Reed Smith In-depth

On 13 December, the German Chancellor and the heads of government of the German federal states agreed on further measures to contain the COVID-19-pandemic (resolution).

Authors: Martin Meißner Harald Francisco Heller Cihangir Agdemir Marie-Ann Dey Etienne Richthammer René Lochmann Constantin Conrads Michael Kreisel

Retail trade, hotels, restaurants and gyms were especially hit by comprehensive restrictions and closures, with few exceptions. These restrictions will apply for the time being from 16 December 2020 until 10 January 2021 (cf. Clauses 1, 5, 6, 9 of the Decision).

However, the resolution’s intent is also to strengthen the position of commercial tenants and leaseholders to make them open the door for negotiations with landlords and lessors on the adjustment of the contract (such as reduction of rent or lease). It does so by applying the doctrine of frustration (“change of basics of the contract”, § 313 German Civil Code, BGB) to state COVID-19 measures (cf. Clause 15 of the Resolution).

The resolution has not been implemented in legal form (law or directive), yet. As of 15 December, it was subject to a draft law (BR Drucks 19/25251). It can be expected that in numerous occasions commercial tenants and leaseholders will take this as an opportunity to request negotiations from landlords with the intention to amend the contract. The following describes the reasoning for such a request but also how it can be repelled.