Changes in tenancy law as a result of the Covid-19 pandemic
Because of the economic disruption caused by the Covid-19 pandemic, Germany’s federal government renacted a legislative package containing far-reaching amendments to civil law. The package came into force on 1 April 2020.
Content of the legislative package in regards to rental law
Tenants who cannot pay their rent from April to June 2020 because of the Covid-19 pandemic cannot be terminated for these rent arrears. Tenants must demonstrate that their rent arrears are due to the impact of the Covid-19 pandemic. The period from April to June 2020 can to be extended by a regulation. Unlike other payment obligations, for which there is even a wide-ranging moratorium, the obligation to pay rent as such remains in place and is enforceable. However, due to the removal of the option of terminating the lease, landlords lose a decisive means of pressure. Termination of the lease due to rent arrears accumulated during the period April to June 2020 due to the Covid-19 pandemic will be possible again from July 2022. This means that landlords are exposed to the risk that tenants will not pay their rent in the next few months and will not make these payments until years later.
While other protective provisions of the proposed law apply only for the benefit of consumers, micro-enterprises and small and medium-sized enterprises, the amendments cover all commercial rental and lease contracts. As the obligation to pay as such remains in place, the landlord will at least be entitled to claim late payment penalties (such as interest) in the event of arrears. The use of rental securities is also normally possible. This requires, however, that the collateral agreement or the wording of the guarantee does not contain any conflicting provisions, such as that termination of a lease is a prerequisite for the use of the rental security.
The law does not entail any changes for or relief of other obligations of the parties – such as the landlord’s obligations to fit out or build under forward lease contracts or the tenant’s operating obligations. In this respect, relief can only result from the generally legally applicable provisions, such as those regarding default, impossibility and disruption of the business basis.
Any questions? Please contact: Gregor Barbers
Practice group: Real Estate Investment Group