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Consequences of Tenancy Law due to the Current Situation Regarding Covid-19 

by Stefan Artner, Marie-Luise Pugl, Magdalena Brandstetter

Published: May, 2020

Submission: May, 2020

 



The government has introduced a comprehensive package of measures to combat Covid-19 ("corona virus") since March 13, 2020. These measures include, in particular, the ordered closure, in particular of shops and restaurants. With the Covid 19 Easing Ordinance , many measures were eased again from May. The following overview therefore deals with some essential questions that arise for tenants and landlords due to the current situation.
 


  • Is rent payable when a shop or restaurant has to / has to keep closed?
  • Can an existing contract for a business or restaurant be terminated if it cannot (or was / was / is allowed to) or cannot be used due to the measures taken against Covid-19?
  • Which stores can open again from May 2020? What is important here?
  • Can my property owner terminate me if I breach my business obligation?
  • What about penalties from the violation of the duty to operate?
  • What is the legal basis for closings? Are there claims for compensation if the tenant or landlord have lost revenue?
  • What are the restrictions for accommodation providers?
  • Are short-term rentals such as via airbnb and other platforms still possible?
  • Which increased protection against dismissal and eviction applies to apartment rental contracts in the current corona situation?
  • Do these provisions on increased protection against dismissal and eviction also apply to business premises?
  • Caution: trap when renewing apartment rental contracts!

Questions and answers


Is rent payable when a shop or restaurant has to / has to keep closed?


If, as in the present case, due to a pandemic and official orders certain (business) premises and accommodation are to be closed entirely, from today's perspective it can be assumed that the obligation to pay the rent will also be payable for the period of closure - depending on whether it is still usable and use of the property - partially or entirely omitted.


However, the exact scope of a possible rent reduction claim must always be checked in individual cases and depends on both the specific circumstances and the specific measures taken by the government and parliament. Specifically, the time component must also be taken into account, and to what extent an impairment continues after May 1, 2020 according to the Covid 19 Relaxation Ordinance (BGBl II No. 197/2020).


In contrast to Germany, no special regulations for commercial leases were enacted in Austria due to the Corona crisis. Conversely, apartment rental contracts are not affected by the current measures; here there are no restrictions on usability and therefore no reduced usability.


Can an existing contract for a business or restaurant be terminated if it cannot (or was / was / is allowed to) use the measures against Covid-19?


Since these are not definitive, but rather temporary measures that have been gradually relaxed, it cannot be assumed that existing contracts can be terminated prematurely. A possible right to reduce rent is independent of this (see above). However , due to the Corona crisis, special protection against dismissal and eviction, such as for apartment tenants (see below), was not enacted. 


Which stores can open again from May 2020? What is important here?


The first very strict measures for business and customer areas were relaxed for the first time with the 96th Ordinance of the Federal Minister for Social Affairs, Health, Care and Consumer Protection regarding provisional measures to prevent the spread of Covid-19; Accordingly, from April 14, 2020, operating facilities that " serve the sale, manufacture, repair or processing of goods " were allowed to reopen with a customer area inside a maximum of 400 m² . This did not explicitly include catering establishments and shopping centers. At that time, bicycle workshops were already allowed to open without restrictions (car repair shops were previously permitted) and hardware stores ("Building materials, iron and wood trade, DIY and garden centers ") and pawnbrokers open.


With effect from 1.5.2020 , the Covid 19 Relaxation Ordinance (BGBl II No. 197/2020) generally has the previous prohibitions, customer areas (according to Regulation No. 96/2020) and public places (according to Regulation No. 98/2020) To enter, to be lifted and to be reorganized : Public places may be entered at least one meter away from third parties , in closed rooms a protective device covering the mouth and nose area (in practice this will be a so-called MNS mask or a scarf or scarf) ) to wear.


For customer areas of business premises , both employees and customers must wear an MNS mask and that a distance of one meter between people must be observed. Furthermore, only one customer may stay in the customer area per 10 m² area of the customer area. If a shop has less than 10 m² of space in the customer area, only one customer is allowed at a time. Compliance with these regulations must be guaranteed by the operator of the business premises. The business premises are in a shopping center or is structurally connected to another facility, the customer areas and the connecting structure are to be added together (e.g. with the entrance area or the aisles in a shopping center) and the maximum number of customers is to be determined on this basis.


Even in typical office spaces , a distance of one meter must be kept between people or an infection risk must be minimized by other suitable protective measures. The wearing of an MNS mask must be agreed between the employee and the employer.


As of May 15th, 2020, hospitality businesses were also allowed to reopen, however, some restrictions must be observed: (1) There must be a distance of at least one meter between visitor groups, (2) a maximum of four adults are allowed at one table (except groups that are in the same household living), (3) obligation to wear an MNS mask for guests up to placement at the table, (4) MNS mask requirement for staff with customer contact, and () maximum opening time until 11 p.m.


Furthermore, entry to museums, exhibitions and libraries has been permitted again since May 15, 2020 (here too, analogous protective provisions apply).  Accommodation establishments for the purpose of recreation and leisure activities (for certain exceptions see below), as well as leisure facilities (including theaters, concert halls, baths, etc.) and sports venues remain closed, but top athletes can train again. Hobby athletes are allowed to practice outdoor sports in which a distance of at least two meters between all athletes can be maintained "(eg tennis or golf); special regulations apply to team sports (such as soccer).


Can my property owner terminate me if I breach my business obligation?


Many existing contracts, especially in the retail sector, often contain extensive regulations on the tenant or tenant's duty to operate. Since the closings specifically prescribed by the Covid 19 measures are officially or legally ordered, however, such contractual regulations on the duty to operate do not currently apply because there is a legally mandated obligation of the tenant or lessee that takes precedence over his contractual obligation.


What about penalties from the violation of the duty to operate?


Here, too, it can be assumed that these will not take effect if the closure of the company results from an official or legal order. The statutory obligations and prohibitions of the tenant or lessee take precedence. Specifically, a special regulation was implemented with the 4th Covid-19 Measures Act passed on April 3, 2020 by the National Council. If a tenant falls behind with such an operating obligation because, as a result of the Covid 19 pandemic, he is either severely impaired in his economic performance or cannot perform due to the limitations of his working life, he is not obliged to apply an agreed contractual penalty numbers.


What is the legal basis for closings? Are there claims for compensation if the tenant or landlord have lost revenue?


The legal basis for the measures imposed by the federal government before March 15, 2020 is the Epidemic Act of 1913 (re-published in 1950), which is intended to combat certain communicable diseases, including Covid-19. With the Covid-19 Measures Act passed on March 15, 2020 in the National Council , however, a new legal basis was created for certain measures. Company closings are therefore no longer covered by the Epidemic Act (and the substitute for loss of profit provided there). 


The legal basis for company closings is now the Covid-19 Measures Act, according to which a ban on "entering [s] business premises for the purpose of purchasing goods and services" can be ordered by the Minister of Health. The Minister of Health made use of this authorization and, on March 15, 2020, prohibited entry to the customer areas of shops and restaurants from March 16, 2020. Initially, only a few areas that served basic services, such as pharmacies or grocery stores, were exempted from this ban on entry (96th regulation: provisional measures to prevent the spread of Covid-19). After the first loosening, the Covid-19 Loosening Ordinance lifted the closure of many customer areas and only certain restrictions were imposed, such as in particular a minimum distance, the limitation of the number of customers in the sales area and the obligation to wear mouth and nose protection (MNS) . However, certain companies are still not allowed to open to customers, especially accommodation, indoor sports facilities and leisure facilities (including theaters, concert halls, pools, etc.).


There is no claim for compensation under the Epidemic Act. According to the Covid-19 Measures Act, the Epidemic Act is not applied to the entry ban ordered by ordinance.


To reduce the economic disadvantages caused by the corona pandemic, the Federal Government has set up the Covid-19 crisis management fund, the funds of which can be used, among other things, to cushion the loss of revenue resulting from the crisis. In addition, various different measures are planned, such as a hardship fund for small businesses, tax deferrals, direct loans and bridging guarantees. You can find more information in our briefing on grants and state aid law . In any case, we advise you to keep precise records of the times of a loss of revenue and the amount of lost revenue, so that these can be added later when making an assertion.


What are the restrictions for accommodation providers?


In the federal states of Salzburg, Vorarlberg, Tyrol and Carinthia, the official closure of accommodation facilities has been in effect since mid-March. Different exceptions apply depending on the federal state. With the decree of 2.4.2020 of the Minister of Health Rudolf Anschober, the previously announced block of accommodation for tourist purposes was implemented for the whole of Germany and extended with the Covid 19 Relaxation Ordinance beyond May 1, 2020. Accordingly, entering accommodation facilities for the purpose of recreation and leisure activities is prohibited. This does not include the accommodation of guests who have already been rented - however, the stay may not be extended.


It is also permissible to use the accommodation facilities to look after and assist people in need of support , for professional purposes and also to meet an urgent need for housing , e.g. for accommodating nursing staff or for people who need an apartment, for example because they have a Covid-19 If the family has to move out of the previous apartment.


Are short-term rentals such as via airbnb and other platforms still possible?


Due to the restrictions imposed by the ordinance of April 2nd, 2020 regarding accommodation facilities and the Covid-19 Relaxation Ordinance (see above), new letting for the purpose of recreation and leisure activities is prohibited. The accommodation of tourist guests who have already been rented remains permitted (but may not be extended). And short-term rentals for purposes other than tourism are also still permittedShort-term letting for residential purposes is particularly important here, which can be particularly relevant for employees who need temporary accommodation due to quarantine measures in individual regions and general travel restrictions. Likewise for people who need an apartment because, for example, because of a Covid-19 case in the family they have to move to a new quarters.


In order to avoid the applicability of the MRG (and therefore a required minimum time limit of three years), it must be ensured that this is only done for apartments of category A or B, the time limit does not exceed 6 months and the tenant lives in the apartment due to his employment or needed as an urgent second home.


The ordinances of the states of Salzburg, Tyrol and Vorarlberg currently only prohibit the entry of accommodation facilities in the context of tourism. Here, too, residential use is still possible. In Carinthia, entering accommodation facilities (hotels, apartment houses, chalets, private room rentals, campsites) is generally prohibited, however exceptions can be requested (e.g. for the accommodation of employees of utilities, etc.).


Which increased protection against dismissal and eviction applies to apartment rental contracts in the current corona situation?


Apartment rental contracts are not affected by the current measures, because people are supposed to stay at home. Since there is no restriction on the use of apartments from the current Corona situation, there is basically no possibility for tenants to reduce the rent. With the 4th Covid-19 Measures Act passed by the National Council on April 3, 2020 , however, increased protection against dismissal and eviction was passed in favor of the tenants. Accordingly, a landlord can neither terminate the rental contract nor demand a cancellation of the contract for an important reason (§ 1118 ABGB) due to the tenant's arrears of rent claims due in the period from 1.4.2020 to 30.6.2020, if the arrears are due to a significant impairment of the economic performance of the tenant as a result of the Covid 19 pandemic. The payment arrears for the affected period can be claimed in court from 1.1.2021 at the earliest . As a reason for cancellation, the payment arrears for the months of April, May and June 2020 can only be claimed from July 1, 2022 if no payment has been made by then.


The rent arrears must be repaid by December 31, 2020 at the latest. The due dates for the rent remain unchanged during the months of April, May and June 2020, however, the statutory default interest of 4% is payable at most. Tenants are also not obliged to reimburse the costs of extrajudicial debt enforcement measures.


As a result, the landlord's right to request a contract termination for the omitted rent payments is postponed by two years. And there is another important limitation: The landlord must not offset the deposit paid by the tenant for the arrears in these three months with the rent claims due. To clarify: For reasons other than due to rent arrears and due to arrears of rent outside these three months, the landlord may continue to terminate or therefore bring eviction proceedings.


Do these provisions on increased protection against dismissal and eviction also apply to business premises?


The aforementioned provisions on protection against dismissal and eviction apply only to apartment rental contracts , not to business premises or leases.


For apartment rents, it is irrelevant whether the tenancy law is fully, partially or not applicable at all (such as for certain rental contracts for single-family houses). It is essential that due to the Covid 19 pandemic, the tenant's economic performance is significantly impairedThe legislator cites as an example of the consequences of the Covid-19 pandemic, for example, layoffs due to closings of restaurants and tourism companies, the lack of income from self-employed hairdressers or physiotherapists or the illness with Covid-19 in self-employed people who quarantined their job due to quarantine / hospitalization can no longer pursue. Tenants who are not impaired in terms of health or suffer from income reductions cannot take advantage of the special regulations.  


Note for business premises: The limitation of default interest with a maximum of 4% also applies to business premises rents and leases.


Caution: trap when extending apartment rental contracts!


The Corona crisis may require action in the coming weeks, especially for apartment rental contracts. If apartment rental contracts now end due to a time limit, it is obvious in the current situation to agree a short-term extension with tenants from goodwill (if the apartment has not already been rented to another tenant, this is of course possible). Because the search for a new apartment or moving is difficult with the current restrictions.


The 4th Covid-19 Measures Act passed by the National Council on April 3, 2020 provides for important relief: For the MRG, short term apartment rental contracts that are subject to the period 31.3. 2020 and 30.6.2020 end , a special arrangement was made for the flexible extension of apartment rental contracts. A written agreement between the landlord and the tenant can take up the end of 31.12.2020 or for a shorter period of the lease be extended , otherwise the current minimum limit of three (3) years is not in these cases.


It is important that the extension is in writing (unfortunately not sufficient online via email!) , Otherwise it will be ineffective. For example, the tenant could sign the document by hand and send it to the landlord, who will return it to the tenant after it has been signed. If the extension is not made in writing (e.g. only by email), this leads to an unlimited tenancy.


Attention : The lease may be extended up to 31.12.2020 and only if the original lease has a time limit that falls within the period mentioned. For this reason, an extension of less than three years can already be agreed as a precautionary measure for a temporary lease expiring after 1.7.2020!


And according to the legal regulation, the extension option only applies to limited contracts . If, therefore, a termination has already been given for an unlimited tenancy and the termination date is between 1.4.2020 and 30.6.2020, the landlord and tenant cannot make use of the exception. In these cases, the statutory minimum time limit of 3 (three) years still applies (see question below). The tenant can, however, take advantage of the deferral of the eviction  execution, also introduced by the Covid-19 Measures Act .


What applies after July 1st, 2020? The Tenancy Law (MRG) remains unchanged, which stipulates a minimum time limit for apartment rental contracts , both for the first time limit but also for a period of at least three (3) years for each extension. If the landlord does not take this into account and only extends until 31.12. this year, this represents an ineffective time limit - it runs the risk of converting the lease into an unlimited tenancy. Here too, it is important that the extension is made in writing and not, for example, online via email, otherwise it will be ineffective.


 



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