Terminating a contract can be done if the tenant is behind at least two monthly rents in payments, or if the landlord has personal interest in the property (Eigenbedarf), which is also rather strictly regulated, though (also won't ever happen when your landlord is a company). I'm sure they could terminate your contract if the tenant actually destroys the place. However, they first have to be aware of it (it's not typical of landlords coming to visit, and if neighbours don't complain things can go unnoticed). So usually they won't notice until they move out, although they're liable for the damages caused. The security deposit won't usually be enough to cover extensive damage, though, as it's in the order of two or three monthly rents.
