Most creatives do not have a big stash of money hidden away to pay rent if they’re unable to work. However many now find themselves with rented spaces they’re unable to use – like art galleries no one may visit. The question many ask: is it possible to cancel or at least amend a lease agreement because of COVID-19?
What is the general rule?
In principle, the risk distribution of general civil law also applies in exceptional situations. Accordingly, the provisions on impossibility of performance as well as the disruption of the basis of the transaction apply. In some cases, however, so-called force majeure clauses can also apply in contracts, modifying the statutory risk distribution. The legal assessment thus depends to a large extent on the relevant regulations in the individual case.
Force Majeure clauses?
Force Majeure is a legal principle according to which a party may suspend or excuse performance under a contract when external, non-culpable, unavoidable and unforeseen circumstances make it actually or virtually impossible to complete. Examples are acts of war, terrorism, or civil insurrection.
My Kreuzberg gallery lease does contain a force majeure clause. Can I break the lease due to the coronavirus crisis?
Considering the massive impact COVID-19 has had on the world’s economic system, grinding business, travel and much of civil life all over the world to a halt, there is every reason to suppose the virus could count as a case of force majeure. Some courts deemed the SARS epidemic in 2003 a case of force majeure as well.
A case-by-case examination must always lead to the conclusion that the parties haven’t met their obligations precisely because of the effects of the restrictions. The time of the conclusion of the contract is also relevant. If, for example, the parties conclude a contract and one contractor could have already known that he would not be able to properly fulfil his obligations after the pandemic has become known and the resulting instability in the economy, no force majeure can be assumed for him. At the latest, this would apply from the declaration of international emergency by the WHO on 30 January 2020.
What if my contract does not contain such a clause?
In the absence of a relevant clause, the regulations of impossibility according to § 275 and the loss of the business basis according to § 313 apply.
If a performance is impossible or unreasonable, § 275 leads to the omission of the obligation to perform or to a right to refuse performance. That is also applicable in the event of temporary impossibility for the respective duration of the impediment. However, it’s not impossible for the tenant to use the gallery space. There is just no money to make out of it. Normally, tenancy law places the burden of risk on the tenant if he cannot use the rented property. So his obligation to pay rent does not lapse.
According to § 313, the courts can adjust contracts, if the circumstances on which they are based have changed and the parties can no longer be expected to adhere to them. If such an adjustment is not feasible, the judge can terminate it. The sample force majeure definition applies in these cases.
I’m broke, so good luck collecting anything from me now. Can I lose my gallery space even if I want to keep it?
Luckily for you, Germany has enacted a temporary moratorium on both residential and commercial evictions. So for the time being, your landlord can’t throw you out of your home or gallery space.
Image: Christian Frignan on Unsplash