Reed Smith Client Alerts

On 25 March 2020, the German parliament (Bundestag) passed the law to mitigate the consequences of the COVID 19 pandemic in civil, insolvency and criminal proceedings law (BT DruckS BT DruckS 19/18110 of March 24, 2020). The law is due to come into force on 27 March 2020. Among other things, the law would contain regulations that would be of considerable importance for the real estate industry (comments deliberately quoted from the Federal Government's draft as far as possible).
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In case of commercial leases, landlords may also not terminate the lease on the grounds that the tenants cannot pay the rent for the period from 1 April 2020 to 30 June 2020 as a result of the COVID 19 pandemic. But commercial landlords, for their part, do not have the same right to suspend the repayment of loans to credit financing banks.

It is required that tenants substantiate that the non-payment of rent is based on the COVID 19 pandemic. The proof of causation between the COVID 19 pandemic and non-payment of rent, as well as the requirement of substantiating, can lead to legal uncertainty in individual cases. This legal uncertainty can affect landlords and tenants alike. It is therefore advisable that landlords and tenants conclude individual agreements on deferral of rent if the landlord is willing to grant such deferral. In case of deferral agreements deviations from the requirements of the law in favour of tenants are possible. In this context, it is important to conclude only such agreements with the tenants that are recorded in a written addendum to the lease agreement. Therefore, it is particularly important to avoid simple letters to the tenant requesting a countersignature, which then carry the risk of violating the written form requirement (sections 550, 126 German Civil Code (“BGB”) and can lead to the rental agreement being terminable at any time, as the fixed terms of the lease would by law turn into indefinite lease agreements.