COVID-19 & commercial tenancy law

Both private and commercial tenants will benefit from the measures that the German cabinet has included in its protective package in response to the coronavirus.

The key issue is when and to what extent tenants can fall short on rent and what landlords need to know in order to avoid being left sitting on arrears for a long time or even having to worry about outright defaulting on rent.

While the current regulations apply principally to those renting apartments, commercial real estate tenants can also find themselves rapidly reaching their limits with rent payments if they suffer a sudden or gradual loss of income as a result of the coronavirus pandemic.

Possible reasons for a reduction in income (requires proof) include

• official directives
• quarantine, restrictions on contact for employees
• disrupted supply chains
• staff shortages due to parents’ caregiving responsibilities

Expensive shop premises in prime locations and complex properties, such as hotel complexes or large storage facilities, are particularly affected. We at the commercial law firm MTR Rechtsanwälte recommend that all businesses consider the suspension of rent payments in their plans for managing the crisis.

It makes sense, for instance, to first think about rent that is due for payment before stopping wage payments or falling short on social security contributions. It is also worth considering whether a loan covering all receivables from Germany’s state-owned development bank, the KfW, might assist in overcoming the crisis.

Ultimately, it comes down to whether a business will be in a position to pay off the mountain of debt post-crisis. Interest-free loans need to be paid back like any other loan, and a deferral is tantamount to a loan.

Businesses need not worry about power and telecommunications services at this time. The rescue package features measures designed to ensure their uninterrupted provision, including for the benefit of businesses. No firm, merchant, or self-employed individual should have their power cut off just because of a short-term inability to pay during the crisis.

Assuming the measures do not need to be extended, rent payments should return to normal on June 30. The option to defer currently applies to the months of April, May, and June..

Lawyers with experience in the fields of commercial tenancy and real estate law can offer advice.

More information about the crisis surrounding the coronavirus is available here!