Germany Update: Tenancy Law: Rent Cuts by Retailers in Lockdown

In times of an officially ordered business closure as a result of the COVID-19 pandemic, traders have, according to the judgment of the BGH of 12.01.2022 (Az. XII ZR 8/21) in principle a claim to a rent reduction. However, the amount of the reduction depends on the individual case.

Circumstance

After ordering the closure of all shops in March 2020, the defendant, a textile retailer, did not pay rent for the shop rented by the plaintiff in April. The landlady, a property management company, therefore sued for payment. The regional court sentenced the defendant retailer to pay the full rent, the OLG reduced the sum to half after the defendant’s appeal. Both parties appealed on a point of law against the judgment of the OLG.

Decision

In the opinion of the OLG, the tenant’s claim to an adjustment of the rent is derived from a disruption of the business basis as a result of the business closure, which took place as a sovereign measure to combat the COVID-19 pandemic. In this respect, the BGH confirms the decision of the OLG. In his view, however, the mere disruption of the basis of the business does not justify an adjustment of the contract. Rather, in view of the legal and contractual distribution of risk, it must also become unreasonable for one or both parties to adhere to the contract unchanged. Since neither the tenant nor the landlord could have foreseen such a disturbance, the consequences of the measure could not be expected of one party alone.

However, this does not mean that the commercial tenant is entitled to a flat-rate adjustment of the rent for the closure period. In the opinion of the BGH, whether and to what extent a discount is permissible must be determined on the basis of a comprehensive balancing exercise based on the individual case. It is therefore necessary to take into account the actual economic effects of the official measures on the tenant and whether they are so serious that he may therefore reduce the rent. Here, for example, B, state aid for the tenant to compensate for pandemic-related disadvantages or benefits of an insurance subject to compulsory insurance must also be taken into account.

The BGH referred the case back to the OLG for clarification of the individual questions.

Result

With the decision, the BGH has clarified that retailers and restaurateurs can in principle demand an adjustment of the rent as a result of pandemic-related closures. At the same time, the owners bear part of the risk of the lockdown. However, the amount of the discount depends on the individual case, which is why the courts of appeal will certainly make some decisions on this. Consequently, there is still a lot of potential for dispute in the subtleties, because in the sense of individual case justice, state aid etc. must also be included in the calculation of the discount. The question of whether a limitation of economic losses could have been achieved, for example through online sales or pick-up and delivery services, does not make the weighing up any easier for the courts. In principle, the BGH has thus provided clarity, but in detail there is still a lot to be done.

This article was first published in the ImmobilienReport Metropolregion Rhein-Neckar, issue 152.

By Beatrice Scheich, MELCHERS, Germany, a Transatlantic Law International Affiliated Firm.  

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

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