Rent Reduction Due to Lockdown – Soon the Rule Rather Than the Exception?

In a recent decision dated November 19, 2020, the Regional Court of Stuttgart followed the path of regional court rulings according to which commercial tenants are generally obliged to pay the agreed rent during a lockdown. Only in exceptional cases tenants are entitled to claim a rent reduction. Politicians now apparently want to reverse the statutory rule-exception relationship.

Up to now: Generally no Right to Reduce Rent during Lockdown

In a ruling of November 19, 2020 (11 O 215/20), the Regional Court of Stuttgart continues the path of the Regional Courts of Heidelberg (judgment of July 30, 2020 - 5 O 66/20), Frankfurt (judgment of October 2, 2020 - 2-15 O 23/20) and Zweibrücken (judgment of September 11, 2020 - HK O 17/20). They all take the view that commercial tenants are generally obliged to pay the agreed rent despite Corona-related government restrictions if they cannot, as an exception, rely on an express agreement in the lease agreement on the distribution of risks (e.g. liability limitations, force majeure clause, etc.).

In contrast to the Munich I Regional Court (ruling of September 22, 2020 - 3 O 4495/20), which took a different view with recourse to the decisions of the Imperial Court (“Reichsgericht”), the majority of regional courts follow the course of the German Federal Court of Justice (“Bundesgerichtshof”). In a series of decisions, the Federal Court of Justice basically assigned the risk of use with regard to the leased property to the tenant (BGH, judgment of February 16, 2000 - XII ZR 279/97). Accordingly, the tenant must bear the risk that subsequent legislative or authority measures may impair his business operations and his profit expectations (BGH, judgment of July 13, 2011 - XII ZR 189/09). Only in extremely exceptional cases, i.e. when restrictions lead to existentially significant consequences, the tenant may demand an adjustment of the lease agreement due to an interference with the basis of the transaction. However, the requirements for the assumption of an interference with the basis of the transaction are extremely high. The tenant must demonstrate and prove that, exceptionally, there is an interference with the basis of the transaction and that he is entitled to reduce the agreed lease.

Outlook: Reversal of the Statutory Rule-Exception Relationship?

In November 2020, Federal Minister of Justice Lambrecht launched an initiative to strengthen the rights of commercial tenants and suggested a legal clarification that corona-related restrictions "regularly entail the interference with the basis of the transaction for a tenancy." In a conference call between the German Chancellor and the heads of government of the German states on December 13, 2020, this initiative was taken up and the following resolution was passed:

"For commercial leases and tenancies affected by government COVID-19 measures, there is a statutory presumption that significant (use) restrictions as a result of the COVID-19 pandemic may constitute a serious change in the basis of the transaction."

Of course this resolution passed during the conference call has no legal force. On the contrary, it is once again clear from the resolution that, according to the current legal situation, it is precisely up to the tenant to present and prove the exceptional case of an interference with the basis of the transaction. Consequently, the resolution can only be understood as a suggestion for a legislative proposal with the aim of legally changing this situation. It remains to be seen whether a corresponding amendment to the law will be able to gain a majority in parliament. Landlord associations are already up in arms against this resolution.

It remains to be seen to what extent the courts will continue to follow the landlord-friendly course of the Federal Court of Justice in the light of recent developments. For tenants and landlords alike, the existing uncertainties continue. It should therefore be all the more advisable to approach each other in the event of Corona-related payment difficulties on the part of the tenant and to seek solutions together. When concluding new lease agreements, it is essential to make specific provisions for dealing with Corona-related or other government restrictions.