FIRST OVERVIEW OF IMPLICATIONS AND OPTIONS FOR ACTION
Note:
The assertion of rights as well as their defense is always also dependent on the specifically agreed, contractual regulations and the actual facts of the individual case. The following overview is therefore only intended as an initial guide and does not constitute legal advice and is not intended to replace it.
Furthermore, it should be noted that the COVID-19 crisis with its resulting economic consequences is unfolding an unprecedented dynamic. There is therefore a risk that courts which will not decide on legal disputes for a few months may, in retrospect, assess factual connections (especially regarding terminations, lack of rent or disruption of the basis of the business) differently than is the case today.
1. BACKGROUND
(A) On 25/27 March 2020, the federal legislature adopted a law to mitigate the consequences of the COVID-19 pandemic in civil, insolvency and criminal proceedings ("Act"). The Act provides, inter alia, for a restriction of the right of termination of rental and lease relationships by landlords:
(B) Article 5 § 2 of the Act provides::
"A landlord may not terminate a lease agreement of land or premises on the sole reason that the tenant fails to pay the rent in the period from 1 April 2020 to 30 June 2020 despite the fact that it is due, if the failure to pay is due to the effects of the COVID-19 pandemic. The connection between the COVID-19 pandemic and non-payment must be substantiated. Other termination rights remain unaffected".
(C) This means that terminations by the landlord due to payment arrears are not possible for the period from 1 April 2020 to 30 June 2020 until 30 June 2022 ("period"). The period of validity may be extended until 30 September 2020 by statutory order of the Federal Government.
2. LEGAL IMPLICATIONS
2.1 Credibility by the tenant: The termination by the landlord due to late rent payment is only excluded if the non-payment of the rent is due to the effects of the COVID-19 pandemic. The law requires that "the connection between the COVID-19 pandemic and non-payment must be made credible".
The tenant may use appropriate evidence, an affidavit in lieu of an oath or other suitable means to substantiate this. Appropriate means can be, in particular, proof of the application or the certificate on the granting of state benefits, certificates of the employer or other proof of income or loss of earnings. In addition, tenants of commercial properties can regularly provide credible evidence of the connection between the COVID-19 pandemic and non-performance, for example, by pointing out that the operation of their company has been prohibited or significantly restricted by legal ordinance or official order in the context of combating the SARS CoV 2 virus.
2.2 Unchanged continuation of the obligation to pay rent: The restriction of the landlord's right to terminate the lease agreement does not mean that the tenant is released from his obligation to pay rent for the period. The obligation to pay the rent continues to exist in full and unchanged at the agreed times and can also be sued or enforced. This also follows from the explanatory memorandum: "This means that tenants and lessees must continue to pay their claims on time [...].“
2.3 Default of the tenant in case of non-payment of the rent: Since the obligation to pay the rent continues to exist in full and at the agreed dates (usually in advance on the 3rd or 5th of a month), and since the regulation does not involve a deferral or a payment moratorium, the tenant is automatically in default of payment of the rent in question in the event of non-payment (assuming a regulation customary in the market is included in a rental agreement, in which the date of performance is determined for the rent payment owed), even without a reminder or setting of a deadline by the landlord (§ 286 para. 2 sentence 1 BGB). In German civil law, the debtor is (almost) always responsible for non-payment.
The explanatory memorandum states that "the general civil law provisions of the Civil Code on maturity and default continue to apply to claims for rent and lease during the period of validity of the Act.“
2.4 Default interest: According to § 288 BGB the tenant has to pay interest on the unpaid amount. As far as a consumer (e.g. a tenant of a residential property) is not involved, the interest rate is 9% above the base rate per year. The base interest rate is currently -0.88% so that the default interest rate between entrepreneurs is currently 8.12% p.a.
If a consumer is involved, the default interest rate is 5% p.a. above the base rate, currently 4.12% p.a.
2.5 Other damage caused by delay: In addition to the interest on arrears, the creditor can claim any other damage caused by delay. Thus, the law provides for a lump sum of EUR 40, in any case, which is to be credited against the costs of legal prosecution, which are also to be qualified as damage caused by default. In any case, the duty to mitigate damages shall of course apply.
2.6 Landlord's securities: The landlord may realize any existing rental securities to settle payments with which the tenant is in default. These rent securities can usually be deposits or guarantees, but also the landlord's lien. In some cases, there may be a claim for the replenishment of the security.
2.7 Other reasons for termination: All other reasons for termination or time limits remain in force. For example, extraordinary terminations by the landlord for other important reasons remain possible (e.g. because the tenant endangers the unit of hire by failing to observe the due diligence incumbent upon him).
2.8 Rent reduction due to use restriction by Corona: In principle, the risk of use of the rented property lies within the tenant's sphere of risk. In the past restrictions of use have therefore not justified a rent reduction if and to the extent that this was not due to the nature or location of the leased item. In individual cases, however, it cannot be excluded that the effects of the COVID-19 pandemic may constitute a defect of the leased property in the future and that tenants may claim a rent reduction. However, this has to be checked in each individual case, for example, if authorities generally prohibit the use of the rental object. However, the federal legislator itself probably does not assume a general defect of the rental object and the restrictions. Otherwise, there would hardly be any need for the landlord to restrict the possibility of termination.
The same should in principle also apply to rent adjustments in the context of the so-called disruption of the basis of the transaction (Störung der Geschäftsgrundlage). However, it should be noted here that there is a risk that courts might nevertheless assume a change in the "business basis" in the future if contact bans, curfews and/or closures of shops continue and cast doubt on the economic basis of the rental agreements.
3. OPTIONS FOR ACTION BY LANDLORD
If the tenant reduces or decreases the rental payments or stops them altogether or announces this, the landlord has the following options for action, among others:
3.1 Demanding the credibility of the claim: Since the landlord can still terminate the lease due to the arrears of payment if the tenant fails or is not able to prove that the non-payment of the rent is due to the effects of the COVID-19 pandemic, the landlord should demand this credibility in writing without delay.
3.2 Announcement and claiming of the damages caused by delay and the default interest: The landlord should immediately claim the default interest and the default lump sum in addition to the payment of the tenants and reserve the right to claim further damages caused by delay (if necessary costs of a lawyer or prosecution costs).
3.3 Entitlement of claims: This can be done simply by applying for a default notice and then an enforcement order. The relevant applications should be made quickly.
3.4 Use of the rental securities: Depending on the available rental securities, you should/could make use of it.
4. OPTIONS FOR ACTION BY TENANT
If the rent payment is to be postponed due to the COVID-19 pandemic, the tenant has the following options for action, among others:
4.1 Credibility: In any case, the tenant should immediately provide written evidence that the non-payment of the rent is due to the effects of the COVID-19 pandemic. This can be done, for example, by means of an affidavit, other documents or statements by third parties.
4.2 Request for deferment: In order to avoid the unpleasant consequences of the debtor's default, the tenant should endeavor to agree with the landlord on a deferral of the rental payments concerned. This can be done by simple deferral agreement.
4.3 Payment of the rent under reservation: As the official restrictions in the context of the COVID-19 pandemic could, in individual cases and in very specific individual constellations, constitute a defect in the rented property, it might be advisable to make the rent payments during this period explicitly subject to the reservation of recovery, so that the rent payments are not later prevented from being recovered by § 814 BGB (performance in knowledge of the non-guilt).
