Rent Reduction of Gastronomy Establishments Due to Lockdown

Current legal situation:

Pursuant to section 1104 ABGB (Austrian Civil Law Code) the rent of a business property does not have to be paid if it cannot be used due to extraordinary coincidences, such as a “plague”.

According to the jurisdiction of the Austrian Supreme Court (OGH), the COVID-19 pandemic qualifies as such a plague.

The rent can also be reduced or exempt if the non-usability only exists because of an administrative order, such as an entry ban of the property during a lockdown.

Whether the business premise was really unusable is determined by the contractually agreed intended use. If, however, an at least partial usability can be derived from the agreement, the rent can only be reduced pro rata, as pursuant to section 1105 ABGB.

Decision of the Supreme Court:

In a recent decision, from the January 25^th, 2022, the Supreme Court dealt with the rent reduction of a property that was used for running a gastronomy establishment. The tenant had not paid any rent during the second lockdown period from November 2020 to January 2021. During this time, there was also an administrative ban on entering restaurants. The landlord, on the other hand, demanded payment of the rent because it was possible to pick up and deliver food and beverages during these months.

In this case, the intended use “gastronomy” was specified in the rental agreement. The court argued that this intended use includes everything that the restauranteur is entitled to do under the Trade Regulation Act (Gewerbeordnung). This also includes take away, as well as the delivery of food and beverages.

Since it was thus objectively possible for the tenant to operate a delivery service and take-away, the rented property was at least partially usable. Therefore, the payment of the rent is not reduced in its entirety and only a pro rata rent reduction can be claimed.

The situation is different if the tenant can prove that starting a delivery and take-away service would be unreasonable. This could be the case if due to the lack of customers it would a losing deal. Thus, the property would be deemed unusable, which would justify an exemption of paying the rent.

The full text of the decision can be read (in German) at this link: OGH 25.1.2022, 8 Ob 131/21d

Update 5/24/2022:

In a new decision of the OGH, the rent reduction of a coffee shop that did not generate any sales during the lockdowns was set at two thirds. In this time, part of the store was used as a warehouse and office, also for the online sales of the larger store network. Thus, the business premise was at least partially usable, which is why the court did not grant a full rent reduction.

In a similar OGH decision about a tanning salon, a full rent reduction was granted. Here is our article on this topic: Rent Reduction for Business Premises due to COVID-19 – Greindl & Köck Attorneys at Law (greindlkoeck.at)