Moratorium on the payment of rents for commercial premises due to COVID-19

The RDL 15/2020 of April 21 has come to regulate, among other matters, an aspect that did not have specific regulations in the Urban Leasing Law (LAU) and that is crucial during the state of alarm decreed by the Council of Ministers. This is the possibility of suspending the payment of rent for those tenants whose premises are prohibited from opening to the public due to the COVID-19 pandemic.

The legal prohibition to operate the establishment itself and the exceptionality of this force majeure measure, never adopted until now, allowed, before the promulgation of RDL 15/2020, to apply an interpretation of our legal system that will enable the suspension of rent payment to all those affected. On the one hand, through the analogical interpretation of art. 26 LAU that provides for this solution in the event that the tenant is deprived, totally or partially, of the use of his home due to the execution of works. This measure extends to leases for use other than housing in accordance with art. 30 of the same Law.

If those precepts contemplated the non-demandability of rent to those who were deprived of the operation of an establishment, it was possible to argue the feasibility of that same solution for a similar case such as the closure due to the coronavirus health crisis. On the other hand, the application of the rebus sic stantibus doctrine of jurisprudential creation to contracts between individuals is now generally accepted. It allows the conditions agreed between the parties to be altered in the event of an imbalance in benefits due to events that could not be foreseen at the time of contracting.

RDL 15/2020 approved by the Government on April 21 and validated in the Cortes has come to regulate this area in detail. The essential lines of this reform are the following:

• The tenant can benefit from a moratorium, not from rent exoneration.
• The rents whose payment can be delayed are those accrued during the state of alarm (including its extensions) and, in addition, for a maximum of four additional monthly payments after the end of the state of alarm if that period is insufficient in relation to the impact caused by COVID-19.
• The moratorium will consist of the fractioning of the quotas in a period of two years, which will be counted from the moment in which the aforementioned situation is overcome, or from the end of the aforementioned four-month period, and always within the term of the lease.
• Not all tenants have this benefit; only the self-employed and SMEs that demonstrate compliance with certain requirements related to its art. 3:
• Include the self-employed registered in Social Security or professional Mutual Society as of March 14, 2020.
• That SMEs, due to their size, are within the legal parameters that allow them to formulate annual accounts in an abbreviated manner.
• In both cases, that their activity has been suspended directly or indirectly due to the declaration of alarm or, alternatively, that they have suffered a reduction in billing for the calendar month prior to the one in which the postponement is requested by at least one 75 percent, in relation to the average monthly billing of the quarter to which said month refers to the previous year.
• If the landlord is a large property owner, the moratorium will be applied automatically. A “large holder” is considered to be the owner (either a natural person or a legal entity) of more than 10 urban properties, excluding garages and storage rooms, or a constructed area of more than 1,500 m² .
• If the lessor is not a large holder, only those who expressly request it within one month from the entry into force of the regulation will be entitled to the moratorium, that is, until May 22, 2020 Those who do not make this request within the term will lose their right.
• If the lessee is not a large tenant, the parties may freely dispose of the deposit for the total or partial payment of one or more monthly rent payments. In this case, the lessee must replace the amount of the deposit provided within one year from the conclusion of the agreement or in the remaining term of the contract if it is less than one year.
• It is not an imperative rule, so it will only be applied in the absence of an agreement between the contracting parties.

The publication of this Decree Law closes any possibility of requesting the suspension of the lease with the arguments that could be articulated before this regulation. In its Explanation of Motives it is expressly stated that the Urban Leasing Law does not allow the exclusion of rent payment due to force majeure or due to a declaration of a state of alarm or other causes.

It can be seen, then, that the measure provided for in articles 26 and 30 of reduction or suppression of income is restricted solely to the assumption of execution of works, which hinders its analog application at closing due to alarm status. And it justifies the regulation established precisely as a normative development of the rebus sic stantibus clause, hindering an interpretation by the Courts different from that dictated by the legislator.

More information:”Rights of companies and self-employed before the state of alarm for COVID-19”