Today, on the same day of its publication, a Decree-Law approved by the Catalan Government on the 20th of October (hereinafter, the “Decree“) comes into force with the aim of promoting negotiations between owners and tenants of commercial and industrial premises regarding the reduction of rentals during the periods of suspension or restriction of activity imposed during the Covid 19 sanitary crisis. In fact since last Friday and for 15 days restaurants and bars are closed. Since weeks, indoor capacity limits apply to many other activities as well in Catalonia.
We summarize the regulation below:
- Tenants of premises where industrial and commercial activities are conducted are empowered to require the owners a reasonable and equitable modification of the conditions of the contract to restore its balance.
- If the parties do not reach an agreement within one (1) month of such requirement, the following shall apply:
1) In case of suspension of the tenant’s activity: reduction of 50% of the rent and other amounts due to the landlord for the duration of the suspension;
2) In case of partial restriction of the actual exploitation of the premises: reduction of the rent and other amounts due to the landlord by half the loss of exploitation of the premises, measured objectively by the reduction of the capacity or of the opening hours or by other mandatory restrictions.
The provision of home delivery services or take away does not impede the application of the above rules;
3) The tenant may request the landlord to use any amounts deposited as guarantee for the execution of the lease (except for the legal bond) and apply them to the payments due. The guarantees applied must be restored within one (1) year as of the end of circumstances described in paragraphs 1) and 2) above, or before the end of the contract, whichever is earlier.
4) In the event that the suspension of the activity is extended for more than three (3) months in the course of one (1) year from today, the tenants may opt out from the contract without any penalty, provided that one (1)-month’s early notice is filed. Termination by the tenant may only be filed during the period of suspension and up to three (3) months after the end of the said period.
Reductions of rent and other charges owed by tenants shall apply from the date of the request for modification of the contractual conditions. Once the requirement has been received, the landlord must refrain from issuing an invoice against the tenants for the rent and other charges due until the period of one (1) month devoted to negotiations has elapsed, or until the date on which they reach an agreement, if this occurs earlier.
Finally, the provisions of this Decree will apply regardless of the agreements reached by the parties on these matters prior its entry into force.
The Decree aims to encouraging negotiation between the contracting parties avoiding litigation that could collapse the activity of the courts of justice, and seeks to implement a quick system to solve conflicts (the decree describes it as “a quick formula for an emergency situation“).
Victoria González and José Villarín