German Federal Court of Justice also upholds pandemic-related reduction in commercial leases

by Vanessa Guzek

The Federal Court of Justice of Germany (hereinafter “BGH“) has confirmed last Wednesday in its judgment dated January 12, 2022 – XII ZR 8/21 – two years after the first lockdown – the reduction of commercial leases by applying the principle of interference with the basis of the transaction (“Störung der Geschäftsgrundlage”) regulated in § 313 (1) of the German Civil Code, equivalent to the rebus sic stantibus clause applied by the Spanish Jurisprudence.

The BGH decided that tenants of commercial leases will be entitled to have their leases readjusted as a result of the pandemic lockdown, but that there is no general right to the reduction, but that individual circumstances, such as sales losses, state aid and insurance benefits, should always be taken into account.

The specific case involved a branch of the textile discounter Kik in the Chemnitz area, which had to close its store from March 19 to April 19, 2020 due to the pandemic. Because of the closure, Kik did not pay the monthly rent of EUR 7,850 to the landlord. Following a legal claim for payment of the full lease filed by the owner of the premises, the Regional Court issued a judgment upholding the claim and ordering Kik to pay the monthly rent despite the State’s closure order. Kik continued to refuse and the next higher court, the Higher Regional Court of Dresden, ruled partially upholding the claim, ordering Kik to pay only half of the rent. The BGH has now overturned this decision on the following grounds:

  1. The adaptation of the lease by the Higher Regional Court to the effect that the lease for the period of business closure is reduced by half without taking into account the specific circumstances cannot be considered, because the risk of pandemic-related restriction of the use of the rented property does not affect either party to the lease.
  2. Rather, a thorough weighing up of the individual case is required, in which first of all it is important which disadvantages the lessee has suffered due to the business closure and their duration. In the case of a commercial tenant, these will mainly consist of a concrete decrease in turnover during the time of the closure, which, however, should only be taken into account for the specific rental object and not for a possible group turnover.
  3. It should also be taken into account what measures have been or could have been taken by the lessee to reduce impending losses during the business closure.
  4. Since an adjustment of the contract according to the principle of interference with the basis of the transaction cannot lead to an overcompensation of the losses suffered, the financial advantages which the lessee has gained from the state benefits to compensate for the disadvantages caused by the pandemic must also be taken into account when examining unreasonableness. In this context, the insurance benefits of the lessee’s company, which he may be obliged to pay, may also have to be taken into account.
  5. Finally, the interests of the owner must also be taken into account in the required weighting.

In contrast, state support measures that were only granted in the form of a loan fall outside the required weighting, as the lessee does not achieve any final compensation for the loss of turnover suffered through them.

After the referral, the Higher Regional Court of Dresden has to decide on the case again, taking into account the individual circumstances pointed out by the BGH and examine, what concrete economic effects the closure of the business had for the defendant during the period in question and whether these disadvantages reached a level that made an adjustment of the lease contract necessary.

Related article: Spanish courts uphold reduction of commercial leases due to pandemic 

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