Tenancy law: rent payment in May 2020?

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The package of measures introduced to help Germany cope with the Covid-19 crisis includes a change to tenancy law that prevents the landlord from terminating a rent or lease agreement for cause on the grounds that a tenant is unable to pay rent in the period 1 April and 30 June 2020, provided that the rent payment debt is due to the pandemic (see « Protection against termination of lease agreements as a reaction to the COVID-10 pandemic »).  As a result, some tenants have withheld their April 2020 rent payments and now face the decision of whether to pay or withhold the rent for May 2020.

 

A false sense of security

The restriction on lease terminations for rent arrears only applies for a 24-month period, i.e. until 30 June 2022. After then, unless new legislation is introduced, lease terminations for cause on the grounds of rent arrears accumulated during the period April to June 2020 will be possible again.

From a legal viewpoint the landlord is entitled to terminate the lease for cause if the rent arrears have not been paid on 1 July 2022 and one of the following two options applies:

  1. The rent arrears exceed one month’s rent and the tenant is in default of making rent payments on two consecutive payment dates; or
  2. The rent arrears exceed two months’ rent and the tenant is in default of making rent payments on more than two payment dates, whether they are consecutive or not.

The termination threshold is therefore twice as high if the rent arrears do not result from the tenant being in default of making payment on two consecutive payment dates. The contractually agreed payment frequency is authoritative. The amount of the rent arrears is calculated on the basis of all of the tenant’s regular payment obligations, i.e. base rent, advance payments of service charges or fixed operating costs, other advance payments, recharged operating costs and allowances. It does not include one-off special payments.

Deviating rules may apply to lease agreements for commercial premises, particularly lower thresholds, which would make individual treatment necessary.

Pay the entire rent for May, if possible

Tenants facing liquidity difficulties because of the pandemic who currently have protection against eviction are advised to pay every second rent in full, if possible. This offers them an advantage over paying a portion of the rent every month because the landlord can only terminate the lease agreement if the tenant is in rent arrears by two months. Tenants who have already not paid (part of) the April rent due to the pandemic can secure longer-term protection against eviction if they pay the May rent in full and the amount is documented in the bank transfer.

It is also necessary to point out that the obligation of timely rent payment continues to apply and therefore default interest will accrue on the rent arrears, irrespective of whether they entitle the landlord to terminate the lease agreement or not. In commercial lease agreements default interest is currently 8.12% p.a. and in consumer lease agreements it is 4.12% p.a.

You are welcome to contact us if you have any questions.

Your contact person:
Dr. Ulrich Lienhard, Partner
+49 173 7291 417
ulrich.lienhard@arqis.com

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