KG Berlin: Commercial rent reduction in response to closures related to COVID-19
In a judgment from April 1, 2021, the Kammergericht (KG) Berlin – the Berlin Court of Appeal – ruled that commercial rent can be lowered by 50 percent in response to a closure related to COVID-19 (Az.: 8 U 1099/20).
Businesses have been forced to either partially or completely close their doors in order to curb the spread of the coronavirus. We at the commercial law firm MTR Rechtsanwälte can report that Germany’s federal government made it clear through new regulations in December of 2020 that the government-imposed lockdown may constitute an interference with the basis of a contract within the meaning of Section 313 of the German Civil Code (Bürgerliches Gesetzbuch, BGB), thus paving the way for an adjustment to commercial rent.
These new regulations informed the KG Berlin’s decision to affirm a reduction in commercial rent in response to the compelled closure of a business by government. In addition, the court held that it is not necessary to prove in individual cases that the tenant is facing an existential threat.
The tenant in the instant case was forced to close its arcade due to COVID-19 and for this reason only paid the commercial rent for the months of April and May in 2020 on a pro rata basis. The landlord subsequently demanded payment of the remaining rent. This claim was unsuccessful.
The federal city-state of Berlin ordered the lockdown in response to the coronavirus pandemic. The court ruled that the tenant could thus cite interference with the basis of the contract pursuant to Section 313 BGB and that the rent stipulated in the contract should therefore be reduced by 50 percent.
The Kammergericht reasoned that the contractual basis for renting commercial premises also encompasses the notion that economic and social life will not be brought to an almost complete standstill due to the onset of a pandemic and the resulting government-mandated closure of businesses. The court went on to point out, however, that this form of interference with the basis of the contract did occur and that the tenant had not been able to make use of the commercial premises in the manner envisaged by the contract.
This was said to go beyond the “normal” level of risk regarding whether the rental object is fit for purpose, with the court finding that this could not be borne by one of the contracting parties alone, i.e. the resulting negatives ought to be borne jointly by both parties. The KG Berlin therefore concluded that in cases such as this one where business premises are forced to completely close their doors, the commercial rent shall be halved.
While the Oberlandesgericht Dresden – the Higher Regional Court of Dresden – came to a similar conclusion in a similar case (Az.: 5 U 1782/20), the issue of whether commercial rent can be lowered ultimately comes down to the facts and circumstances of a given case. Experienced lawyers can provide counsel.