Question

With the Covid-19 pandemic, many businesses were forced to close and, as a result, many people are now unemployed.

1) Please attach or link a relevant news article that discusses something about the struggles of either a commercial (business) or residential (person, family etc.) tenant that can no longer pay its rent due to these unprecedented time.

2) Describe how the tenants and their landlords, and possibly the government, are attempting to adjust to the situation. Feel free to include as many real estate law references as you can find in the article. Remember, both businesses and individuals can be tenants.

(200-300 words) Remember to attach or include a link to the article.

Answer 1

Covid -19 Pandemic -

(1)Effect and struggles on tenant (Business,Family, Students, Individual etc) can no longer pay rent and

(2)Initiatives from landord , Tenant and Government to adjust to the situation

(3) Real estate law reference

(4) Attach a Article

Effect and struggles on tenant (Business,Family, Students, Individual etc) can no longer pay rent as follows :

1)Due to COVID 19 Pandemic and its long duration Many Business were close and as a result Unemployed rate Increases. Due to this many business as well as Individual are not able to pay rent to landlord due to closed down of business and due to this unemployment rate increases at a large scale

2)Covid 19 Pandemic has eefected tenant and Landlord due to long duration and also still there is no vaccine available in the market, future is very uncertain and very difficult to predict.

3)Small Landlords struggles a lot due to  neither they the cash nor the credit availability to cover their costs when the rents aren’t paid.

4)That certainly causes a lot of instability for families who may have had a guaranteed paycheck at one time and now they are looking at how can we meet needs, such as rent and others day to day expenses

5)Residential tenants ask themselves what will happen if, due to the economic consequences of the pandemic, they are no longer able to pay their rent on time, for example because of reduced pay due to short-time work, loss of income for the self-employed or even unemployment.

6)Commercial tenants are faced with a situation in which they could, in principle, continue to use the rented property, but such use makes little business sense - or even orders to prohibit or close down operations. Some commercial tenants are also subject - at least according to the wording of the lease agreement - to a duty to operate, which in principle obliges them to maintain operations.

7) Multiplexes and Restaurants business has suffered a loss and have a huge impact on the going concern as a business and as a result business are calling for rent suspension

Article on Struggle from an Business relating to Multiplexes

Multiplexes call for rent suspension

Top Indian multiplex players, including PVR, Inox Leisure, Cinepolis India and Carnival Cinemas, have decided to invoke the ‘force majeure’ clause and suspend rentals on their leased properties during the time cinemas remain shut due to the Covid-19 crisis.

Sources across cinema chains have confirmed , that they had individually written to the landlords and mall owners seeking waiver of rent under the ‘force majeure’ clause of their contracts.

The clause excuses companies from meeting some obligations in case of certain unusual circumstances.

Experts say that for the multiplex industry, where revenues have fallen to nil, paying rentals is not going to be possible. "We have discussed with majority of our landlords and many of them understand our plight. We have received very enco-uraging response from our partners,”.

Added that rental and electricity, apart from salaries are two of the biggest fixed costs. “If the government can help in reducing the minimum demand charge for electricity, we will be able to pay salaries on time,” he said.

Rental, ranging between 15% and 20% of their revenue, is the biggest fixed cost for multiplexes

Umrotkar added that rental and electricity, apart from salaries are two of the biggest fixed costs. “If the government can help in reducing the minimum demand charge for electricity, we will be able to pay salaries on time,” he said.

https://economictimes.indiatimes.com/industry/media/entertainment/media/covid-19-impact-multiplexes

Article on Struggle from an Individual

Natalia Kurteczko plans to move out of her home and into a hostel next month

A self-employed events organiser said she would need to leave her home and move into a hostel after work suddenly dried up because of the coronavirus.

Natalia Kurteczko, 30, has lived in Oxford for seven years and lodges in a house.

But she said a lack of work after events were suddenly cancelled had pushed her into drastic action.

She plans to move into a hostel because she can live there rent-free in exchange for work.

Annual events she has previously worked at across the country, including the Grand National, have been either cancelled or postponed over coronavirus fears.

Ms Kurteczko, who is Polish, said: "I'm absolutely jobless. I'm self-employed and I cannot get any hope from anyone. I'm not entitled to sick pay.

"What am I going to do? I have decided that I am going to keep my savings and move to a hostel and volunteer for 20 hours a week and I can stay there for free.

"This is my career. I used to work in delivery, marketing, social media and management, in different industries, but I don't know where to start really.

"We have been advised to work from home but in my job it isn't possible."

https://www.bbc.com/news/uk-england-oxfordshire

There are different way of Initiative recommended by Tenants, Landlord and Government as follows,

1)Rent can be paid in Installments in a period of 3 to 6 months instead of paying Lumpsum rent

2)Prime Minister Boris Johnson said the government would bring forward legislation to protect private renters from eviction but the details were still to be finalised.

3)A group in the city has called for three-month "rent holidays", similar to those promised by Chancellor Rishi Sunak on Tuesday for mortgage holders.

4) Landlords themselves can apply to their mortgage lender for a repayment holiday of their own, if they are struggling as a direct result of coronavirus.

When this support was put in place by government and the banks, it was made clear that any landlord taking up such an option should pass this advantage on to tenants by deferring their rent

5)The government also announced a three-month ban on evictions in England and Wales, with similar plans also discussed in Scotland.

6)Some tenants' groups want the support to go much further. The London Renters' Union wants a suspension of all rent payments, to avoid a build-up of unsustainable debt.

7)The National Union of Students has called for landlords to stop charging rent to students who have left their digs empty and returned home, with teaching cancelled for the foreseeable future.

8)City of Tacoma offers $1.2Million to help tenants struggling to pay rent amid COVID -19

9)The aim of the announced legislative project is to relieve tenants during the pandemic.

According to the current status, a regulation is planned according to which tenants may not be terminated solely due to rent debts from the period from April 1 to June 30, 2020, if the tenant can credibly demonstrate that the delay is due to the effects of the Corona pandemic. Termination for other reasons remains possible.

However, the tenants' obligation to pay rent shall in principle remain in place.

The exclusion of termination is valid until June 30, 2022. According to a preliminary assessment, this is to be interpreted as meaning that if rent arrears from the period April 1 to June 30, 2020 have not been settled by then, termination may be effected again as of July 2022 due to these arrears.

The Federal Government is authorized to extend the regulations by statutory order to rent arrears for the period from 1 July 2020 to 30 September 2020 if social life, economic activity and employment continue to be significantly impaired by the COVID 19 pandemic.

The most relevant lease-related provisions fo Article 5 of the COVID-19 Pandemic Act (con-cerns amendments to the Introductory Act to the Civil Code and matters of contract and civil law that are essential to it) can therefore be summarized as follows:

• Limitation of the right of termination due to late payment: The landlord or lessor is not entitled to terminate the lease solely due to late payment by the tenant or tenant in the period from 1 April to 30 June 2020, if the tenant can credibly demonstrate that the delay is due to the effects of the Corona pandemic. Termination for other reasons remains possible.
• Time component: The exclusion of termination is valid until June 30, 2022. According to a preliminary assessment, this is to be interpreted as meaning that if rent arrears from the period April 1 to June 30, 2020 have not been settled by then, termination may be effected again as of July 2022 due to these arrears.
• Ordinance authorisation and temporal scope of application: The Federal Government is authorised to extend the regulations by statutory order to rent arrears for the period from 1 July 2020 to 30 September 2020 if social life, economic activity and employment continue to be significantly impaired by the COVID 19 pandemic.

10) Sources across cinema and restaurants chains have confirmed that they had individually written to the landlords and owners seeking waiver of rent under the ‘force majeure’ clause of their contracts. The clause excuses companies from meeting some obligations in case of certain unusual circumstances

Real estae Law references relating to Landlord and Tenant

The following article attempts to provide a brief overview of the current and possible future legal conditions and opportunities for tenants and landlords - with a focus on commercial leases and an attempt to take into account recent developments in a dynamic environment.

Planned amendments to the statutory provisions regulating lease agreements pursuant to the COVID-19 Pandemic Law

The Federal Cabinet passed resolutions to further complete the announced packages of measures to mitigate the consequences of the Pandemic.

The main building blocks are primarily an emergency aid programme for smaller companies, freelancers and the self-employed with a volume of up to Euro 50,000,000,000 and the establishment of an economic stabilisation fund with a volume of up to Euro 600,000,000,000.

Another important building block from a legal point of view is the draft of a law to mitigate the consequences of the COVID-19 pandemic in civil, insolvency and criminal procedure law (hereinafter also referred to as the "COVID-19 Pandemic Law").

Although the approval of the Bundestag and Bundesrat is still pending, it is to be expected that the law will be passed essentially in the version of the drafting aid submitted by the Federal Government. Nevertheless, it should be expressly noted that amendments may still be made.

A summary of the legislative amendments in the field of lease can be found in the second part of the present article.

The basic idea that characterizes German civil law is still decisive: pacta sunt servanda - concluded contracts must be observed.

In a lease, the economic risk is shared between the parties. According to the current understanding, the commercial tenant bears the risk of use and thus the risk of being able to generate income and profits with the leased object. The lessor, on the other hand, bears the risk of the continued usability of the leased object.

Therefore, a rental payment obligation is only waived - subject to special contractual provisions or statutory regulations - if the landlord can no longer make the leased property available. Even in times of COVID-19, many, if not most, landlords are, however, easily able to continue to make the premises provided for rent available as agreed in the underlying contract. The tenant is thus still obliged to pay the rent.

Exceptions are conceivable, but should not be the rule. For example, the case is being discussed in which the contractually owed provision of the building which is the object of the lease requires the use of personnel to be provided by the landlord and the landlord is no longer able to meet this obligation due to the effects of the pandemic. In this case, there could be a defect in the leased property and thus the obligation to pay rent no longer applicable or a right to reduce rent.

A lack of turnover - for example due to the overall economic situation, restrictions on exit, or a zoning agreement - thus falls within the sphere of risk of the tenant as an entrepreneur and does not lead to the lapse or limitation of his obligation to pay rent.

The situation may be different if the landlord has assumed the tenant's business risk in whole or in part, for example on the basis of a turnover-based rent. Where turnover-based rent has been agreed, the underlying contractual relationships have to be examined to determine the distribution of risk in each specific case.

The risk allocation described above also applies - at least in principle - where a tenant has subjected himself to an obligation to operate, i.e. where he has not only obtained the right to use the leased property through the lease, but has also undertaken to operate and maintain a shop or otherwise run a business. Unless otherwise agreed with the landlord, the tenant who is subject to an obligation to operate is thus not released from his obligation to operate even in times of crisis.

https://www2.deloitte.com/dl/en/pages/legal/articles/auswirkungen-covid-19

For the duty to operate, an objective impossibility in accordance with § 275 BGB (German Civil Code) must be assumed in the case of ordinances issued by the authority to close a respective trade even under current law. This means: It is impossible for the commercial tenant to fulfil his duty to operate as stipulated in the rental agreement and he is released from this duty to operate for the duration of the closure order.

Beyond this, however, official closure orders do not justify the assumption of the existence of a defect in the rented property. A reduction of rent is therefore not possible under current law . This is because the government measures relate to specific industries or activities, but not to a specific type or quality of rented space or property. If the landlord makes the leased property available in accordance with the contract, the tenant is generally obliged under tenancy law to pay the rent.

Something else may possibly result from contractual provisions made in the specific individual case. Often the purpose of the lease and use are specified in detail in the contract. In such cases, the landlord may be obliged to hand over the rented property to the tenant in such a way that it is suitable for the agreed use. If a lockdown occurs and the lessee cannot use the leased property as intended for by means of the purpose of lease and use, as stipulated in the lease agreement, the lessor may be considered temporarily unable to fulfil his obligation, namely to hand over the leased property for the agreed purpose. The landlord would then for the duration of the impossibility be released from his obligation and the tenant from its reciprocal obligation to pay rent. In view of the standard wording frequently found in commercial leases, however, a landlord's obligation to assume responsibility for the possibility of a certain use of the premises by the tenant would probably be the clear exception.

Yes, under certain circumstances. Section 313 of the German Civil Code ("lapse of the basis of the transaction", ) regulates a balance between the interest in performance on the one hand and the interest in adjustment or even termination on the other. , As an expression of the concept of good faith, can be a tool to adapt existing contractual relationships or even to bring about their termination.

These principles can also be applied in commercial tenancy law. For an application in a specific individual case, it is decisive whether the parties, had they foreseen the outbreak and the effects of the current pandemic, would have made a deviating contractual arrangement and whether each of the parties could reasonably be expected to adhere to the unchanged contract. The examination to be carried out in this respect must always take into account the distribution of risk originally intended by the parties.