Newsflash: Changes in tenancy and consumer loan law due to the corona crisis

(Last update: 25 March)

Coronavirus is having a massive impact on a many lessees and lessors. Shops and restaurants have had to be closed. Revenue has dropped and it is difficult to meet claims arising from contractual obligations. As lease relationships can - unless the contract stipulates otherwise - already be terminated without notice if the lessee falls into arrears with payment of the rent or a more than inconsiderable part of the rent for two consecutive due dates, or falls into arrears with the payment of the rent in a period extending over more than two due dates in a sum totaling the rent for two months, the Bundestag has today adopted temporary changes for lease and loan agreements, among other things. The envisaged changes are still subject to the approval of the Bundesrat, which is scheduled for Friday.

The following individual changes are planned:

For lease agreements (residential and commercial contracts) concluded before 8 March 2020, the following will apply:

• Lessors may not terminate lease agreements if the lessee fails to pay the rent in the period from 1 April to 30 June 2020 (this can be prolonged by ordinance until 30 September 2020) if this failure to pay is caused by the effects of the COVID-19 pandemic. The regulation applies accordingly to usufructuary lease relation-ships [Pacht].
• The lessee has to prove the connection between the non-performance and the effects of the COVID-19 pandemic. Thus, whilst the lessor is unable to terminate the contract due to the lessee’s failure to pay the rent in the above-mentioned period, the lessee's payment obligation - subject to other contractual or legal rights - fundamentally continues to exist. The adopted law specifically does not provide for a special right of the lessee to reduce the rent.  Other termination rights remain unaffected.
• If the lessee and lessor mutually agree on a deferment or reduction of the rent payment obligation, then ideally this should be documented as a written addendum to the lease agreement. Although case law does not generally consider it to be a breach of the written form requirement if the lease parties agree on a regulation that is to be applicable for a period of less than one year, this does not apply, however, if the parties agree on further long-term changes to the lease agreement in addition to the (one-off) deferral. Furthermore, in the recent past the Federal Court of Justice [Bundesgerichtshof, BGH] has also emphasised the evidentiary purpose of the written form requirement several times. Therefore, if one wishes to exclude with certainty the possibility of the premature termination of a long-term lease relationship due to a breach of the written form requirement, the agreement should be reached in the form of an addendum to the lease agreement.

For consumer loan agreements concluded before 15 March 2020 the following shall apply:

• Any claims of the lender to repayment, payments of interest or principal that fall due between 1 April 2020 and 30 June 2020 are to be deferred for a period of three months from the due date. However, a prerequisite for the deferral is that the borrower has lost earnings due to exceptional circumstances caused by the spread of the COVID 19 pandemic, resulting in the fact that he cannot reasonably be expected to make the payments he owes. In particular, it cannot be reasonably expected of the borrower to make the payment if his reasonable level of subsistence or the reasonable level of subsistence of his dependants is at risk.
• The borrower is nevertheless entitled to make his contractual payments during the aforementioned period on the originally agreed payment dates. To the extent he continues to make payments in accordance with the contract, the regulated deferment is deemed not to have taken place.
• The parties to the contract may reach deviating agreements, in particular regarding possible partial payments, adjustments of interest and principal payments or debt rescheduling.
• Terminations by the lender due to payment arrears, a significant deterioration in the financial circumstances of the consumer or in the value of collateral furnished for the loan are excluded until the expiry of the deferral. This may not be deviated from to the detriment of the borrower.
• The lender shall give the borrower the opportunity to discuss the possibility of an amicable arrangement and possible support measures. If such agreement cannot be reached for the period after 30 June 2020, the contract term shall be extended by three months. The respective due dates of the contractual payments are postponed by this period.
• The aforementioned provisions shall not apply if the deferral or exclusion of termination is unreasonable for the lender, taking into account all circumstances of the individual case, including the changes in (his) general life circumstances as a result of the COVID 19 pandemic.

Dr. Stefanie Minzenmay, Marc Alexander Häger, Marvin Rochner

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