In accordance with article 61.2 of the Insolvency Act, in the interest of the insolvency proceedings, the Insolvency Court may terminate contracts where there is a pending fulfilment of reciprocal obligations on the part of the insolvent company, on the understanding that the satisfaction of credit, as well as the continuity of business activity are in the interest of the proceedings.
In this respect, the following question was raised: ¿is said decision-making capacity of the insolvency court applicable to rental contracts which bind the insolvent company and which are prior to the entry into force of the current Urban Renting Act (rent-controlled contracts)?
The recent judgement 660/2016 of the High Court, dated 10th November, came to resolve said question, establishing that indeed, rent-controlled contracts are not excluded from the decision-making capacity of the courts, meaning that, if it is deemed to be in the interest of the insolvency proceedings, they may be terminated in the same way as any other contract with reciprocal obligations.
In this particular case, and as is common with rent-controlled contracts, the rent that the lessee of business premises was obliged to pay was disproportionately less than the market rental value.
Pursuant thereto, the High Court understood that the resolution of the rental contract was in the interest of the insolvency proceedings, without prejudice to the financial compensation to be covered by the bankruptcy assets to be established in favour of the lessee, equivalent to the result of multiplying the difference between the rent that was being paid and the market rental value by the remaining duration of the rental contract in accordance with the transitory rules of the compulsory extension of the Urban Renting Act of 1994.
Ismael Marina Schneider
Vilá Abogados
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5th of January 2017
