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Covid-19 coronavirus: Covid-19 Act and impact on real estate leases

Massive economic effects of Covid-19 on the real estate sector, in particular, on lease agreements.

On 25 March 2020, the first chamber of the German parliament, the Bundestag, passed the draft bill submitted by the government for an "Act on Mitigating the Effects of the Covid-19 pandemic in civil, insolvency and criminal procedure law" (the Covid-19 Act).  The Covid-19 Act provides for various economic support measures for consumers, entrepreneurs, sole proprietors, other small, medium-sized and large enterprises and banks.  It is designed as an omnibus act introducing changes to contractual law in the field of leases and loans in civil law in particular, which are to be made in article 240 of the Introductory Act to the German Civil Code (Einführungsgesetz zum Bürgerlichen Gesetzbuch, EGBGB).

The objectives of this briefing are:

  • first to outline the somewhat unclear legal situation regarding the effects of the Covid-19 pandemic on existing lease agreements before the Covid-19 Act comes into force;
  • then to describe the changes in tenancy law; and
  • finally to briefly show the consequences these changes will have for existing lease relationships as well as the related problems.