Do I still have to pay rent for my business if it’s closed?

Many businesses have had to stay closed due to the coronavirus pandemic. Is rent still due? MyRight provides the answers.

The answer in detail

Read the impact of the latest developments in our legal tip on the coronavirus: The latest federal decisions and their effects for SMEs

Rent payments when the shop is closed

Even though since June 2020 the situation is no longer considered to be extraordinary, but rather only special, various institutions were and are affected by government ordered closures. What does this mean for the rent for commercial space? What can or must I do as landlord or tenant? Does the obligation to pay rent remain in effect? Unfortunately, we cannot give a definitive answer to this question as there has never been a situation such as this before and there are no legal precedents to provide clarification.

A federal law, the COVID-19 Act on Commercial Rent, was planned: This law would have stipulated that commercial tenants who had to close or reduce operations in the first half of 2020 due to the COVID-19 Ordinance 2 would only have to pay 40% of the rental fee. This would apply for the duration of the closures or limitations in accordance with COVID-19 Ordinance 2 in spring 2020. However, the corresponding draft legislation was rejected by parliament at the beginning of December 2020.
By contrast, there were and are provisions in many cantons and cities based on which the cantons compensate in full or in part for rent reductions, provided that landlords and tenants each also bear a part of the rent or come to a corresponding agreement.  Oftentimes, a so-called “rule of thirds” applies, according to which the landlord, tenant, and state each agree to pay one-third of the rent (up to a certain amount). Such rules were in place for closures in the canton of Basel-Stadt in the spring of 2020, for example, and now once again for the second wave of the pandemic. Now the city council of the City of Zurich has passed such a provision for the second wave (fall/winter 2020/21).

For this reason, we recommend looking into the applicable situation in your municipality in advance and trying to talk to your landlord. In this way, you can work together to find a solution that is acceptable for both of you and document this in a written agreement. It would be in both of your interests if business could resume operations once the situation has normalized again. In other words, once customers have returned, rent can be paid again. The bankruptcy of a tenant is not in the interest of the landlord.

What happens if you and your landlord cannot find a bilateral solution? Then you as the affected commercial tenant must request a waiver of or reduction in rent by court order. However, the legal situation is still unclear and it is uncertain how a court would rule in the case of a dispute.

MyRight provides the answers to your questions:

Do I still have to pay rent?

The question of whether a reduction in rent can be claimed is still unanswered. If you can no longer use the rented property for the contractually agreed purpose and you have to close your business, then you can try to apply for a reduction in rent for this time. If the use of the rented space becomes entirely impossible, a 100% reduction in the rent would be conceivable. Whether and to what extent such a claim can be asserted must, however, be assessed on a case-by-case basis. The question must be asked whether and to what extent it is not possible to use the rented space and/or a an unreasonable situation exists. You as the tenant bear the burden of proof. If you are affected by the closure, we recommend contacting the landlord directly to find a joint solution. A letter template for this purpose is available in the download section.

Can I give extraordinary notice of my rental agreement due to the current situation?

There is currently no legal precedent on the matter. Legal experts have the following position: “If the continuation of your business operations seems unfeasible due to the ongoing coronavirus pandemic, this would likely be viewed as what is referred to as good cause according to Art. 266g of the Swiss Code of Obligations. This entitles a tenant to extraordinary dissolution of the rental agreement in observance of the legal notice period of six months to any date of termination. Continuation of the business is deemed to be unreasonable if the use of the space for the agreed purpose is made completely impossible for a longer period of time." For example: You manage a completely furnished restaurant and are obligated to keep certain opening hours. In this case, you as the tenant must be able to prove the existence of an unreasonable situation in a specific case.

To get out of the rental agreement quickly, you have the usual options:

  • You can search for a solvent new tenant or
  • transfer the business to another person.

For both options, the provisions of the Swiss Code of Obligations apply. However, for you as a commercial tenant, an option of terminating the contract with a six-month notice period is not likely to be of any interest, especially if you have made large investments. Moreover, as mentioned above, it is unclear whether the coronavirus crisis would be deemed good cause within the meaning of Art. 266g of the Swiss Code of Obligations. Another decisive factor will be how long the crisis and the closure of your business will last. For this reason, we recommend that you consider the following before you give notice: Is there really no possibility of finding a solution together with your landlord and reaching an agreement regarding rent payments?

I will give up my apartment or business premises at the end of the month. However, I do not want to be present for the handover because of the risk of infection. What can I do?

If you have concerns about handing over the apartment or business premises in person, we advise notifying your landlord of your concerns in writing. Ask them whether you can return the keys by registered mail. The landlord can then complete the acceptance of the rental property by themselves. To avoid subsequent discussions regarding tenant-caused damage, we recommend documenting the condition of the apartment beforehand – possibly also with photos.

Do rent reductions also apply to my private apartment?

Private residences was not covered by the emergency ordinance that applied in spring of 2020. There were also no provisions in this regard for the second wave. Rent is still due and there are no extraordinary termination options.

Other articles for companies on the subject of coronavirus

Important documents
Sample letter to landlord coronavirus