Impact of the Covid-19 Pandemic on Commercial Leases in Germany

Secretly, quietly, on Dec. 22, 2020, German lawmakers passed a law that will have a revolutionary impact on existing commercial leases in times of the corona pandemic. This opens up significant negotiating potential for commercial tenants in terms of rent amounts and forces landlords to take precautions to safeguard liquidity.

The Act contains the following provision:

“If, as a result of government measures to combat the Covid 19 pandemic, leased land or leased premises that are not residential premises cannot be used for the tenant’s business or can be used only with considerable restrictions, it shall be presumed that, in this respect, a circumstance within the meaning of Section 313 (1) of the Civil Code, which has become the basis of the lease agreement, has changed seriously after the conclusion of the agreement.”

One can assume that with this regulation the German state wants to keep itself free from compensation payments and to shift the support needed by tenants to landlords. The payment of state compensation could possibly depend on the fact that the tenant has previously attempted to enforce a reduction in the commercial rent by invoking the aforementioned law.

The new statutory provision now establishes the (rebuttable) presumption in favor of the tenant / lessee that one of the conditions for an adjustment of the rent has been met and it is up to the landlord / lessor to rebut the presumption. This has significantly increased the chances or risks that a rent reduction can be enforced in court. Previously, the courts had been rather cautious in their rulings on the recognition of a rent adjustment or rent reduction due to the Corona pandemic.

In our view, this means that commercial tenants – not least against the background of possible consideration in the context of state reimbursement claims – should attempt to demand a rent adjustment from their landlord in a timely manner if the use of the rental space is impaired or excluded by official orders due to the Corona pandemic. For commercial landlords, conflicting questions arise: how to counter corresponding contract adjustment requests or demands for rent reductions.