Update on Covid-19 and Rent Reductions: Switzerland’s First Court Rulings Are in
Government measures to contain the Covid-19 pandemic have put commercial tenants in a very difficult situation in some cases (see also: Swiss Landlords and Tenants Looking for Solutions as Covid-19 Impacts Commercial Leases). Even though businesses had to be temporarily closed or were severely restricted, rents still had to be paid. The courts have now decided on cases where tenants and landlords have been unable to reach an agreement.
No enforcement of outstanding rent in summary proceedings under debt collection law
In its ruling of April 23, 2021, the District Court of Zurich said that it is not possible to enforce outstanding rent for business premises whose use was limited due to official measures, at least not in summary legal proceedings. A summary procedure can be used to dismiss a legal objection (Rechtsvorschlag) to debt collection. In such cases, the creditor must present a document (e.g. a contract) in which the debtor acknowledges the claim in writing.
But a lease agreement is unsuitable as an acknowledgement of debt for outstanding rent, at least where the tenant objects on the grounds that there are defects in the leased property that justify a rent reduction.
According to the present ruling, summary proceedings cannot be used to examine whether or not the official Covid-19 measures justify a rent reduction in an individual case. For a final ruling, ordinary court proceedings are required instead.
Zurich Rental Court rejects claim for rent reduction
The Rental Court of Zurich has conducted a more in-depth examination of the legal situation in its ruling of August 2, 2021 (not yet final). Its conclusion is that official closures of businesses are not sufficient grounds for lodging a claim for a rent reduction.
Unless otherwise expressly agreed between the parties, where there is an ordinary lease agreement for business premises, business risk lies exclusively with the tenant.
The landlord only needs to ensure that the leased property is handed over and maintained in a condition that allows it to be used for its intended purpose. The intended use clause concerns only property-related features, not business-related ones. This means that, as long as the leased premises per se can be used as a shop or a restaurant, the landlord has fulfilled the obligations under the existing lease. Even if the establishment is not allowed to receive customers because of official measures, there is no defect in the rented property.
Where official measures have a particularly severe impact, a court may consider ordering the amendment of the contract on the grounds of substantially changed circumstances (clausula rebus sic stantibus). But the requirements for this are strict and they must be examined on a case-by-case basis.
The Rental Court states that for a contract to be amended, tenants must explain how the official measures have specifically affected their business operations. They must show which operational countermeasures they have taken and how successful they have been, and what state aid they have received or why they have decided to forego it. If evidence of this cannot be provided, the prospects of getting a court to order a reduction in the rent are poor, based on current court rulings.