By judgement of 27 September 2017 (case no. XII ZR 114/16) the Federal Court of Justice (BGH) declared so-called written form cure clauses generally invalid, no matter if they were agreed in general terms or negotiated individually.
Background of the decision is § 550 German Civil Code, according to which long-term lease agreements require written form. If the written form is not complied with the lease agreement has an indefinite term and can be terminated early with a statutory notice period. Since compliance with the written form may become difficult in practice (e.g. for side agreements) the market practice in the past often used so-called written form cure clauses pursuant to which both parties undertook in the lease agreement to cure possible form defects and not to terminate the lease agreement by reason of such defects. As the court cut the ground from under this practice the legal due diligence on compliance with the written form requirements is once again becoming more important.
01/04/2020 On 25 March 2020, the German Bundestag unanimously adopted the draft law restricting the right of landlords to terminate a lease in order to protect tenants who are unable to pay their rent as a result of the Corona epidemic (the Bundestag communication of 25 March 2020 can be found here; the draft law of 24 March 2020 can be found here). The Bundesrat approved the draft law in a special session on 27 March 2020.
The wording of the new legislation is as follows:
“The landlord cannot terminate a lease of real properties or rooms for the sole reason that the tenant does not pay the rent in the period from 1 April 2020 to 30 June 2020 despite being due, if the non-payment is due to the effects of the COVID 19 pandemic. The link between the COVID 19 pandemic and non-payment must be substantiated.”
The period for which the landlord’s termination is restricted by law in the event of non-payment of rent due to the corona epidemic can be extended if necessary by a statutory order of the Federal Government to the months July to September 2020 (and possibly even further with the approval of the Bundestag).
The new restriction of the right to terminate a lease applies to both residential and commercial properties.
The law was promulgated on 27 March 2020 and came into force on 1 April 2020.
Please contact us at JP Rechtsanwälte if you need help.