In the context of the extraordinary situation arising from COVID-19, the Government has issued the Royal Decree-Law 15/2020 of March 21st on urgent complementary measures to support the economy and employment in order to deal with COVID-19 (hereinafter the Royal Decree). This Royal Decree will enter into force on April 23rd 2020.
The purpose of this note is to set out the provisions stated in the aforementioned regulation regarding non-dwelling leases.
Those measures are, essentially, the following:
- 1. Who may be covered by the measures:
The measures of the Royal Decree are aimed at SMEs and the self-employed.
- 2. Which leases are affected by the Royal Decree:
2.1. Leases for use other than dwellings owned by «large holders».
Individuals or legal entities who are tenants and who have a non-dwelling lease contract, in accordance with the provisions of Article 3 of the Urban Leases Law -basically, business premises-, signed with a landlord who is either a company or a government housing entity or a large holder, and if they meet the requirements established by the Royal Decree Law itself, will be able to request a moratorium (not a waiver or remission) on the payment of the rent, within one month of the entry into force of this Royal Decree Law.
For this purpose, it should be remembered that a large holder is an individual or legal entity that owns more than 10 urban properties, excluding garages and storage rooms, or a built up area of more than 1500m2.
The moratorium on the payment of rent will be applied automatically – therefore, the lessor must assume it – and its duration will be extended during the state of alarm. This moratorium can be extended month by month, with a maximum of 4 months. The Royal Decree-Law itself establishes that the postponement -moratorium- can neither accrue penalties nor interests. The refund of the amount not paid, due to the moratorium, must be made from the following month by means of the division of the instalments within a period of two years or within the remaining contractual period.
The maximum period of two years must be counted from the time when the situation of affectation by the COVID-19 is overcome or the maximum of 4 months established, as long as it is within the term of the lease and any of its extensions.
The moratorium ordered by the Royal Decree analysed shall be understood without prejudice to any other agreements that may have been reached between the parties.
2.2. Other non-dwelling leases: persons or companies without the status of «large holder».
Lessees who are individuals or companies under a non-dwelling lease agreement – basically business premises – with a landlord other than those indicated in the above measure, may request a temporary and extraordinary delay in the payment of the rent, having to request this measure within one month of the entry into force of this Royal Decree Law. In this case, the law provides a power and not an obligation to accept this moratorium, unlike what happens when the tenant is a «large holder».
Among the agreements that may be reached, the Royal Decree provides that the parties may freely use the deposit for the total or partial payment of some or all of the monthly rent. In this case, the deposit must be refunded within one year of the conclusion of the agreement or within the remaining term of the contract, if this is less than one year.
- 3. What requirements must be met by SMEs and self-employed workers in order to be able to benefit from the measures articulated by the Royal Decree:
3.1) In the case of the self-employed, the contract must have as its object a property that is affected by the economic activity carried out by a self-employed person and the following requirements must be met:
– and to be registered as such at the time the state of alarm was decreed,
– develop a suspended activity as a consequence of the alarm state,
– or if the activity has not been suspended, the invoicing has been reduced by 75% in relation to the average invoicing of the quarter to which the said month belongs in relation to the previous year.
3.2) In the case of SMEs, the contract must have as its object a property that is affected by the economic activity carried out by the SME, and the following requirements must be met
– May submit short-form annual accounts,
– Its activity must have been suspended by the decree of the state of alarm
– or, if its activity has not been suspended, its turnover must have been reduced by at least 75% compared with the previous quarter.
- 4. How the measures established by the Royal Decree can be activated.
The tenant must prove that meets the requirements of the RD Law by submitting the following documentation:
– The reduction in activity will be proven by the presentation of a responsible declaration, which will state the reduction in turnover of at least 75% from the previous quarter. However, the lessor may require the lessee to show the accounting books.
– The suspension of the activity must be proved by means of a certificate issued by the State Tax Administration Agency or the competent body, if any, on the declaration of cessation of the activity.
Finally, anyone who requests the benefits of the RD without complying with the requirements will have to pay for the damages caused.
«This document has as its exclusive purpose the disclosure of its contents. It does not constitute advice of any kind and, therefore, cannot be considered as such nor should it be used as a basis for decision making«.