Date Published: 22/10/2020
ARCHIVED - 50 per cent rent cut for businesses closed by coronavirus restrictions; Catalan Government passes new law
ARCHIVED ARTICLE Bars and restaurants benefit as proportional reductions apply to partial closures
The regional government of Catalunya passed a law on Tuesday by which the rental of commercial properties to businesses which are unable to carry on their normal activities due to Covid-19 restrictions, such as bars and restaurants, must be reduced by up to 50 per cent.
In Catalonia all bars and restaurants have been forced to close by the regional Government as part of measures to fight covid in one of the worst affected regions of Spain. Two attempts by representatives of the hostelry sector to obtain a judicial reversal of the order have failed.
This measure has been adopted as the regional Government believes that businesses and landlords should equally bear the financial burden of the lockdowns.
The figure of 50 per cent is specified for those business concerns which are required to close down completely, while in the cases of other businesses proportional reductions are now required by law if no agreement can be reached between landlord and tenant. Given the dire straits in which many businesses now find themselves as a result of the pandemic, the move is an attempt to help them out and to enable them to survive by reducing their fixed costs, and the wording of the legislation includes specific reference to the need for “solidarity” on the part of landlords.
Importantly, the legislation still leaves the possibility open for landlord and tenant to reach agreement on a reduction in rental independently of the application of the law, but if such agreement is not forthcoming a scale of reductions based on the proportional suspension of business activity is established: the aim of this is to promote the resolution of disputes without long delays or legal costs. The possible involvement of legal representation and court proceedings has effectively been bypassed, no doubt to the relief of both the courts themselves (where long delays are already the norm due to the number of cases pending) and the businesses concerned, many of which would quite probably go out of business while waiting for their cases to be resolved.
The measures outlined in the law will become applicable as soon as a tenant requests from the landlord a modification of the rental contract to reflect the current situation: this marks the start of a negotiation period during which all rental payments are suspended, again encouraging the rapid response of landlords.
In the case of businesses which have not been required to close down during the pandemic but whose operations have been severely affected, the stipulation is that the rent must be reduced by a proportion equivalent to half of the useful area which has been made useless by Covid restrictions. This calculation takes into account not only square metres but also restrictions on the number of people allowed inside at any one time and on opening hours, while home deliveries and the collection of orders made online are not taken into account.
At the same time, the Catalan government has also approved the creation of a 40-million-euro fund to provide direct help to businesses and sole traders affected by coronavirus prevention measures, and a credit line of 20 million euros in order to provide loan guarantees.
Meanwhile, it is reported that the national government of Spain is contemplating the introduction of similar legislation, although it seems that rental caps are unlikely to be included in the next national budget.