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Adaptation of rental payments due to COVID-19-induced measures

To mitigate business closures during the pandemic, German lawmakers have decided to bolster the negotiation options of commercial tenants and lessees. To this end, a Section 7 has been added to Art. 240 of the Introductory Act to the Civil Code (Einführungsgesetz zum Bürgerlichen Gesetzbuch, EG-BGB).

New regulations

Since 1.1.2021, there has now been a legal presumption that the circumstances forming the basis of a contract will be deemed to have significantly changed within the meaning of Section 313 of the German Civil Code if a business activity in rented or leased premises is prohibited because of the government’s measures for combating the COVID-19 pandemic. This shall apply even if the business operation is subject “merely” to considerable restrictions. Should a closure ensue then the tenant may become entitled to an adaptation of the contract if it is deemed that there is interference with the basis of the contract.

This however does not mean that the rent may be automatically deferred, or alternatively that only a reduced rent has to be paid. Rather, the question that has to be asked is what would the parties have agreed if they had foreseen this interference. Therefore, there has to be a caseby-case assessment of what agreements would still be reasonable for the landlord and the tenant. In the course of this, any government subsidies have to be taken into account and the financial situation of the tenant and the landlord have to be weighed up against each other. There is therefore a need to examine the financial situation of both parties.

Faster judicial enforcement

If the tenant and the landlord are not able to reach an a greement out of court then it would also be possible to bring a claim before a civil court. In this regard, the German Government has provided for an amendment in Section 44 of the Introductory Act to the Civil Procedure Code according to which such claims have to be accorded preferential treatment and the first appointment has to be scheduled within one month following the filing of an action. The tenant can thus be brought to the negotiating table as quickly as possible.

Recommendations: It should be noted that the above-mentioned right to the adaptation of the contract does indeed only exist for contracts that were concluded prior to the outbreak of the COVID-19 pandemic. Therefore, in the future, all rental or lease agreements should include an individual contractual clause that contains specific arrangements in the case that business premises have to close because of measures by the government.

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