Within the context of private law responses to the current Covid crisis, this blog post focuses on the property-related area of tenancies and how legislative protection is granted by moratoria (i.e. authorised periods of delay in the performance of private legal responsibilities, such as payment of rent). A comparative perspective will be provided by looking at the British and at the German measures.
It is against this background that the special protection of tenancies has to be seen. Like in Germany, the British legislator has introduced special provisions for the protection of tenants. The common ground seems to be that maintaining one’s rented dwelling and business premises in these times of crisis is of paramount importance for every individual, and therefore the State, and this has led to the adoption of moratoria for tenants. The importance of tenancy protection is evident in Germany, where around half of the population live in rented accommodation, and in the UK still a third, which is to be seen in addition to the increasing commercial rentals of more than 50%.
A comparable extension of (at least) three months was made with regard to notice periods for practically all residential tenancies in the UK. The extension applies to a notice served until the end of September 2020 – that is already two months longer than for businesses. This moratorium is a significant modification compared to the ordinary requirements of the Housing Act 1988, under which a claim for recovery of possession based on outstanding rent can be commenced just two weeks after serving a notice. However, for the current most common form of residential tenancy – the assured shorthold tenancy – this means only an increase of one month in addition to the two months which are ordinarily required on expiry or termination (and a longer notice period may anyway be required when terminating a periodic tenancy).
Germany enacted a universal protection of tenancies, which does not distinguish between commercial or residential purpose and could therefore be seen as somewhat more straightforward. The German restriction on the termination of tenancies, which effectively resembles the British approach in substance, was introduced by the Act to Mitigate the Consequences of the Coronavirus Pandemic. The landlord may not terminate a tenancy on the sole ground that the tenant cannot pay rent, which is due in the three-month period until the end of June, similar to businesses in the UK. The condition is that the non-performance results from the pandemic, which must be substantiated by an affirmation in lieu of an oath. Notably, a right of termination for any other reason is not affected by the newly introduced restriction.
For the time being, and potentially even more so in future, protecting the tenant as one of the parties to a bilateral contract however shifts the financial impact onto the landlord. Cash-flow and other financial problems are pushed up the chain to the landlords as creditors. Their financial obligations to pay off loans and mortgages have not received general protection in turn. However, the UK and Germany have, to slightly varying extents, addressed specific issues that affect borrowers. Among the temporary measures, which have been suggested to and have been implemented by banks in the UK, is a payment holiday on mortgage payments, which benefits landlords and other homeowners; this scheme has recently been extended until the end of October. The German legislator has granted relief only to consumer borrowers by introducing a corresponding consumer loan repay moratorium on the condition that the consumer has lost income due to the Covid crisis and it would endanger their reasonable livelihood to repay the loan.
To summarise the above observations, the UK and Germany have adopted specific emergency measures to respond to the challenges posed by the Coronavirus pandemic onto tenants. Through legislation, both jurisdictions have granted special moratoria for commercial and residential tenancies. Perhaps even more importantly, it will be necessary to avoid a “second wave” of financial distress and the danger of evictions when the emergency measures will expire.
This paper was presented at the Faculty Webinar “The COVID-19 Crisis: Legal, Policy and Ethical Challenges” on 5 June 2020. It is based on the paper “Coronavirus measures in private law: Comparison of moratoria in the United Kingdom and Germany”, which was published in (2020) Oxford University Comparative Law Forum 1.
How to cite this blog post (Harvard style)
Ungerer, J (2020). Coronavirus Moratoria in Private Law: Comparing the Position of Tenants in the UK and Germany. Available at: https://www.law.ox.ac.uk/research-and-subject-groups/property-law/blog/2020/06/coronavirus-moratoria-private-law-comparing (Accessed [date]).