According to a recent ruling by the Zurich Rent Court, no rent reduction is generally owed in the event of a loss of turnover due to official coronavirus measures.
Flavia Mattioz
Associate at Fricker and Füllemann Attorneys at Law
Studied at the University of Lucerne, graduating with a Master of Law (Lucerne) in 2019, not admitted to the bar.
Matthias Fricker
Attorney at law and partner at Fricker and Füllemann Attorneys at Law
Studied at the University of St. Gallen, graduating with a Master in Law (M.A. HSG in Law) in 2012, registered with the Zurich Bar Registry, member of the Zurich Bar Association.
Fabian Füllemann
Attorney at law and partner at Fricker and Füllemann Attorneys at Law
Studied at the Universities of St. Gallen and Zurich, graduating with a Master of Law UZH in 2013, registered with the Zurich Bar Registry, member of the Zurich Bar Association.
High losses due to measures to combat the pandemic
Due to the emergency operating restrictions to combat the Covid-19 pandemic, many traders were unable to use their business premises at the beginning of 2020 and again at the beginning of 2021. This led to a high loss of sales and companies often experienced such liquidity bottlenecks that they were no longer able to pay their business rents. It is true that the state refrained from interfering in the private-law relationship between tenants and landlords. Nevertheless, tenants of commercial properties were supported with various financial aids. For example, the city of Zurich accommodated its commercial tenants by allowing a rent reduction on request.
The public tenor at the time also went in this direction. It was rumored that, upon application to the landlord, there was a right to a rent reduction as a result of the business premises not being used in accordance with the contract. The provision on the reduction of rent due to material defects pursuant to Art. 259d CO was cited as the legal basis. Furthermore, the legal concept of “clausula rebus sic stantibus” was used, according to which the judge can adjust a contract if a subsequent change, which was neither foreseeable nor avoidable, leads to a gross disproportion between performance and consideration.
Rent reduction is out of the question in the opinion of the court
At least in the first instance, the Zurich Tenancy Court has now clarified this matter with an initial decision (see judgment MJ21008-L of August 2, 2021). The central question was who should bear the consequences and risks of usage restrictions resulting from official or legislative pandemic measures.
The court held that the mere impossibility of use by the tenant was not part of the service owed by the landlord. The contractual service is still objectively possible. The operating risk therefore lies solely with the tenant. The landlord only has to ensure that the property is handed over and maintained in a suitable condition. A contract correction in accordance with the rules on the partial impossibility of contracts or a rent reduction is generally out of the question in the event of an official closure of business operations. Only special assurances by the landlord, with which the landlord participates in the tenant’s operating risk, remain reserved.
No scope for judicial contract adjustment in the event of a multi-week interruption to sales operations
The Zurich rental court also examined whether an adjustment to the contract was possible. It stated that contracts were to be kept as they were concluded in accordance with the legal principle of “pacta sunt severanda”. In the case of particularly serious effects of official measures in terms of time and substance, a judicial adjustment of the contract due to a significant change in circumstances could be considered in accordance with the “clausula rebus sic stantibus”. However, the prerequisites for this are high. The particularly severe effects are therefore likely to be neither foreseeable nor avoidable. This does not include a change in the legal situation. An adjustment also always requires the assessment of all circumstances for both contracting parties. As a result of the changed circumstances, a gross disproportion between performance and consideration is assumed. It is undisputed that the official measures to combat the Covid-19 pandemic have caused an at least temporary imbalance between the performance and consideration of the contracting parties. For its part, however, the tenant must explain in particular how the official measures have specifically affected its business operations, what operational countermeasures it has taken and with what success, what state aid it has made use of and why it has waived any possible countermeasures. In the case in question, the court came to the conclusion that the tenant had not substantiated this sufficiently. Overall, an interruption of sales operations lasting several weeks is notoriously not comparable to several years of operating restrictions due to warlike events or a total currency and economic collapse such as after Black Friday in 1929. A judicial adjustment of the contract within the meaning of “clausula rebus sic stantibus” is therefore not possible.
In summary, in the opinion of the Zurich Tenancy Court, a rent reduction can only be enforced if there are special risk clauses in the tenancy agreement. The hurdles for a judicial contract adjustment in the sense of clausula rebus sic stantibus are likely to be too high as a rule.
