Retail companies can hope for rent reductions if their business premises had to remain closed due to the corona pandemic in lockdown. However, there is no general rule such as dividing the costs halfway between the tenant and the lessor.
The Federal Court of Justice decided on Wednesday in Karlsruhe (Az. XII ZR 8/21) to always take into account all the circumstances of the individual case. Tenants cannot always request an adjustment of the rent. Complicated processes are likely to follow.
Both sides – tenants and landlords – are burdened by the state measures in the fight against the corona pandemic, neither side bears sole responsibility. Dividing the rent in half is too flat.
Kik’s rent is being renegotiated
In the specific case, it was about a branch of the textile discounter Kik in the Chemnitz area, which had to close from March 19 to April 19, 2020 and for which the landlord wants the full rent of around 7,850 euros.
The Dresden Higher Regional Court decided that Kik only has to pay about half of it. The Federal Court of Justice overturned this judgment, the court in Dresden has to hear the matter again.
Kik boss Patrick Zahn said: “With its statement today, the Federal Court of Justice has confirmed Kik’s practice to negotiate with all landlords in individual discussions about compensation.” There are also “partnership agreements” for the year 2021 with the defendant, from whom Kik has rented two retail spaces.
Pandemic is not included in the rental agreement as a risk
The judges of the seventh civil senate found that the corona pandemic posed a life risk that would not be covered by rental contracts without a corresponding regulation. That could not be assigned to any contracting party alone. The lockdown in spring 2020 affects the so-called big business foundation, it said. “This is understood to mean the expectation of the contracting parties that the fundamental political, economic and social framework conditions of a contract will not change and that social existence will not be shaken.”
However, there is no defect in the sense of the law, because the retail companies could have continued to use the rooms, explained the presiding judge Hans-Joachim Dose. The state measures do not affect the nature or location of the rental property, only the type of use and public traffic.
In the event of a dispute, courts must now examine how high the loss in sales was for each individual case. It is about the specific branch, not the group, stressed Dose. Any insurance benefits and the extent to which the trader has endeavored to obtain coverage must also be taken into account. Aid payments from the state also need to be assessed, with the exception of loans. The disadvantages that have arisen should not be overcompensated.
Modeverband BTE welcomes the decision
The BTE trade association textile shoes and leather goods is pleased with the judgment of the Federal Court of Justice. Because it means that tenants have a fundamental right to rent adjustments if the state orders shop closings, the association announced on Wednesday.
“It is only fair that the costs and disadvantages of a forced closure are shared between tenants and landlords,” said BTE General Manager Rolf Pangels. “Thousands of textile, shoe and leather goods stores can benefit from the judgment, as they often pay high rents, especially in city centers, and have not always been able to agree with their landlords about a rent reduction during the lockdown.”
The Real Estate Association Germany IVD emphasized that it depends in particular on the circumstances on the part of the tenant – although the judgment can be understood as “that the landlord has to slacken a certain part”. “In the end, tenants and landlords sit in the same boat and are confronted with a situation that was not foreseeable for them,” said association president Jürgen Michael Schick. Litigation should be the exception: “Avoiding litigation and finding an amicable solution would be the best way.”
Cases before the Federal Court of Justice are increasing
At the end of 2020, the legislature had made it clear that commercial tenants can request an adjustment to their lease if they have to close due to Corona measures or are only allowed to open their business to a very limited extent. It is assumed that tenants and landlords would probably not have signed a contract if it had been clear what the future would bring. This means that business owners are not automatically entitled to have part of their rent waived. Landlords could just grant a respite.
It is not the first time that the highest civil judges in Germany have dealt with the consequences of the corona pandemic. The cases are now increasing noticeably: On January 26th, the question of whether a restaurateur is entitled to claims from a business closure insurance due to the closure of his restaurant as a result of the pandemic is to be negotiated in Karlsruhe.
And just on Wednesday the Federal Court of Justice announced that it would negotiate compensation and damages for corona-related business closings at the beginning of March. The owner of a hotel and restaurant business demands compensation from the state of Brandenburg for his losses that were not covered by emergency aid granted. (FashionUnited / dpa)
This post was updated at 3:24 p.m. on January 12, 2022 with details of the judgment, statements from Kik and the real estate association, and more background information.