German Supreme Court (BGH) ruling on HOAI minimum rates
In an treaty violation proceeding pursued by the European Commission, the European Court of Justice (ECJ) had ruled by judgment of July 4, 2019 (C-377/17) that the Federal Republic of Germany had failed to comply with its obligations under Article 15 I, II g and III of Directive 2006/123/EC of the European Parliament and of the Council of December 12, 2006 on services in the internal market (Services Directive) by retaining mandatory fees for the planning services of architects and engineers. As a result, a dispute arose in the case law of the courts and in the literature as to whether the relevant provisions of the Services Directive have direct effect in the context of ongoing legal proceedings between private individuals in such a way that the national provisions in Section 7 of the Ordinance on Fees for Architectural and Engineering Services (HOAI), which are contrary to the Directive and according to which the minimum rates for planning and supervisory services set out in this Fee Ordinance are in principle binding and a fee agreement in contracts with architects or engineers that is lower than the minimum rates is no longer valid.
The VII Civil Senate of the Federal Court of Justice, which is responsible among other things for legal disputes concerning contracts with architects and engineers, then submitted several questions on the unlawfulness of the binding price law of the HOAI (2013) in a reference for a preliminary ruling pursuant to Article 267 TFEU to the ECJ in the appeal proceedings VII ZR 174/19, which is based on the HOAI in the version of 2013, by decision of May 14, 2020 (see Press Release No. 59/2020). The ECJ ruled by judgment of 18. January 2022 (C-261/20 – Thelen Technopark Berlin) that Union law is to be interpreted to the effect that a national court before which a dispute is pending in which only private persons are opposed is not obliged, solely on the basis of Union law, to disapply a national rule which, in breach of the provisions of the Services Directive at issue, sets minimum fees for the services of architects and engineers and provides for the ineffectiveness of agreements derogating from that rule, but without prejudice, on the one hand, to the possibility for that court to exclude the application of the rule in the context of such a dispute on the basis of national law and, on the other hand, to the right of the party harmed by the incompatibility of the national law with EU law to seek compensation for the damage it has suffered as a result.
BGH, Urt. v. 2.6.2022 – VII ZR 174/19
30.6.2022 RA Dr. Gerrit Binz, Certified Specialist Lawyer for construction law and architecture law, Certified Specialist Lawyer for law of tenancy and residential property law
German Supreme Court (BGH): Corona & gyms
The Federal Court of Justice ruled that the plaintiff has a claim for repayment of the monthly contributions paid for the period of closure pursuant to § 275 I 1, § 326 I 1 and IV, 346 I BGB. The defendant cannot counter this repayment claim of the plaintiff by arguing that the contract should be adapted due to frustration of contract pursuant to § 313 I BGB to the effect that the agreed term of the contract is extended by the period during which the fitness studio had to be closed.
During the period in which the defendant had to close its fitness studio due to the sovereign measures to combat the COVID 19 pandemic, it was legally impossible for it to grant the plaintiff the opportunity to use the fitness studio in accordance with the contract and thus to fulfill its main contractual obligation.
The Court of Appeal was also correct in assuming that the defendant cannot counter the plaintiff’s claim for repayment by arguing that the contract should be adjusted due to frustration of contract pursuant to § 313 I BGB to the effect that the agreed term of the contract is extended by the period during which the fitness studio had to be closed.
BGH, Urt. v. 4. Mai 2022 – XII ZR 64/21
5.5.2022 RA Dr. Gerrit Binz, Certified Specialist Lawyer for construction law and architecture law, Certified Specialist Lawyer for law of tenancy and residential property law
German Supreme Court (BGH): Corona & Business Premises Rent
The Federal Court of Justice (BGH) has ruled that in the event of a business closure due to a sovereign measure to combat the COVID 19 pandemic, the tenant of commercially used premises may in principle have a claim for adjustment of the rent due to frustration of contract pursuant to § 313 I BGB.
The tenant of commercially used premises may, in principle, be entitled to an adjustment of the rent due to frustration of contract pursuant to § 313 I BGB in the event of a business closure that occurs due to a sovereign measure to combat the COVID 19 pandemic.
However, the mere fact that the basis of the contract has ceased to exist pursuant to § 313 I BGB does not yet entitle the parties to adjust the contract. Rather, the provision requires as a further prerequisite that the affected contractual partner cannot reasonably be expected to adhere to the unchanged contract, taking into account all circumstances of the individual case, in particular the contractual or statutory distribution of risk. If, as in the present case, the tenant’s disappointed profit expectation is based on a sovereign measure to combat the COVID 19 pandemic, such as a plant closure for a certain period of time, this goes beyond the tenant’s ordinary risk of use. This is because the economic disadvantages suffered by a commercial tenant due to a pandemic-related business closure are not the result of entrepreneurial decisions or the disappointed idea of being able to operate a business in the leased premises that would generate profits. Rather, they are the result of extensive government intervention in economic and social life to combat the COVID-19 pandemic, for which neither of the parties to the lease can be held responsible. As a result of the COVID 19 pandemic, a general risk of life has ultimately materialized which is not covered by the distribution of risk under the lease agreement without a corresponding contractual provision. The associated risk can regularly not be assigned to any contracting party alone.
However, this does not mean that the tenant can always demand an adjustment of the rent for the period of closure. Whether it is unreasonable for the tenant to adhere to the unchanged contract also requires a comprehensive consideration in this case, in which all circumstances of the individual case must be taken into account § 313 I BGB. A general approach does not meet the requirements of this normative element of the provision. For this reason, the adjustment of the contract made by the Higher Regional Court to the effect that, without taking into account the specific circumstances, the rent for the period of the closure of the business is in principle reduced by half because the risk of a pandemic-related restriction on the use of the rental object does not affect either of the two parties to the rental agreement alone is not an option. Rather, a comprehensive and case-by-case assessment is required, in which the disadvantages suffered by the tenant as a result of the business closure and its duration are of primary importance. In the case of a commercial tenant, these will primarily consist of a concrete drop in sales for the period of the closure, whereby, however, only the concrete rental object and not a possible group turnover is to be taken into account. It may also be necessary to take into account what measures the tenant has taken or could have taken to reduce the impending losses during the closure of the business.
However, since an adjustment of the contract in accordance with the principles of frustration of contract must not lead to overcompensation of the losses incurred, the financial benefits which the tenant has obtained from state benefits to compensate for the disadvantages caused by the pandemic must also be taken into account in principle when examining the unreasonableness. In this context, benefits from a business insurance policy of the tenant, which may be liable to indemnify, may also have to be taken into account. State support measures that were only granted on the basis of a loan, on the other hand, are not taken into account in the required weighing, because the tenant does not achieve any final compensation for the sales losses suffered through them. An actual threat to the economic existence of the tenant is not required. Finally, the interests of the landlord must also be taken into account in the required weighing.
BGH, Urt. v. 12.1.2022 – XII ZR 8/21
20.1.2022 RA Dr. Gerrit Binz, Certified Specialist Lawyer for construction law and architecture law, Certified Specialist Lawyer for law of tenancy and residential property law
German Supreme Court (BGH): CAUTION WITH DEBT REPAYMENT FOR THE HOMEOWNERS ASSOCIATION
Who is not familiar with this situation: The homeowners association is “tight”, but the operating and maintenance costs continue to run; an owner agrees to “advance” the costs and now wants compensation not from the “tight” homeowners association, but from the other owners.
The BGH denies him this, the owner remains sitting on his costs, here the guiding principle: “A liability of the condominium owner in accordance with § 10 VIII 1 WEG for liabilities of the association is excluded if it is a matter of claims of other condominium owners that arise from the community relationship (so-called social liabilities). These include claims for reimbursement of expenses to which a condominium owner is entitled due to the repayment of a liability of the association, even if the repayment is an emergency management measure within the meaning of § 21 II WEG; this applies regardless of whether or not satisfaction can be expected from the community assets.”
We therefore advise you to exercise extreme caution if, as a condominium owner, you are considering “advancing” debts of your “insolvent” community of owners; we can show you ways in which the problem can be solved in a legally secure manner!