Reed Smith In-depth

The law has a complicated name and intends to strengthen the positions of commercial tenants and lessees. Behind the new law are the govern-mental restrictions in connection with the COVID-19 pandemic. These restrictions shall now also be borne by landlords and lessors. Whether the law can achieve this purpose is set out below:

On 17 December 2020, the German parliament (Bundestag) passed the Law on the Further Shortening of the Residual Debt Relief Procedure and on the Adjustment of Pandemic-Related Provisions in Company, Cooperative, Association and Foundation Law as well as in Rental and Lease Law (BT-Drucks. 761/20) (the Law). The Law is based on the resolution recommendation and report of the Committee on Legal Affairs and Consumer Protection (Ausschuss für Recht und Verbraucherschutz) (BT-Drucks. 19/25251, 19/25322) – following the resolution of the telephone conference of the Federal Chancellor with the heads of government of the federal states on 13 December 2020. The German council (Bundesrat) approved the Law on 17 December 2020 (see BR-Drucks. 761/20) and it will enter into force the day after its proclamation.

The Law contains the provision that in principle the disturbance of the basis of the contract (Doctrine of Frustration) is applicable in the special situation of the COVID-19 pandemic (article 10 of the Law). If government measures to combat the COVID-19 pandemic lead to significant restrictions on the operations of the commercial tenant/lessee, the Law will in future presume this to be a circumstance that can lead to an adjustment of the rental/lease agreement on the grounds of disturbance of the basis of the contract (section 313 of the German Civil Code (BGB)). However, this does not per se entail the legal consequence of an adjustment of the contract. This remains a consideration in each individual case.