COVID-19 and commercial leases: Case-by-case contract adjustment – the new decision of the Federal Court of Justice

On 12 January 2022, the Federal Court of Justice (Bundesgerichtshof, BGH) ruled on the legal consequences of public closure orders to combat the COVID-19 pandemic for commercial leases, in this case for the first so-called lockdown in spring 2020 (BGH - XII ZR 8/21).

According to the BGH, lease agreements can in principle be adjusted due to a frustration of contract (Störung der Geschäftsgrundlage). In doing so, the court emphasised that a comprehensive consideration of all circumstances of the respective individual case was indispensable. A blanket adjustment of the rent payment obligation (e.g. in the sense of a 50/50 split between the parties) was legally erroneous.

The BGH overturned the decision of previous instance, the Higher Regional Court (Oberlandesgericht, OLG) of Dresden (5 U 1782/20) and referred it back for a new decision.

In this briefing, we provide an overview of the legal situation and analyse the new BGH ruling.