Obligation to pay rent despite an officially ordered business closure?
Pursuant to Section 535 (2) BGB, the tenant has the primary obligation to pay the rent under a rental agreement. According to Section 537 (1) sentence 1 BGB, this applies even if the tenant is prevented from using the rented property for reasons relating to them. Accordingly, the operator of an affected facility must in principle continue to pay the rent without restriction in the event of a self-imposed closure of the business due to the coronavirus.
However, if the closure is ordered by the authorities, a distinction must be made according to the reason for this:
In case of doubt, the rent is reduced to zero by law in accordance with Section 536 of the German Civil Code (BGB) if the business restriction imposed by ordinance constitutes a material or legal defect in the rented premises. A prohibition issued by way of a statutory order constitutes an obstacle to use under public law. With regard to the distribution of risk between tenant and landlord, it depends on whether this obstacle to use is caused by the specific nature of the rented or leased property or by the personal or operational circumstances of the tenant. The responsibility for restrictions or obstacles to use under public law therefore depends on the statutory distribution of risk, which is essentially derived from Section 535 (1) BGB. According to this, the landlord is generally responsible for ensuring that the rental property can be used in accordance with the contract without any legal restrictions or obstacles that may arise specifically from a breach of public law regulations. In contrast, the tenant generally bears the risk of use, unless this has been contractually transferred to the landlord. In the case of commercial leases, the risk of use includes in particular the risk of being able to make a profit from the leased property. If a tenant is no longer able to use the rented property as a result of the legal regulation in question and his sales expectations are therefore no longer fulfilled, the question of whether this constitutes a defect must be differentiated according to whether only the tenant's risk of use has been realized or whether the landlord's obligation to transfer use has been breached.
The Reichsgericht has already dealt with such a differentiation. It dealt with the question of whether the tenant of a dance hall is entitled to a reduction in the rent if public dance events are generally prohibited due to a police order and the tenant therefore suffers considerable losses in turnover. In this case, with the outbreak of the First World War, the operation of dance halls was generally prohibited throughout Berlin. According to the legal distribution of risk, the lessor bears the risk of such accidents that affect the leased property itself and thus restrict or make it impossible to use it in accordance with the contract. The lessee, on the other hand, bears the risk of the "reality of the fruit yield", i.e. the economic viability of the operation of the leased premises. In the opinion of the Reichsgericht, the police ban represents a coincidence that affects the leased property itself (i.e. the obligation to transfer use) and not the fruit or its production (i.e. the risk of use). The lessor must therefore bear this risk.
The Federal Supreme Court has applied the same principles in its decision-making practice: Obstacles to use under public law and restrictions on use that prevent the contractual use of a rented or leased property constitute a material defect within the meaning of sections 536 et seq. BGB if they are based on the specific nature of the leased property and are not caused by personal or operational circumstances of the lessee. If the contractual use of a commercial rental or leased property is impaired during an ongoing rental or lease relationship as a result of legislative measures, this may subsequently constitute a defect within the meaning of Section 536 (1) sentence 1 BGB. However, the prerequisite for this is that the restriction of use caused by the legislative measure is directly related to the specific nature, condition or location of the leased property. On the other hand, other legislative measures that impair commercial success fall within the tenant's/lessee's sphere of risk.
Accordingly, the landlord bears the risk that the leased premises are suitable for the contractually agreed purpose in terms of their location and structural condition. If, for example, the use as a discotheque is not permitted under building regulations due to inadequate fire protection or the operation of a restaurant leased as such is not permitted under building planning law due to its location in a purely residential area, this risk is borne by the landlord. However, the tenant's risk of use is affected if the operation of a restaurant is economically impaired by the introduction of a statutory smoking ban. The Federal Court of Justice made the decisive point that the Non-Smoking Protection Act is based on the operational circumstances of the restaurant operator, not on the condition or quality of the rented or leased premises. Furthermore, the individual guest is the addressee of the smoking ban; the restaurateur is only indirectly induced to implement it.
The pivotal point for the question of who bears the risk caused by the operating restrictions remains the specific contractual agreements. This is the only way to determine the specific purpose of the contract and thus also the target state to be used for the question of a possible defectiveness of the rented premises. The other contractual agreements on the distribution of risk also play an important role. We will be happy to advise you on the effects of operating restrictions on your tenancy or lease and support you in solving the resulting problems.
Status: 18.03.2020