Corona Crisis: Differing legal treatment of lease and rent is constitutional


Mark Krenn, Partner

Johanna Kaschubek,  Associate

Corona Crisis: Differing legal treatment of lease and rent is constitutional

In the decision G 279/2021-15, the Austrian Constitutional Court ("VfGH") had to deal with the question whether lessees of enterprises as well as tenants of business premises would have to pay only a reduced rent for the period of limited usability of the business premises due to Covid-19 lockdowns.

The specific case involved a restaurant in an office building that was required by its landlord to pay the full rent for the period April 2020 to January 2021 - despite limited use due to lockdowns caused by Covid19. 

While the provision of Section 1105 Austrian Civil Code („ABGB“) allows tenants of business premises to reduce the rent accordingly for the period of limited use of the rented premises, this provision does not apply to lessees of enterprises. For lessees of enterprises, pursuant to Section 1105 sentence 2 of the Civil Code, a reduction of the rent is only permissible in the case the leased enterprise for a term of not more than one year and – in addition - only if more than half of the average income produced by the enterprise was lost due to an extraordinary coincidence, such as a pandemic. If the lease contract regarding the enterprise lasts longer than one year, no rent reduction is generally due in the event of a pandemic.

The Austrian Constitutional Court considers this different treatment of tenants and lessees in the case of limited use of the rented premises to be objectively justified, and thus the corresponding statutory provision of the Austrian Civil Code remains in force. The Austrian Constitutional Court based its argumentation on the fact that the economic nature of rent and enterprise lease differs significantly from each other and therefore there the provision in question does not result in unequal treatment. A differentiation between renting and enterprise leasing is, hence constitutionally permissible, since renting involves the transfer of the leased property for mere use, while enterprise leasing additionally grants the possibility of enjoying the benefits and the property can only be used applying diligence and effort.

Thus, the lessee of an enterprise can influence the profit due to its more extensive and self-determining scope of activity and, in the opinion of the Austrian Constitutional Court, should therefore also bear the economic risk to a greater extent.

Likewise, it is appropriate that a one-year enterprise lease and a longer enterprise lease are treated differently, since good and poor economic periods can be balanced out in the case of longer-term leases, whereas this is not possible or only to a limited extent in the case of short-term leases.