Federal Court of Justice: No general reduction of commercial rent during lockdown
The Twelfth Civil Senate of the Federal Court of Justice (BGH) today (January 12, 2022) announced a decision (XII ZR 8/21) on the obligation of commercial tenants to pay rent in the event of Corona-related closures. According to the ruling, tenants are in principle entitled to reduce the rent in the event of pandemic-related closures, but the amount of this reduction must be assessed on the basis of the circumstances of the respective individual case; a fixed 50/50 split of the rent is not an option. The BGH has remitted the case back to the Dresden Higher Regional Court, which must now hear the case anew.
Background
The lawsuit was filed by the landlord of commercial premises let to a textile retail store (KIK). The store, located in Chemnitz, was closed from March 19, 2020, to April 19, 2020, due to a general order issued by the state of Saxony. The tenant did not pay rent for the month of April 2020. The landlord sued for full payment of the contractually agreed rent. The lower court (LG Chemnitz, 4 0 639/20) had condemned the tenant to pay the rent for April 2020 in full. The Higher Regional Court of Dresden overturned this decision and ordered the tenant to pay only 50% of the rent. In justification, the court stated that the closure order constituted a frustration of the lease agreement pursuant to Section 313 (1) of the German Civil Code (Bürgerliches Gesetzbuch – BGB) (Wegfall der Geschäftsgrundlage) , which resulted in an adjustment of the lease agreement in such a way that half of the basic rent was reduced for the duration of the closure. The risk of a closure, so the Higher Regional Court, was not foreseeable and was not the responsibility of either party to the contract, so that a unilateral shifting of the risk to the tenant was ruled out. The risk therefore shall be borne equally by the contracting parties.
Decision
The BGH now agreed with the OLG Dresden insofar as an adjustment of the rent in the case of an officially ordered closure is possible, in principle. However, the general division of the rent into halves is legally incorrect. The reduction oft he rent rather depends on the circumstances of the individual case. In the context of reasonableness, state compensaiton payments or insurance benefits for example had to be taken into account in addition to sales losses for the specific property. The BGH remitted the case back to the Dresden Higher Regional Court, which must now examine the criteria of unreasonableness more closely on the basis of the circumstances of the individual case.
Opinion and outlook
This is consistent. Section 313 (1) BGB requires consideration of the circumstances of the individual case. The question of reasonableness cannot be based on the fact that neither party caused or foresaw the restriction. This is a circumstance that lies in the past; the question of reasonableness, however, is directed to the future.
It remains to be seen which criteria the Dresden Higher Regional Court will identify in the context of reasonableness.
The OLG Frankfurt am Main (2 U 143/20) had already considered possible criteria in detail in March of last year. It names the following: The concrete terms of the lease (term, amount of rent, termination options), also legal and actual possibilities for the tenant to continue using the leased premises in a modified manner. In addition, the degree of liquidity or creditworthiness of the tenant must be taken into account, as well as the possibility of using catch-up effects. It could also be important whether the tenant operates several branches or is part of a group of companies, whether the tenant has business interruption insurance or whether it has received public subsidies and whether it has formed or should have formed reserves. On the landlord’s side – so the Higher Regional Court of Frankfurt am Main – it must be taken into account whether the landlord is dependent on regular rental income to repay a loan.
It is already clear that there cannot and will not be a generally applicable standard for adjusting the rent in the lockdown for the many and varied existing commercial leases in Germany. This is also preferable in the sense of case-by-case justice.
Author:
Yvonne Spatz, Lawyer