Berlin Court of Appeal, 14.07.2014, Az.: 8 U 140/13
With regard to the defectiveness of a rental object, a basic distinction must be made between a material defect and a defect of title.
Obstacles/restrictions to use under public law, such as the absence of an official authorisation or an official prohibition of use, which prevent use in accordance with the contract, may constitute a legal defect in the rented property within the meaning of Section 536 BGB if they are related to the condition of the rented property, are not caused by personal or operational circumstances of the tenant and nothing to the contrary has been agreed in the rental agreement.
However, a prerequisite for the assumption of a defect of title and an associated rent reduction is that the lack of authorisation results in the cancellation or significant impairment of the suitability of the rented property for use in accordance with the contract.
Below are some examples of a defect of title:
- No licence to operate a restaurant.
- Delayed transfer of a food market due to neighbour's objection.
- Licence not granted to operate a dance restaurant.
In the above-mentioned judgement by the Berlin Court of Appeal, the court had to decide on appeal whether the prohibition of the conversion of rented commercial premises into an amusement arcade resulted in the tenant's rent being reduced to zero and the landlord's right to terminate the lease without notice.
Facts of the court case:
The landlord in these proceedings was the plaintiff, the tenants the defendants
As of 15 May 2010, the plaintiff had rented premises to the defendant for the operation of a commercial amusement arcade/sports bar. By decision dated 22 June 2010, the district authority issued a temporary ban on the conversion of the commercial premises into an amusement arcade and rejected the application for permission to operate an amusement arcade by decision dated 4 April 2011.
After the district authority banned the use of the property as an amusement arcade, the tenant stopped paying
As a result, the defendant stopped making rent payments from May 2011. On 17 February 2012, the plaintiff declared termination of the rental agreement without notice due to late payment.
As the tenant did not vacate the commercial premises despite giving notice, the landlord initially sued in the first instance for eviction, payment of rent and ongoing compensation for use as well as indemnification against pre-trial legal costs.
The landlord then sued for eviction, but the local court dismissed the claim
This action was dismissed by the court of first instance. On appeal to the Berlin Court of Appeal, the plaintiff continued to pursue his claims at first instance.
Judgement of the Berlin Court of Appeal:
The Berlin Court of Appeal has now ruled in the above-mentioned decision that the appeal should be dismissed with regard to part of the claim and justified with regard to part:
Court of Appeal rejected claim for rent payment as there was a defect of title
The action for payment of rent for the period from May 2011 until the termination without notice in February 2012 was unfounded.
The rent owed during this period was reduced to zero in accordance with Section 536 (1) sentence 1 BGB, as the suitability of the premises for contractual use, namely for the operation of a gaming centre/sports bar, had been cancelled and there was therefore a defect in the rented property.
Although it had been contractually agreed between the parties in § 2 No. 3 of the rental agreement that the tenant, i.e. the defendant and appellant, bore the risk of official authorisation, this provision did not effectively exclude the plaintiff's warranty:
A form clause with this content does not stand up to content control in accordance with Section 307 BGB because it also excludes liability on the part of the landlord in the event that the required official authorisation for the commercial operation intended by the tenant is refused for reasons based solely on the nature or location of the rented property.
Thus, according to the clause, in the event of refusal of authorisation, not only the tenant's warranty rights but also his right to terminate the tenancy agreement without notice are excluded.
Such a far-reaching exclusion of liability would unreasonably disadvantage the tenant contrary to the requirements of good faith and is therefore invalid according to § 307 BGB.
§ Section 307 of the German Civil Code (BGB) is also applicable in this respect, as Section 2 No. 3 of the tenancy agreement is not an individually negotiated clause, contrary to the plaintiffs' view, but a clause used in a form. The court was unable to establish that the provision had been individually negotiated between the contracting parties within the meaning of Section 305 (1) sentence 3 BGB.
There was also no recognisable legal basis for the plaintiff's argument that only a reduced rent reduction could be considered because the defendant should have endeavoured to use the property in accordance with the building plan at the latest following the authority's rejection notice.
Admittedly, even if the suitability for use for the contractual purpose was cancelled, a (certain) rent may have been owed in good faith if the defendant had nevertheless used the rooms.
However, the plaintiff's submission had too little substance in this respect. The establishment as an amusement arcade/sports bar is explained by the planned project and does not suggest an actual use.
However, the plaintiff could demand compensation for use for the period from the termination without notice until the eviction
Despite the rent reduction to zero, the plaintiff could, however, at least for the period from receipt of his termination without notice on 20 February 2012 until the return of the rental property on 20 March 2014, claim payment of compensation for use from the defendant in accordance with Section 546a BGB in the amount of the usual local rent for comparable properties totalling EUR 26,097.22, because the defendant had unlawfully withheld the rental property from him. This is because the plaintiff's termination without notice on 17 February 2012 was effective.
Although this could not be based on payment arrears within the meaning of Section 543 para. 2 sentence 1 no. 3 BGB due to the justified rent reduction to zero, the plaintiff was entitled to terminate the contract without notice in accordance with Section 313 para. 3 sentence 2 BGB due to the lack of a basis for the transaction.
Plaintiff could derive rights from frustration of contract
When the rental agreement was concluded on 20 April 2010, the parties had considered it possible that the property could be used as an amusement arcade. However, as this possibility had never existed, the plaintiff could derive rights from a frustration of contract if, taking into account all the circumstances of the individual case, in particular the contractual or statutory distribution of risk, he could not reasonably have been expected to adhere to the unchanged contract. This was the case here.
The fact that the termination of 17 February 2012 (as well as the termination of 25 April 2012) was based on default of payment and not on a discontinuation of the basis of the transaction was not detrimental because a justification for termination without notice pursuant to Section 569 (4) BGB is only required for residential tenancies.
Source: Berlin Higher Regional Court
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