OGH: Rent reduction to zero for "bakery-cafe" in lockdown

Jul 1, 2022 Benn-Ibler Rechtsanwälte

The Austrian Supreme Court (Oberster Gerichtshof, OGH) ruled that a "bakery-cafe" in an industrial zone did not have to offer a delivery or pick-up service during a lockdown, which meant that the property was completely unusable.

The plaintiff is the landlord of business premises in which the defendant operates a "bakery-cafe". The gastronomic part of the business predominates (90%), whereas only 10% of the turnover is generated by the sale of bakery products at the counter. The premises are located in a retail park in an industrial zone. In the lease agreement, a duty to operate and a contractual penalty in case of breach of contract was agreed.

During the various lockdowns, the premises were closed. On the one hand, the defendant regarded the premises as a restaurant (ban on entering), and on the other hand, it would have been economically impossible to maintain pure counter sales, as there were hardly any walk-in customers and the turnover was mainly generated by customers of the surrounding retail warehouses. However, these were also predominantly closed during the lockdown. No rent was paid for the period of the lockdown.

The plaintiff is now demanding payment of what was considered to be outstanding rent together with payment of the contractual penalty. Since bakeries were exempt from the ban on entering, operation would have been possible without further ado.

The court of first instance and the court of appeal ruled in favour of the defendant with reference to Section 1104 of the Austrian Civil Code (Allgemeines Bürgerliches Gesetzbuch, ABGB). Due to the ban of entry, the agreed use of the property was not possible.

This was also the view of the OGH:

For the assessment of whether complete or partial unusability exists, not only the written lease agreement but also oral agreements of the parties are relevant. The unusability is to be assessed in consideration of the agreed business purpose on the basis of an objective standard. This works in favour of the defendant here, because objectively it was not possible for it to switch to delivery service in a short time, which, moreover, would have been a loss-making business for it. Especially the location in an industrial zone made it clear that even a "pick-up service" would not have covered costs.

OGH 3 Ob 36/22y (19.05.2022)