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Legal
01. Oct 2025
RA/StB Frank Moormann

The validity of change-of-control clauses (e.g., in lease agreements)

Geschäftsführer beraten über Papieren

Contracting parties sometimes have an interest not just in the contractual partner themself staying the same but, in the case of a company, also that there should be no changes in the persons/shareholders behind that contractual partner, or its membership of a specific group of companies. For such events, so-called change-of-control clauses are then frequently agreed that provide for, for example, an amendment to the agreement or the option to give extraordinary notice of cancellation. However, in a recent case, a court declared such a clause to be invalid (legally).

Reasons for change-of-control clauses 

There are no specific legal bases for change-of-control clauses. They are subject to the general provisions of contract law and can be used in different types of agreements. These clauses typically provide for certain legal consequences if

  • there is a significant change in the contractual partner’s controlling interest (e.g., change of shareholder >50%),
  • there is a change in the management of the contractual partner, or third party control is introduced (e.g., domination agreement),
  • the contractual partner undergoes a conversion, or
  • a substantial part of the assets is outsourced.

The concomitant legal consequences can likewise be of various types and range from the option to cancel without prior notice to a simple obligation to inform the contractual partner.

Hotel lease agreement with a change-of-ownership clause

In a case that reached the Higher Regional Court (Oberlandesgericht, OLG) in Frankfurt/ Main, the parties had concluded a form lease agreement for a hotel. This contained a clause according to which a “change of ownership” of the lessee or a change of legal form would be equated with a transfer of use to third parties and would thus require the consent of the lessor. The lessee - a GmbH [German private limited company] - did not obtain consent when the sole shareholder/managing director sold his shares to a third party. Thereupon, the lessor cancelled the agreement for good cause without prior notice. Unlike the lower-instance court, the OLG Frankfurt/M., in its ruling of 21.2.2025, (case reference: 2 U 35/24) decided that this was unjustified. Here, the court made reference to two key points:

  • first of all, there was as yet no change of ownership as provided for in the contractual clause. Replacing the managing director or a change of shareholder for the GmbH simply did not constitute a change of contractual partner for the rental or lease agreement because the company, as a contractual partner, stayed the same;
  • secondly, the provision would also have been invalid as a change-of-control clause. It should be viewed here as a general term and condition and, in this respect, it unreasonably disadvantages the contractual partner.

Please note

The application of the Law on the General Terms and Conditions of Business (Recht der Allgemeinen Geschäftsbedingungen, AGB) already ensues because of the use of a standard form. In this case, it is then irrelevant if its use was planned just in the one single case.

The unreasonable disadvantage comes about from an overall view of the circumstances. The court did not see any reason here for a specific interest in the person of the lessee. Anyone who concludes an agreement with a GmbH must be aware of the possibility of the respective changes and, in this regard, is not in need of protection.

Recommendation

Anyone who attaches particular importance to the persons behind their contractual partner should carefully formulate the appropriate contractual clauses and ensure that the strict AGB regulations would not be applicable. Standard agreements must be avoided and you have to be able to provide proof that the clause was ‘negotiated’ as individually as possible.