The continuous rise in COVID-19 infections and the desire for a uniform nationwide regulation for a so-called “lockdown” were the reason for a joint decision by the Federal Chancellor and the heads of government of the federal states on December 13, 2020.
Among other things, the resolution focuses on commercial tenancies and leases. It provides that for commercial tenancies and leases affected by government Covid-19 measures, it should be legally presumed that significant (usage) restrictions as a result of the Covid-19 pandemic may constitute a serious change in the basis of the transaction within the meaning of Section 313 BGB. This is intended to simplify negotiations between commercial tenants or leaseholders and owners.
The background to this regulation is the legal situation, which has not yet been conclusively clarified, as to whether tenants may reduce the rent or even terminate the rental agreement if they are affected by government orders. This applies in particular to the many restaurants, hotels and personal care businesses, but now also to the retail sector, which remains closed due to the regulations already in force. Some of the businesses affected by these regulations have foregone income for months due to government closure orders, but must meet their obligations in full – in particular the obligation to pay the monthly rent/lease.
The decision does not deal with the broader question of whether tenants and leaseholders can terminate existing rental and lease agreements. This is because, in addition to the existence of a disturbed business basis, termination also requires that adherence to the contract has become unreasonable. This in turn must be assessed in each individual case, taking all circumstances into account.
What you should know now
This decision should make it easier for tenants and leaseholders to renegotiate existing contracts, as it means that tenants and leaseholders may be entitled to amend existing rental and lease agreements. It is therefore important to contact the landlord or lessor and work out an amicable solution together.
Landlords and lessors, on the other hand, should exercise caution and only enter into negotiations if the tenant’s or lessee’s business is actually affected by the general closure order. However, there is no obligation to negotiate if the tenant’s or lessee’s own business had to remain closed due to a company’s own COVID-19 outbreak.
It is advisable for both sides to seek a fair balance of interests that keeps an eye on the long-term consequences for the contractual relationship.
It should not be forgotten that even after the new resolution, there is no automatism to the detriment or benefit of one side or the other. The “disruption of the basis of the transaction” remains a general standard that needs to be filled in, with every opportunity to apply justice in individual cases. The circumstances of the individual case remain decisive.
Outlook
The Federal Minister of Justice, Christine Lambrecht (SPD), announced back in November that she intended to introduce a comparable regulation as a bill in the Bundestag in the near future. We will keep you informed about this.
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Download COVID-19 update “Consequences of the lockdown for commercial tenants and landlords”
The author and your usual contacts in the IM Real Estate and Commercial Rentals competence team will be happy to answer your questions!
Devora Kacheva
kacheva@tigges.legal
+49 211 8687 146