Germany Update: Does the Corona Ordinance allow the termination of a lease agreement?

What is it about?

The Higher Regional Court of Frankfurt (Az.: 2 U 147/20) recently had to decide on a situation in which the tenant of a restaurant claimed to be entitled to terminate the contract without notice as a result of the provisions of the Corona Ordinance. As a result, the tenant cleared the leasehold property and handed over the keys to the lessor. The lessor opposed the termination and asserted the outstanding lease in the context of the legal dispute. Thus, in order to decide the legal dispute, the OLG also had to examine whether the corona-related restrictions constitute a reason for termination without notice.

This article provides an overview of the content of the reasons for the decision and makes it easier to assess the procedural risk in similar cases. This is important because due to the currently rising corona numbers, new lockdown-related closures in the commercial sector are not excluded:

How did the court decide?

1.Termination without notice

The Higher Regional Court of Frankfurt essentially ruled in favour of the lessor and largely upheld his payment action. In its reasons for decision, it took the view that the corona-related orders do not lead to a defect giving cause for termination and thus not to a reason for termination without notice according to § 543 Abs.1, 2 Nr.1 BGB.  

The court gave the decisive reasons for its decision by means of the following argumentation:

• The sovereign requirements are not directly attributable to the specific condition of the leased property.

• It is not apparent that the lessor did not fulfil his obligations under the lease agreement. Thus, the relevant duty of the lessor is to ensure the possibility of using the leased property. Sufficient for the fulfillment of this obligation is that the lessor provides the leased rooms.

• The principle applicable to tenants that the official closure orders do not fall within the risk area of the landlord is transferable to a lease agreement. Thus, the tenant – despite official order – still has the possibility of fruiting. The lessor only has to create the possibility of making a profit in the abstract, which is also guaranteed under the pandemic-related orders. Thus, the concrete nature of the leasehold rooms remains unchanged even during the pandemic situation. It is therefore irrelevant whether the public traffic required in a restaurant business is absent.

• The temporary nature of the pandemic means that the balancing of interests to be carried out in favour of the lessor in the event of termination without notice fails. This is particularly the reason why a lease agreement is to be classified as a continuing obligation and the period of closure only makes up a small part of the total lease period.

2.Loss of the business basis

The court also addressed the problem of whether the official orders could possibly justify a loss of the business basis and thus a reduction in the lease amount. However, the court also denied this in favour of the lessor. Thus, in the case to be decided, account had to be taken of the fact that the lessee, at his own discretion, ceased his business after the dismissal he had given. An assessment of how the official orders affected his operation was therefore not possible from the outset.

What does this mean in practice?

On the basis of the statements of the Higher Regional Court of Frankfurt, the tendency can be deduced that the pandemic and the associated official closure orders do not constitute a reason for termination without notice. It should be noted that the decision is not yet final. It therefore remains to be seen whether the decision will be evaluated by the highest court by the BGH and, if necessary, confirmed. Once again, however, the decision has expressed that the pandemic, especially in the area of tenancy and lease law, confronts the courts with still unresolved issues, so that the outcome of legal disputes is uncertain. In order to avoid lengthy and cost-intensive court proceedings, an amicable agreement between the parties may be appropriate both with regard to disputes over the amount of rent and lease as well as with regard to premature termination of the contract. We are happy to support you.

By Svenja Riedling, MELCHERS, Germany, a Transatlantic Law International Affiliated Firm.  

For further information or for any assistance please contact germany@transatlanticlaw.com

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