Building law and regulation in Germany during Covid-19

Specific construction-relevant regulations do not exist, unlike in tenancy law (temporary suspension of termination right due to non-payment ).

However, a general payment moratorium for consumers and micro enterprises may apply to contracts for work and services if they create a continuing obligation (Art. 5 Sect. 1 para. 1, 2 Law to mitigate consequences of COVID-19 in civil, insolvency and criminal procedure).

A decree of the Federal Ministry of the Interior (BMI) orders the continuation of construction work on federal construction sites until further notice.

 Economic Stabilisation Fund (WSF) for Germany including recapitalisation measures amounting to EUR 100 billion and loans of up to EUR 100 billion to refinance German public support bank KfW special programs. Ac-cess to these instruments is granted to companies with a balance sheet total of more than EUR 43 million, revenues of more than EUR 50 million, more than 249 employees on an annual basis.

Special support programs of the KfW. Further information and an overview of support programs can be found at: https://www.kfw.de/KfW-Konzern/Newsroom/Aktuelles/KfW-Corona-Hilfe-Unternehmen.html.

An overview of support programs of the federal government, the federal states and the European Union can be found at www.foerderdatenbank.de.

Distinctions must be made between contracts under the German Civil Code (BGB) and the VOB/B, which are largely used conditions of contract.

a)    Contracts under VOB/B:

A pandemic such as COVID-19 can, in principle, constitute a case of force majeure (Sect. 6 para. 2 No. 1c) VOB/B). Force majeure gives rise to extension of time claims (EoT) of the contractor (Sect. 6 para 4 VOB/B). Claims for damages or compensation against the contractor are excluded.

Please note that the mere reference to COVID-19 and a precautionary cessation of work are not sufficient in order to constitute force majeure.

b)    Contracts under the German Civil Code (BGB):

If a contract does not include clauses on force majeure (which is pretty much market standard), general regulations on impossibility of performance (Sect. 275 BGB) and a disruption of contract (Störung der Geschäftsgrundlage, Sect. 313 BGB) shall apply. 

Impossibility of performance leads to a lapse of the obligation to perform. At the same time, the claim to consideration shall expire (Sect. 326 BGB). This would be the case, for example, if all or the majority of the contractor's employees are ill or quarantined and the contractor cannot perform the service under assistance of third parties or if necessary, material is no longer available (e.g. due to supply bottlenecks) and it is impossible to obtain these materials. 

A disruption of contract (Sect. 313 BGB) requires that circumstances which have become the basis of the contract change significantly and as a result, it is unacceptable for one of the parties to adhere to the contract. In this case, an adjustment of the contract can be demanded, also a termination or rescission is possible. However, please note, that the risk of exorbitant price increases is generally borne by the contractor, so that a disruption of contract cannot be assumed without further ado.

Either party may terminate the agreement for good cause. This requires that it is unacceptable for the terminating party to continue the contractual relationship.  High hurdles, financial hardship/ liquidity risks due to COVID-19 are generally not sufficient. Furthermore, in this case, force majeure or a disruption of contract do not apply.

BGB/ VOB/B grants the client a free right of termination. In this case the contractor is generally entitled to full remuneration. Since cost savings resulting from an alternative use of labour must be deducted, it is common practice to pay the contractor 5% of the agreed remuneration. However, if the contractor does not obtain any other engagements as a result of COVID-19, he may be entitled to higher/ full remuneration. 

Furthermore, the VOB/B provides a right of termination for both parties in Sect. 6 para. 7 VOB/B, if construction work is interrupted for longer than three months.

As of now, there are no construction-relevant COVID-19 regulations or prohibitions/operating restrictions in place resulting in changes of law. As a general note, a specific change in law doctrine does not exist in German law. A change in law may lead to a lapse of contractual obligations due to impossibility, an adjustment of the contract or termination rights of the parties (see above question 3, 4).

It may be advisable, to include clauses on force majeure in future contracts. As clients and contractors are now aware of supply bottlenecks, price increases, work stoppages etc. it may in the future no longer be possible to classify the currently existing effects of the COVID-19 as force majeure without a corresponding contractual clause.

Both federal and state authorities have issued guidelines and regulations concerning occupational health and safety. These contain, in particular, regulations on distancing and hygiene on construction sites. Since the requirements differ from state to state, it is advisable to check the regulations applicable in the respective state, where the construction site is located.