The first judgement on the continuation of the obligation to pay rent during official closures and restrictions during the COVID-19 pandemic is here.
The District Court of Zurich has – as far as the authors are aware – rendered the first judgment on the question whether the rent is owed also during official closures of businesses or other restrictions (e.g. limitation of the maximum number of customers in the business premises) during the COVID-19 pandemic (hereinafter "Covid-19 measures") (MJ210008; ZMP 2021 No. 10). In that case, the landlord of retail premises sued for payment of several months' rent, which the tenant failed to pay in whole or in part in 2020 and 2021, citing the official measures.
The parties raised the arguments and counter-arguments often heard in this context and, after considering them, the court concluded that the rent had also been owed for the duration of the COVID-19 measures.
- First of all, it is necessary to look at the lease agreement and to check whether a specific provision was made regarding the bearing of risks in the event of official closures. In the present case, however, the rental agreement – like presumably most rental agreements – did not contain any provisions in this regard. In the opinion of the authors, an explicit provision should be made in this regard and negotiated between the parties in the future if clarity is to be achieved in this regard.
- Subsequent impossibility (Art. 119 CO), i.e. due to circumstances for which the tenant is not responsible, his performance has become impossible: If a case of subsequent objective impossibility through no fault of the debtor exists, the debtor is no longer obliged to perform. According to the case law of the Federal Supreme Court, however, circumstances are only qualified as subsequent impossibility if such circumstances are certain to persist until the end of the contract term or at least for an unforeseeable period of time. This prerequisite is not given in the case of the COVID-19 measures from the outset, since they only lasted a few weeks in each case and their discontinuation was foreseeable from the beginning.
- Partial impossibility, subsequent impossibility, which, however, concerns only a part of the debtor's performance, e.g. if the tenant can only partially use the rented object (is only represented by a part of the doctrine). In this context, a distinction must be made between a failure to achieve a purpose (a result to be achieved within the scope of a contractual obligation, which is part of the content of the performance owed, can no longer occur) and mere impossibility of use (the debtor cannot (or no longer) use the object for the intended purpose, but the use for the intended purpose is not part of the performance owed). Consequently, it has to be examined by means of contract interpretation whether the landlord, in addition to the obligation to provide the rented property, has also assumed the responsibility that the tenant can use the leased rented accordingly. In the present case, the court concluded that the COVID-19 measures qualify as mere impossibility of use, since the landlord has not assumed any obligation for actual specific use and thus there is no partial impossibility.
- Defect in the leased property, i.e. as a result of the COVID-19 measures, the leased property, such as a store or a restaurant, is no longer fit for the contractually agreed use, since it can no longer be used in accordance with its purpose without or with limited public traffic: According to the judgment of the district court and the prevailing doctrine, the agreed quality of the rental object basically only includes object-related but not operation-related properties. Unless there is a special agreement between the parties in this respect, the operation falls within the legal and risk sphere of the tenant. Otherwise, the landlord would participate in the operational risk of the tenant, which, however, is not the content of a classic (business) lease agreement. The official closures and restrictions during the COVID-19 pandemic therefore do not constitute a defect in the leased property and the rented property complied with the contractually agreed suitability, since the COVID-19 measures had no influence on the object itself and only on the operations in the rented property.
- Clausula rebus sic stantibus, judicial adjustment of a contract in case of changed circumstances: The judicial adjustment of a contract is possible if the circumstances under which a contract was concluded change neither foreseeably nor avoidably which results in a serious equivalence disturbance and the contract is not fulfilled without reservation. This must be proven by the tenant. Since in the specific case the tenant refused to provide detailed evidence of the alleged decline in sales, citing business secrecy and data protection, the court did not review the issue in more detail. However, it can be inferred from the court's comments that the COVID-19 measures probably lacked the necessary intensity to justify such a serious intervention by the judge in a contractual relationship.
Finally, it should be noted that, according to the view expressed here, neither tenants nor landlords can draw valid arguments from the fact that the COVID-19 Business Rent Act failed in Parliament. As is well known, part of the Parliament wanted to intervene retroactively in party agreements by means of a law and to modify, after the fact, the arrangements contractually made between the parties. Such an intervention would have clearly contradicted the fundamental principles of party autonomy and pacta sunt servanda (contracts are to be fulfilled) and would thus have been contrary to the system. It is to the credit of the majority of the parliament that it was finally recognized that laws cannot bring about justice in individual cases and that this matter can be left to the courts, which decide on the basis of the applicable legal foundations. However, neither landlords nor tenants can derive anything in their favor from the failure of an idea that is contrary to the system and politically motivated.
It should be noted that the ruling is not yet legally binding and the matter may be judged differently by the next instances. It is also not impossible that courts in other cantons will come to different conclusions. However, the cleanly edited and well-founded verdict is convincing in many respects. In any case, it is to be hoped that these questions will be judged by the highest court as soon as possible and that legal certainty will prevail.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.