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Protection Against Dismissal Under Tenancy Law for Systemically Important Companies in the Corona Crisis

The German law to mitigate the consequences of the COVID 19 pandemic in civil, insolvency and criminal proceedings, passed on 27 March 2020 provides, among other things, for restrictions on the termination of tenancy agreements.

According to the pertaining provision, a landlord cannot terminate a commercial lease solely on the basis that the tenant fails to pay the rent due during the period from 1 April 2020 to 30 June 2020, provided that this non-payment is caused by the effects of Corona. The lessee must however, substantiate this causality. Other termination rights, such as in the case of a mere refusal to pay, shall remain unaffected. The same applies to the due date of the rental payment.

Against this background, the question arises to what extent the aforementioned restriction of the termination right also applies to medical supply stores, opticians, hearing aid acousticians or pharmacies.

During the legislative process, the legislator expressly pointed out in this respect that, in the case of commercial real estate, an indication that the enterprise’s  operations have been prohibited or significantly restricted by legal ordinance or official decree, in the context of the fight against the SARS-CoV-2 virus, should suffice as credible evidence. In the case of the above-mentioned businesses, however, the relevant legal ordinances at federal state level generally provide for exceptions that permit them to continue operations.

The question therefore arises as to how the above-mentioned companies should deal with this regulation in the end. Irrespective of the above-mentioned restrictions on the right of termination, other legal bases for a payment moratorium may also have to be considered.

In any case, a detailed legal examination should be carried out in each individual case before rent payments are stopped solely in reliance on the above-mentioned restrictions of the tenancy law right of termination, or to assess how to react to such notifications.

This applies all the more so for compliance reasons, for example to minimize reputation risks, as current examples have already shown. Moreover, since in the event of a mere refusal to pay, termination would still be permissible despite the above-mentioned provision, there are also considerable legal risks in connection with possible actions for eviction. Furthermore, it must be taken into account that the suspension of the right of termination does not affect the due date of the rental payments, and that the result will therefore be a considerable additional burden due to the accrued interest on arrears.  

Our blog contributions shall provide an overview with regard to legal topics, legislation and case law and are supposed to provide some general information rather than constituting any specific advice. Please do not hesitate to contact Maiwald and in particular the authors of the particular contributions if have any questions on the addressed topics or on other legal issues.

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