On 12 March 2025, the German Federal Court of Justice (“BGH”) (XII ZR 76/24) settled the important question – for the landowners, project developers and operators of wind farms – of whether a use agreement for a planned wind turbine can be terminated before the start of construction or commissioning of the plant. The BGH’s answer is a clear ‘no’, provided that the parties have implicitly agreed to a fixed contractual commitment until certain conditions are met.
"Until now, the legal situation has been uncertain, with differing views on the terminability of such contracts."
The core of the legal dispute revolved around whether a land use agreement for a planned wind turbine can be terminated by the landowner before the actual start of construction or commissioning. Until now, the legal situation has been uncertain, with differing views on the terminability of such contracts if the start of the fixed contract term depended on an uncertain future event, such as the start of building or commissioning of a wind turbine that has not yet been approved at the time the contract was concluded.
On 2 July 2020 (5 U 81/19), the Higher Regional Court of Hamm (“OLG Hamm”) ruled that clauses stipulating that a lease’s fixed term only commence at the start of construction or commissioning (COD) of the wind turbine allow for ordinary termination of the lease prior to such event. The Court found that the start of construction or commissioning of the wind turbine describes an uncertain event in the future. Before this event occurs, the contractual relationship therefore exists as an open-ended tenancy agreement. Pursuant to Section 542 BGB, ordinary termination is therefore possible in principle. The OLG Hamm wanted to examine whether a formal exclusion of the right to ordinary termination would stand up to an examination of the general terms and conditions or whether it would unreasonably disadvantage the owner based on all the circumstances of the individual case. The industry therefore discussed how to best regulate a secure and long-term contract term for wind energy projects. Many market participants considered clauses that did not allow the contract to commence until the start of building or commissioning of the wind turbine to be risky.
"The BGH has now taken a stand, rejecting the possibility of ordinary termination before the start of construction or commissioning."
The BGH has now taken a stand, rejecting the possibility of ordinary termination before the start of construction or commissioning.
The defendant’s legal predecessor concluded a use agreement with the plaintiff in May 2017. Among other things, the contract allowed the plaintiff to lay cables, build access roads and use the land for rotor blade sweep over, as well as approve construction easements on the defendant’s property. The compensation for use was only to be paid after the registration of the easement and priority notice agreed in the usage agreement and the start of construction. The fixed contract term of 20 years was not to begin until the end of the year in which the last planned wind turbine was put into operation in accordance with Section 3 of the usage agreement. Section 8 of the contract regulated termination without notice for good cause. Section 9 contained a right of withdrawal for both parties if the emission control permit was not granted within five years of signing the agreement or if it could not be proven that such a permit would be granted soon. This period could be unilaterally extended by the user by a further year against payment of €500. In February 2022, the defendant declared the ordinary termination of the license agreement. The plaintiff then applied for a court order requiring the defendant to make the necessary declarations for the land register entries. The Regional Court upheld the action and the Higher Regional Court dismissed the defendant’s appeal. The defendant lodged an appeal against this decision with the Federal Court of Justice.
The BGH rejected the appeal and confirmed the view of the lower courts that the defendant was not entitled to terminate the contract with due notice. The court’s reasoning provides decisive guidelines for the interpretation of usage agreements for energy projects:
The BGH initially affirmed the legal comparability of land use contracts for wind turbines with rental agreements and thus the applicability of tenancy law (Sections 535 et seq. BGB). This classification affects the legal framework and obligations of both parties and ensures the contracts are treated legally in the same way as conventional rental agreements. With this confirmation of previous case law, there is no longer any doubt as to the classification of such usage agreements as rental agreements.
According to the BGH, linking the start of the fixed term of 20 years to a future, uncertain event (namely the commissioning of the last wind turbine) constitutes a condition precedent pursuant to Section 158 (1) BGB. This is because at the time the contract was concluded, it was uncertain not only when the commissioning would take place but also whether it would occur at all due to the outstanding approvals. Although the contract was valid from the time it was signed, the limited fixed term had not yet begun at that time. Until the occurrence of this condition and thus the start of the fixed term, there is therefore an open-ended tenancy (which can generally be terminated in accordance with the statutory notice periods).
Despite the indefinite rental period up to the commencement of the term, the BGH found that the right to terminate a wind turbine usage agreement with due notice during the indefinite phase up to the commencement of the fixed contract term may be impliedly excluded. Such an implied exclusion resulted from the system of the contract and the interests of the parties:
"The BGH clarified that the interests of both contracting parties must be considered when interpreting usage agreements for energy projects."
The BGH clarified that the interests of both contracting parties must be considered when interpreting usage agreements for energy projects. If a right of termination were to be assumed during the pending period, the investment security of the plant operator would be undermined, potentially making the feasibility of such projects de facto impossible. This is just as relevant as the landowner’s interest in prompt remuneration.
As the usage agreement – as is often the case – was a document frequently used by the project developer, the BGH examined whether the (implied) exclusion of termination unreasonably disadvantaged the property owner (Section 307 BGB). The court concluded that this was not the case for the following reasons:
The decision of the Federal Court of Justice has significant implications, and not only for the wind energy sector. The ruling specifically concerned a land use agreement for wind turbines. However, the principles applied by the BGH for the interpretation of contractual clauses are transferable. It can be assumed that similar clauses in usage contracts for PV systems or battery storage systems will be judged similarly by the courts, even if the specific interests involved may differ slightly. What does the ruling mean in concrete terms?
Provided that the contracts are similarly balanced, project developers can now plan and invest with greater certainty, as the risk of premature termination by the landowner during the long approval phase is reduced. The ruling underlines the principle that contracts should endure, especially those for large-scale projects with long terms that dependent on uncertain conditions.
"With this ruling, the BGH resolves the previously unclear legal situation and clarifies that the long-term planning security required for a successful energy transition can be contractually structured in a legally secure manner."
The ruling further emphasises the need for clear and balanced wording, particularly concerning termination and withdrawal rights for both parties in case of failure or significant project delays, as well as the clear definition of deadlines and conditions. It is also important to have a clear definition of the subject matter of the contract, realistic and fair deadlines for approvals and the start of construction and unambiguous provisions regarding the rent (amount, due date, adjustment).
The ruling does not leave landowners unprotected. The usage agreements continue to be subject to general terms and conditions controls and abusive clauses, such as indefinite commitments without an exit option or appropriate compensation payment, would continue to be subject to a considerable risk of invalidity.
With this ruling, the BGH resolves the previously unclear legal situation and clarifies that the long-term planning security required for a successful energy transition can be contractually structured in a legally secure manner without unduly disadvantaging landowners, provided that the contracts are balanced. The court clarifies that an indefinite, free-of-charge commitment is not permissible and emphasises the importance of fair termination clauses after a reasonable waiting period if projects face long-term delays. This underlines the importance of a coherent and well-drafted contract that considers and reconciles the interests of both parties.
