Impacts of the coronavirus crisis on tenancy law
The coronavirus crisis and tenancy law are closely linked, as the economic restrictions caused by the COVID-19 pandemic and the government measures taken as a result had significant consequences for tenancy relationships. Through various legislative measures, tenancy law was partially adjusted during the pandemic period in order to protect tenants, both in residential and commercial settings, from existential threats. The following comprehensively presents the legal foundations, protective regulations, and the effects of the pandemic on German tenancy law.
Legal framework and background
General situation
In Germany, tenancy law is primarily governed by the German Civil Code (BGB). Central to this are the provisions on tenancy (§§ 535 et seq. BGB), which cover both residential and commercial leases. However, the coronavirus pandemic led to an exceptional situation: many commercial tenants were – due to state-ordered closures – unable or only partially able to make their rent payments. Residential tenants also faced payment difficulties as a result of the economic crisis.
Changes during the coronavirus pandemic
To cushion social and economic hardships, special, time-limited regulations for tenancy law were enacted as part of the Covid-19 Act (Act to Mitigate the Consequences of the COVID-19 Pandemic in Civil, Insolvency and Criminal Procedural Law, Federal Law Gazette I 2020, p. 569).
Protective regulations for tenants during the coronavirus crisis
Moratorium on termination restrictions
The so-called termination moratorium is one of the key measures introduced during the coronavirus crisis. According to Art. 240 § 2 EGBGB (Introductory Act to the BGB), landlords were prohibited from terminating tenancy agreements solely due to rent arrears caused by the pandemic for the period from April 1, 2020 to June 30, 2020.
Requirements for termination protection
* The rent default had to be caused directly by the coronavirus crisis (e.g., due to loss of income as a result of short-time work, business closure, or decline in orders).
* Tenants had to credibly demonstrate that they were unable to pay the rent on time due to the pandemic and its economic effects.
* Outstanding rents from the protection period had to be paid by June 30, 2022 at the latest, otherwise the usual right of termination would apply again.
Deferral of rent payment
There was no statutory obligation for landlords to grant a deferral of rental payments. However, tenants were protected from losing their homes or business premises by the termination moratorium. Nevertheless, the rental arrears remained as a civil debt and had to be repaid.
Effects on residential tenancy agreements
Legal treatment of pandemic-related rent arrears
For residential tenants, the regulation meant that terminations due to pandemic-related payment arrears were initially excluded. All other grounds for termination – for example, personal use or breach of contract – remained applicable during the coronavirus crisis.
Subsequent payment and dunning proceedings
Outstanding rent claims from the protection period continued to exist. Landlords could continue with dunning procedures or file lawsuits for payment. Only the right to terminate was restricted.
Effects on commercial tenancy agreements
Specific features for business rents
For commercial premises, pandemic-related restrictions such as business prohibitions and requirements were particularly relevant. In many cases, tenants were unable to operate their business for an extended period.
Legal amendment: Disruption of the basis of the contract
With the entry into force of Art. 240 § 7 EGBGB, it was clarified that pandemic-related restrictions are to be regarded as a disruption of the basis of the contract (§ 313 BGB). As a result, both commercial tenants and landlords can negotiate an adjustment to the rental agreement if continuing the contract under unchanged terms becomes unreasonable for one party.
Requirements for a contract adjustment
* Existence of a significant change in circumstances due to the pandemic
* Neither party has contractually or legally assumed the risk
* Continuing the contract under unchanged conditions is unreasonable
If such a contract adjustment cannot be reached amicably, a court may intervene and adjust the contract in the event of a dispute.
Rent reduction and abatement during the pandemic
No statutory right to rent reduction: For the duration of pandemic-related restrictions, there was no statutory general entitlement to a rent reduction, since landlords continued to be obligated to provide the premises for use and typically were not responsible for a defect in the rental object.
Disruption of the basis of the contract: However, case law clarifies that an adjustment may be required and permissible if the existence of the business is existentially threatened and no compensation is available through government aid.
Termination of tenancies during the coronavirus pandemic
Termination options for landlords
The termination moratorium was limited to rent arrears resulting from payment difficulties caused by the pandemic. Other grounds for termination remained applicable. After the moratorium expired, the general termination provisions also applied to pandemic-related arrears.
Return of rental objects and eviction proceedings
Return: The obligation to return the rented object at the end of the tenancy was not suspended.
Protection against eviction: In the sphere of compulsory enforcement, courts could also order temporary protection against enforcement during the pandemic in exceptional cases to avoid particular social or health-related hardships.
State support measures
Bridging aid and social benefits
To mitigate the effects of the coronavirus crisis, affected tenants could claim various government supports:
* Housing benefit, especially with simplified access (§ 5 Housing Benefit Act)
* Short-time working allowance for wage-dependent employees
* Bridging aid and special funding programs for companies and the self-employed
* Basic security under SGB II (“Hartz IV”)
Case law on the coronavirus crisis and tenancy law
Leading court decisions
Various state and higher regional courts as well as the Federal Court of Justice (BGH) have issued rulings connected to pandemic-related rental arrears, commercial lease terminations, and rent adjustments in light of a disruption of the basis of the contract. Key criteria were always the allocation of risks and access to compensation measures.
Sample judgments:
* OLG Dresden, judgment of 24.2.2021 – 5 U 1782/20 (40% rent reduction in individual cases)
* Federal Court of Justice (BGH), judgment of 12.1.2022 – XII ZR 8/21 (clarification on disruption of the basis of the contract and its legal consequences)
End of special regulations and outlook
Return to standard tenancy law
In most cases, the special regulations under tenancy law expired on June 30, 2022. From that point on, only the general statutory provisions of the BGB have applied to tenancies.
Lasting effects
The experiences during the coronavirus pandemic have highlighted the overall societal significance of tenancy law and reignited the debate over balancing the interests of tenants and landlords. Details regarding the disruption of the basis of the contract in commercial tenancy law will likely continue to be developed and refined in the future.
Summary
The coronavirus crisis led to significant, in some cases temporary, special regulations in tenancy law, particularly to protect residential and commercial tenants from termination and unreasonable burdens. The introduction of temporary termination protection, clarification of the disruption of the basis of the contract in the context of commercial leases, and extensive government support measures shaped the tenancy law landscape during this period. With the return to regular statutory regulations, court practice in dealing with pandemic-related rent adjustments remains a guideline for future comparable crisis situations.
Frequently Asked Questions
Can I simply reduce or suspend my rent due to loss of income caused by the coronavirus crisis?
There is no general right to rent reduction or suspension of rent payments for residential tenants due to the coronavirus pandemic. The contractual obligation to pay the rent in full and on time remains in force despite income losses caused by the pandemic. Nonetheless, it has been legally stipulated that for the period from April 1 to June 30, 2020, terminations due to rent arrears resulting from the coronavirus crisis should not be enforced immediately if the rent was not paid (§ 2 of the “Act to Mitigate the Consequences of the COVID-19 Pandemic”). However, the rent itself continued to be due; the rent debts remained and tenants had to pay any arrears no later than June 2022. Otherwise, termination could then be declared. Self-employed persons and business operators should also check whether specific regulations or support measures, usually in the context of commercial tenancy law, apply to their case. It is advisable to consult with the landlord early and, if necessary, to document any individual agreements in writing, since after the statutory grace period, neither a reduction nor deferral can be unilaterally granted.
Can landlords terminate a tenancy during the coronavirus crisis if the rent is not paid?
During the acute phase of the coronavirus crisis, termination of a tenancy due to outstanding rent was initially restricted: From April 1 to June 30, 2020, landlords could not terminate solely due to non-payment if the payment failure resulted from the effects of the coronavirus crisis and the tenant could demonstrate this circumstance. However, this special regulation did not mean that the due rent did not have to be paid; claims remained in force and could be collected later. Once this period expired, the usual tenancy law provisions under §§ 543, 569 BGB applied again and immediate or ordinary termination due to arrears was generally possible if the preconditions – such as arrears exceeding two months’ rent – were met. Other grounds for termination (e.g., personal use) were unaffected by the temporary protection and could still be asserted.
Do I have to tolerate rent arrears as a landlord if a tenant cannot pay due to coronavirus?
As a landlord, you must tolerate rent arrears that are demonstrably due to the economic consequences of the coronavirus crisis within the legal moratorium (April to June 2020) and cannot derive the right to terminate, either without notice or ordinarily, from such arrears. After the moratorium ends, however, you can demand payment of outstanding amounts and, if non-payment continues, assert the regular termination rights. For rent arrears arising outside of the moratorium period or not clearly attributable to the coronavirus pandemic, no special protective regulations apply, so you as a landlord can respond according to the general provisions of tenancy law. The tenant protection regulations were intended to counteract social hardship in the short term without permanently altering the ordinary contractual relationship and its rights and obligations.
As a commercial tenant, am I entitled to a rent reduction during a coronavirus-related lockdown?
For commercial tenants, particularly in retail, hotels, and gastronomy, coronavirus-related closures were generally not considered defects within the meaning of § 536 BGB, as they were not due to the condition or quality of the rented premises. However, § 7 of Art. 240 EGBGB explicitly stipulates that coronavirus-related usage restrictions may be regarded as significant disruptions of the basis of the contract according to § 313 BGB. This creates an opportunity to request an adjustment of the rental contract if it is unreasonable to maintain the contract unchanged – for example, through a rent reduction for the duration of the lockdown, provided that the loss of revenue was substantial and other government aid was insufficient. Such adjustments must always be examined on a case-by-case basis, and usually require out-of-court negotiations. A unilateral rent reduction is generally not permitted even for commercial tenants.
What should I do if I cannot pay rent due to coronavirus?
Tenants who are unable to pay rent in full and on time due to the coronavirus pandemic should immediately communicate with their landlord and inform them about their financial situation. Supporting documents, such as a letter of termination from the employer, evidence of short-time work allowance, or proof of loss of income, should be submitted to substantiate the claim. For the duration of the statutory moratorium (April to June 2020), you are – provided you meet the conditions and the non-payment is a result of the coronavirus – initially protected from termination. After the grace period expires, any arrears should be settled promptly to avoid reasons for termination. In addition, government support such as housing benefit or one-off grants can be applied for to secure rent payments. If prolonged payment difficulties are foreseeable, it is advisable to arrange an individual payment agreement with the landlord and put it in writing.
Will my tenancy continue to be permanently protected by the coronavirus-related laws?
No, the COVID-related protection against termination was strictly limited in time and targeted only at rental losses credibly caused by the pandemic for the period from April to June 2020. After this period, the outstanding rent arrears generally had to be paid within 24 months; the obligation to pay rent and the risk of ordinary or immediate termination in the case of further or ongoing arrears remain in place. Permanent protection against termination beyond the Corona pandemic was not legally established. The basis of tenancy law remains unchanged, so after the expiry of the special regulations, the regular provisions of the German Civil Code (BGB) apply without restriction.
Can I refuse or postpone a modernization measure in the rental property due to Corona?
During the coronavirus pandemic, there is generally no blanket right to refuse or delay planned or ongoing modernization measures. However, tenants have a legitimate interest in health protection. Thus, pandemic-related restrictions (such as quarantine or risks for vulnerable individuals) must be individually considered within the scope of the reasonableness assessment. Modernization measures may only be refused if they would significantly endanger the health of residents due to inadequate hygiene concepts or if access objectively cannot be granted. Nevertheless, the landlord is obligated to take the special pandemic circumstances into account. An amicable postponement should be sought in exceptional situations; individual solutions can always be made, but should be agreed upon in writing for evidentiary purposes.
