To mitigate the negative consequences of the COVID-19 pandemic, the German legislature early in 2020 introduced a moratorium on terminations (Art. 240 Sec. 2 Introductory Act to the German Civil Code [Einführungsgesetz zum Bürgerlichen Gesetzbuch – EGBGB]). The legal policy pursued by this provision was especially to prevent (commercial) tenants – and thus also hotel operators – from being threatened in their existence. As a result, tenants having arrears in rent from the period of April to June 2020 could not be subject to extraordinary termination for failing to pay the rent.

The moratorium was put in place for a limited term running until 30 June 2022. Since it was not extended, tenants – and especially hotel property tenants – now in principle have until 30 June 2022 to settle arrears in rent for the period from April to June 2020. Otherwise the respective landlord as a general rule will have a legal right (subject to individually contractual provisions) to once again use such backlogs in rent payments as grounds to terminate tenants for failing to pay their rent.

The question primarily raised in this context is whether and to what extent tenants can be granted a rent reduction right for the period of April to June 2020. This essentially depends, according to the most recent rulings of the Federal Court of Justice [Bundesgerichtshof - BGH] – subject to individual contractual provisions –, on the circumstances of the individual case. Some of the factors of relevance here may in particular include:

• the significance of declines in revenue suffered;
• the extent and success of efforts by the respective tenant to mitigate imminent losses;
• state relief payments received and/or benefits under a business closure insurance policy.

What is therefore decisive for determining the rent arrears for the period of April to June 2020 relevant in each case for the termination is first and foremost the existence of a lease reduction right relating to such period. Based on this assessment it is then determined whether and to what specific extent the respective tenant is required to make back-payments on rent for the period of April to June 2020 to prevent the landlord from exercising a termination option in this regard. Recognition of a COVID-19 pandemic-related rent reduction in the specific lease will thus directly impact the rent payment arrears relevant for a termination in each case as well as the particular landlord’s termination rights.

However, unlike a rent reduction claimed for reasons relating to the COVID-19 pandemic – where the tenant has the full burden of statement and proof – what has to borne in mind in this context is that landlords wishing to serve notice of termination for their part have the burden of statement and proof in accordance with general procedural principles if they claim termination-relevant rent arrears.
It remains to be seen what impact the expiry of the termination moratorium will ultimately have on the hotel industry. In this regard it is advisable to (re-)engage in discussions early on and to develop the best mutually acceptable solution possible. At the same time agreement should be reached on how – and to what extent – to settle the rent arrears for the period of April to June 2020 and how to deal with the resulting recurring rights of termination. This may be consolidated in an appropriate addendum to the lease agreement in a way that offers both sustainably and legal certainty. That will make it possible to avoid (further) disputes over the amount of the lease payments owed for the period of April to June 2020.