Lease of Use and Profits Agreement: Simple on the surface, risky underneath

A pacht agreement is a type of contract where a person is allowed not only to use property, but also to benefit from its profits or yields.
Unlike a standard lease, it involves economic exploitation of the asset.
It is commonly used for farmland, businesses, restaurants, or similar operations.
In practice, however, these agreements are often poorly drafted or incorrectly labelled, which later causes disputes.
A properly structured agreement is essential if you want to avoid legal and financial problems.

YOU MAY BE THINKING…

“Isn’t this basically just another type of lease?”
“If I rent something and make money from it, does that automatically mean it is a pacht?”
“Can I simply download a free template online?”
“Does it really matter if we only agreed verbally?”

THE REAL PROBLEM IN PRACTICE (THEORY VS REALITY)

In theory, the distinction is simple:

• lease = use of property
• pacht = use of property + right to profits/yields

In reality, however, things become blurred very quickly.

In practice, I regularly see situations where:

• the agreement is called a “lease”, but legally functions as a pacht
• nobody addresses the issue of profits until a dispute arises
• responsibility for losses is not clearly defined
• termination rules are missing completely

And then the typical conflict begins:

One party claims it is a lease.
The other claims it is a pacht.

And each side believes different legal rules apply.

In the end, the actual content of the agreement matters more than its title — and that is often where the problems start.

BIGGEST RISKS AND COMMON MISTAKES

Here is the reality many people underestimate:

• Using a generic “free template” that does not fit the actual situation
• Incorrectly identifying whether the relationship is a lease or a pacht
• Failing to address profits and yields
• Missing rules for repairs and investments
• Poorly drafted termination provisions
• Ignoring liability for damages

A very common client mistake is:

“We agreed informally, so it should be fine.”

Years later, nobody can prove what was actually agreed.

HOW TO APPROACH IT (REALITY, NOT THEORY)

In practice, the safest approach usually looks like this:

1. Clearly define what the other party will actually do
   (simple use vs economic exploitation)
2. Clarify the financial structure
   (rent, pacht fee, percentage of profits, etc.)
3. Define responsibility and risks
   (damage, crop failure, operational losses)
4. Plan the termination from the beginning
   (handover, investments, notice periods)
5. Only then draft the agreement itself

The reality is that most people start with step five — and that is exactly why problems arise.

PRACTICAL EXAMPLES

👉 A client allowed another person to operate a restaurant under a poorly drafted agreement. When the relationship ended, the equipment was damaged and there was no clear contractual protection.

👉 A farmer cultivated land without a properly structured contract. Later, a dispute arose regarding ownership of the harvest.

👉 A business was described as “leased”, but legally functioned as a pacht arrangement. The owner was surprised to discover he had fewer rights than expected.

WHY YOU SHOULD BE CAREFUL WITH “I’LL DO IT MYSELF”

I understand why people try to do this themselves.

At first glance, the agreement may seem simple.

But a pacht relationship is usually long-term and financially significant.

And that is exactly where mistakes become expensive.

A “free template” will not explain:

• how to allocate risks properly
• what happens during disputes
• how to protect your position

In practice, I often deal with disputes that could have been avoided by one properly drafted agreement.

LAWYER’S RECOMMENDATION + CHECKLIST

From practical experience, I recommend:

• Focus on the actual content of the agreement, not only its title
• Clearly define rights to profits and yields
• Address liability and damages properly
• Think about termination from the very beginning
• Avoid using generic templates without legal review

Quick checklist:

✔ I know whether this is a lease or a pacht
✔ Profit rights are clearly defined
✔ Liability and damages are addressed
✔ Termination rules are clear
✔ The agreement reflects the actual business situation

FAQ

Is a pacht agreement the same as a lease?
No. A pacht includes the right to profits or yields.

Can I use a free online template?
You can, but in most cases it will not properly protect your interests.

Does the agreement need to be in writing?
Not always legally required, but strongly recommended in practice.

What if it is unclear whether the contract is a lease or a pacht?
The actual content matters more than the title — and disputes often arise because of this.

Where are pacht agreements commonly used?
Most often for farmland, businesses, restaurants, or commercial operations.