In a December 23 2010 ruling (24 U 25/10), the Dusseldorf Higher Regional Court interpreted the concept of defects and the possibility of termination considerably more strictly than in previous case law.

The court ruled that a notice of termination given by a restaurateur because a temperature of 20 degrees Celsius (which is considered necessary in shops) was not guaranteed during August and September was valid. The court found that it had not been possible to heat the restaurant in the second half of August and September, and that it was therefore too cold to serve the restaurant's visitors properly during that time. It was stated in evidence that several complaints had been made to the landlord due to the inadequate room temperatures. In the final analysis, the court considered it unimportant whether the lack of heating was due to a shortage of fuel oil or whether the heating system had previously been defective, which was found to be the case in October. The court stated that the landlord was obliged to remedy the situation, but had made an effort to do so only at the end of September. Thus, the landlord was judged to have violated its fundamental obligations.

As a result of this violation of obligations, the court considered that the tenant was significantly impaired in its business activities and, therefore, could not be reasonably expected to continue the rental contract. The fact that it had been too cold in the rented premises for a few weeks was therefore deemed to entitle the tenant to give notice, although customers had visited the restaurant in spite of the inadequate temperatures. It also held that the tenant's notice of termination was valid even without a warning, because a warning was unlikely to be successful (Section 543(3) of the Civil Code), in view of the fact that the landlord had asserted that it was not obliged to guarantee that the premises could be heated in August and September.

In addition to termination, the court considered that the tenant was entitled to reduce the rent payable for August and September until such time as the termination came into effect – the reduction would be in proportion to the limited suitability of the premises for their contractual use as a result of the inability to heat the premises. In this respect, the court deemed that a reduction of two-thirds of the net rent was appropriate, in view of the importance of a reasonable room temperature in a restaurant.

In this ruling – which follows a general trend that may be observed in case law rulings on liability for defects – the court favoured the tenant and granted it a valid reason for termination and grounds for a rent reduction, since the rented premises could not be heated due to a defect. In its ruling the court explicitly left open the question of the validity of a clause in the rental contract between the parties, which stated that:

  • the collective heating system would fundamentally be operated only from October to April; and
  • a demand for the heating to be switched on could be made only in particularly justified individual cases if the outdoor temperature was below 14 degrees Celsius at 8:00pm on three consecutive days.

However, the court pointed out that it at least doubted the effectiveness of this provision, because it considered a pleasant room temperature for visitors to be an essential requirement for the operation of a restaurant; thus, it would be unacceptable on principle if unreasonably cold temperatures were not deemed to exist under the conditions in the provision until the cooler evening hours in a restaurant which also operated during the evening. When evaluating this provision, the court stated that it must also be considered that the tenant was in any case obliged to pay the costs of heating, and that the landlord could turn the heating on with a minimum amount of extra work. The court therefore considered that there was much to suggest that the tenant was placed at an unreasonable disadvantage by this provision as a whole (Sections 307(1) and (2) of the Civil Code), although the court did not make a final decision on this point.

In its ruling, the court once again took the side of the tenant. A landlord has extensive fundamental obligations which must be complied with to avoid the risk of premature termination by the tenant or a rent reduction. In addition to the landlord's fundamental obligation to ensure that an adequate temperature can be achieved for the contractually designated use of the rented premises (which is referred to in the ruling), extensive and possibly expensive obligations may also arise from the purpose of the contract or other implicit agreements in the rental contract.

For further information on this topic please contact Sonja Braun at SIBETH Partnerschaft by telephone (+49 89 38 80 80), fax (+49 89 38 80 82 02) or email ([email protected]).