irreversibly terminated - even if the tenant immediately pays all outstanding amounts. This is by far the most severe consequence and the most important distinction from residential law.

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