Special features of tenancy law due to the Covid-19 pandemic

On March 27, 2020, the Bundestag passed the Act to Mitigate the Consequences of the COVID-19 Pandemic.

Accordingly, pursuant to Article 240(2) of the Introductory Act to the German Civil Code (EGBGB), a landlord may not terminate a lease for real property or premises solely on the grounds that the tenant failed to pay rent during the period from April 1, 2020, to June 30, 2020, despite the rent being due, provided that the failure to pay is attributable to the effects of the COVID-19 pandemic. The connection between the non-payment and the COVID-19 pandemic must be substantiated.

The most important questions and answers on this topic:

Is the landlord entitled to rent payments for the period from April 1, 2020, to June 30, 2020?

This provision does not affect the tenant’s obligation to pay rent or the due date for rent. Thetenant therefore remains obligated to pay the agreed-upon rent to the landlord.

Can a landlord terminate the lease due to rent arrears caused by the COVID-19 pandemic?

For the time being, the landlordcannot terminate the lease due to rent arrears from the period between April 1, 2020, and June 30, 2020. Termination on this basis is prohibited until June 30, 2022. If there are significant payment arrears from other periods or other grounds for termination, termination remains possible.

What options do I have if the tenant is late with a payment?

• If the tenant fails to pay or does not pay on time, late payment interest will accrue for the period of default. The statutory late payment interest rate is 9 percentage points above the base rate per annum for businesses and 5 percentage points above the base rate per annum for consumers.
• During the period of default, the tenant must compensate the landlord for any damages resulting from the default (e.g., legal costs).
• If the tenant is late in making a payment, the landlord may call upon the tenant’s security deposits (bank guarantee, security deposit, etc.).

Is the tenant entitled to a rent adjustment during the COVID-19 crisis?

At most, an adjustment might be possible on the grounds of a so-called change in the basis of the contract pursuant to § 313 of the German Civil Code (BGB). However, the Federal Court of Justice applies this legal concept very restrictively, andit must be guided in particularby the contractual and statutory allocation of risk. This allocation generally assigns the risk of use of the leased property to the tenant. Accordingly, the existence of such a claim—whichmust be examined on a case-by-case basis—is currently considered unlikely.

What should be considered when agreeing to a deferral or reduction of rent?

Any deferral or adjustment of rent should always be agreed upon through aproper, written amendment to the lease agreement. If the parties reach only a verbal agreement—especially in the case of commercial leases with a fixed term—there is arisk of termination due to a violation of the requirement for written form.

Attorney Daniel Ledvinkais available to provide consultation and answer any questions you may have.