22. Aug 22

OLG Frankfurt rules on commercial rent reduction due to COVID-19

Grounds for reducing commercial rent can also potentially come in the form of indirect repercussions of the coronavirus pandemic. That was the conclusion of the Oberlandesgericht (OLG) Frankfurt – the Higher Regional Court of Frankfurt – in a judgment from February 18, 2022 (case ref.: 2 U 138/21).

The decision follows a ruling of the Bundesgerichtshof (BGH) – Germany’s Federal Supreme Court – from January 12, 2022 in which the Court held that commercial rent can under certain circumstances be adjusted for reasons related to the COVID-19 lockdown (case ref.: XIII ZR 8/21). We at the commercial law firm MTR Rechtsanwälte can report that the BGH also clarified that a blanket 50 percent reduction in rent was not possible, it always being necessary to consider the individual circumstances of the case in question.

The defendant in the case heard by the OLG Frankfurt had been renting commercial space for their cleaning business. While they were not forced to close their business during the coronavirus pandemic, they were, however, indirectly affected by the closure orders issued by the authorities. These resulted in many events being cancelled and consequently a lower than usual volume of clothes being brought to their business for cleaning. This meant that the defendant began experiencing a sharp drop in sales from March of 2020 and ceased paying rent for the commercial premises from April to June. The landlord subsequently sued for payment of the outstanding rent.

The OLG Frankfurt upheld the claim, ruling that while the landlord was entitled to the contractually agreed rent payments, indirect repercussions of the coronavirus pandemic were in fact capable of giving rise to circumstances leading to frustration of contract and justifying a claim for adjustment of the rent. To this end, however, the tenant would have to have demonstrated that it would be unreasonable for them to have to adhere to the original rental agreement, something which the Court concluded that the tenant had failed to do in this case.

Despite acknowledging that the pandemic had severely undermined the commercial basis of the rental agreement – the decline in the demand for cleaning services due to the large number of cancelled events meant that the tenant’s cleaning business had at least been indirectly impacted by the official closure orders – the OLG Frankfurt found that the tenant had failed to demonstrate that it would have been unreasonable for them to have to adhere to the unchanged rental agreement. The Court noted that this would have required the tenant to give an account of, in particular, the cost structure and development of the general economic and financial situation of their business, in the absence of which they had no claim to adjustment of the rental payments.

Whether commercial rent can be adjusted ultimately always comes down to the individual circumstances of a given case.

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