04 Nov The Catalan Government intervenes in the regulation of the commercial rental market.
As a result of the COVID-19 pandemic, the authorities have had to take measures to suspend or restrict industrial and commercial activities. As a result, the Catalan Government has established by law that the tenants of premises affected by these suspensions and restrictions have the right to adapt their lease agreements to these circumstances by negotiating with the landlord or, failing that, by establishing certain measures ex lege.
On 22nd October, Decree-Law 34/2020, of 20th October, on urgent measures to support economic activity in rented business premises, approved by the Catalan government, came into force. This law intervenes in the rental market, establishing the possibility of reducing the rental income of establishments and commercial premises affected by the obligation to close down totally or partially due to the approved measures to prevent the spread of COVID-19.
The Decree-Law establishes the right for tenants to require landlords to “reasonably and equitably modify the conditions of the contract”, i.e. that the parties themselves establish the modifications to the contract by mutual agreement, in order to adapt it to the current situation. However, in the event that the parties do not reach an agreement within a period of one month, the Decree-Law establishes certain rules that will be automatically and forcefully applied to the contract in question. In such a case a distinction is made between whether the activity of the tenant has been suspended totally or only partially.
In the case of a total suspension, a reduction of 50% of the monthly rent is established for the duration of the suspension. If the activity is only partially suspended, the rent must be reduced by half of the loss of capacity or time slot. The rent reductions are effective from the date of the letter of formal notice from the tenant to change the contractual conditions. An important aspect to take into account is that home delivery or pick-up of goods in establishments does not affect the reductions provided for.
It must also be taken into account that as soon as the landlord receives the request from the tenant, he or she cannot issue an invoice against the latter for the amount of the rent and other costs until the monthly period for negotiating the contractual modification has elapsed or, if applicable, until the date of the agreement.
Finally, it is also possible for the tenant to demand from the landlord that the rent and other costs be charged for the guarantees previously provided by the tenant and held by the landlord, with the exception of the legal deposit.
In the event that the government’s restrictions are extended for more than three months, the tenant is granted the right to terminate the contract without any penalty, as long as he gives one month’s notice.
According to the Catalan government, this regulation seeks to “share costs between owner and tenants, so that the cost of the pandemic does not fall exclusively on one of the parties”. On the other hand, some market experts defend that the loss of income should not be assumed by either the owners or the business tenants, but by the very administration that has established the restrictions. Finally, two circumstances must be taken into account for this Decree-Law to remain in force; firstly, as it is a Decree-Law approved by the Catalan Government, it must be approved by the Catalan Parliament, and secondly, the central government must not appeal against this regulation before the Constitutional Court.
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