COVID-19 Q&A on real estate and tenancy law

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In the days between 13 March 2020 and 15 March 2020, the government announced a comprehensive package of measures to combat Covid-19 (“Corona virus”), which is to enter into force on 16 March 2020. This in particular includes the ordered closure of shops and restaurants. The following initial overview addresses a number of key issues that arise for tenants and landlords as a result of the current situation.

Is rent still payable when a shop or Restaurant has to close?
If, as in the present case, (business) premises and accommodation facilities have to be closed down completely due to a pandemic and official orders, it can be assumed from today’s perspective that the obligation to pay rent is partially or completely suspended for the period of closure – depending on the further usability and use of the premises.

The exact scope of a possible rent reduction claim must always be examined on a case-by-case basis and depends both on the specific circumstances and the specific measures taken by the government and parliament.

Residential leases are not affected by the current measures; no restrictions on usability are to be expected for residential premises and therefore no reduced usability permitting rent reduction is to be expected.

Since the current measures are only temporary, premature terminations because of measures against COVID-19 are currently not possible. Nevertheless, a right to reduce rent exists (see above). However, if the official closures were to last for several months, the situation would have to be reassessed and termination rights – for both tenants and landlords – could arise.

Can my landlord terminate my lease agreement if I breach my duty to operate?
Many lease agreements, especially in the retail sector, contain extensive operating obligations of the tenant. Since the closure of businesses is ordered by the by law, such contractual operating obligations do not apply at present because the tenant or lessee has a statutory duty that takes precedence over his contractual duty.

What is the situation regarding penalties for breach of the duty to operate?
Here, too, it can be assumed that these do not apply if the closure of the business is the result of an official or legal order. The statutory obligations and prohibitions take precedence over the tenant’s contractual obligations.

What is the legal basis for business closures? Are there claims for compensations if tenants or landlords have lost income?

The legal basis for the measures imposed by the federal government last week is the Law on Epidemics of 1913 (re-issued in 1950), which aims to control certain communicable diseases, COVID-19 being one of them. However, the COVID Measures Act passed in the Austrian Parliament on Sunday, 15 March 2020 created a new legal basis for certain measures. Accordingly, business closures are no longer covered by the Law on Epidemics (and the compensation for loss of profits provided for there).

The new legal basis for business closures is the COVID Measures Act, according to which the Minister of Health can prohibit the “entering of business premises for the purpose of purchasing goods and services”. The COVID 19 crisis management fund is intended to set out measures to cushion the resulting loss of revenue. The exact legal implementation of these measures is not clear yet.

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