The worldwide pandemic generated by COVID 19 is making the different governments, both at national and regional level, adopt legal measures directed at reconciling the health objective of containing the spread of the virus with achieving a lesser impact on the economy.
In this context, the Generalitat de Catalunya (Government of Catalonia) is adopting different measures in the area of civil law, and specifically with regard to rentals. Recently, measures were adopted aimed at containing rentals on housing in certain areas with tense prices as we explained in our recent article RESTRAINT ON RENT: HOUSING LEASE AGREEMENTS IN CATALONIA.
Subsequently, it was the turn of the lease on business premises. The Generalitat has approved Decree law 34/2020 of 20th October on urgent measures for supporting business activity carried out in rented business premises. This regulation affects lease agreements on properties leased for the development of industrial and commercial activities, the main object being that lessees may continue with their activity, and consequently preserve employment.
Primarily, this regulation is aimed at giving priority to the freedom of choice of the parties, so that, in accordance with the principles of contractual good faith, they arrive at agreements in lease relationships. Accordingly, this allows those lessees affected by the limitations on activity imposed by the authorities as a consequence of COVID 19 to call for the lessor to modify the lease agreement. In order to benefit from this right, the lease agreement must have been signed as of 1st January 1995 and the request must be channelled through a registered fax (burofax) or by other irrefutable means.
The lawmaker understands that the closures and limitations on activities mean an alteration to the balance of the benefits, to the detriment of the lessee. For this reason, an obligation is imposed, so that in the absence of reaching an agreement by the parties within the term of one month as from the moment that the lessee requests the modification of the contract, the rent of the contract must be reduced by certain fixed percentages.
For cases where the activity carried out on the premises is stopped completely, the rent and other amounts owed by the lessee must be reduced by 50% while the activity is ceased.
If, on the other hand, the restriction on the activity is partial, the rent and other amounts owed by the lessee must be reduced, while the restrictive measures last, in a proportion equal to half of the loss of utilisation of the property. In order to measure this loss, objective parameters must be used in response to the reduction in capacity or timetables or other limitations imposed by law.
These reductions in rent and amounts owed are understood to be effective as from the date of the request made by the lessee for the renegotiation of the conditions of the contract. So much so that the lessor is prohibited from issuing an invoice until the term of negotiation of one month has passed, or until the date of the agreement, if this is achieved before this deadline.
The regulation establishes that the aforementioned reductions shall not be affected by the existence or non-existence of home delivery services or the collection of products in the establishment. This seems to indicate that the fact that home delivery or collection activities exist may not be an argument on the part of the lessor for refusing a reduction in the rent.
In the absence of an agreement, the lessee is also permitted to demand that the lessor allocates, either fully or partially, any amounts which ensure the compliance with their obligations, such a deposit, to all or part of the payment of rent and any other overdue amounts. Nevertheless, the obligatory legal deposit and other guarantees deposited with the official competent authority are excluded. However, the lessee must return these guarantees and deposits used as rent, within the term of one year as from the disappearance of the circumstances of suspension or restriction of the activity; and, in any case, before the end of the contract if the duration thereof is less.
We must point out that where the cease of an activity takes place for more than three months (we understand that suspensions of a shorter duration may be accumulated) as from the 22nd October 2020 and for a year following this date, the lessee is allowed to withdraw from the contract without penalty. This right is held while the activity is suspended and for three months following the complete cease of the suspensory measures. The withdrawal must be carried out via notification to the lessor with one month’s advance notice, also by irrefutable means.
Jaime Madero
Vilá abogados
For more information, please contact:
30th October 2020
