First decision of a Vienna District Court on Section 1104 of the Civil Code in connection with COVID-19

First decision of a Vienna District Court

The District Court of Meidling in Vienna has become the first court to rule on the obligation of a commercial tenant to pay rent during the lockdown in the spring of 2020. It considered that the removal of the payment obligation on the operator of a hairdressing salon was justified (see case 9 C 368/20b). In particular, it was argued that a hairdresser's salon could not be used at all during the lockdown because it was not possible to find an alternative use for it; in particular, no goods could be stored there and the hairdresser was unable to make up for lost business after the salon reopened to customers. Customers could get their hair done again by visiting the hairdresser's on a single occasion and therefore they would not visit the salon more often than usual just to make up for the number of appointments they had missed. The Court also rejected the argument that the closed hairdressing salon had an advertising effect, in particular because hardly anyone visited shopping streets in April 2020.

It should be noted that this is still a first instance decision which does not yet have the effect of res judicata. Further, the decision is not accessible to the general public but is only available from newspaper reports.

In this respect, it remains to be seen whether this decision will be upheld in court and also before the Supreme Court and to what extent this decision can also be applied to other operational uses of existing properties. Furthermore, there are very decisive differences between hairdressing salons and commercial and catering businesses, which makes it questionable whether the first instance ruling can be applied unconstrained to such businesses.

However, we have serious doubts as to the correctness of the decision based on the available reports on this judgment. As already explained in detail elsewhere, there are good reasons to believe that this is not an extraordinary coincidence within the meaning of Section 1104 of the Civil Code, even if the disease is explicitly mentioned in this provision. In simple terms, it is not the disease that is responsible for the property being unusable, but rather a risk that is linked solely to the business carried out by the tenant, as this simple comparison shows: while a grocer or a bank could have been open in the same premises despite the outbreak of the disease, a hairdresser was not. It follows from this that it cannot be due to the existing property being unusable.