New urgent measures adopted in Catalonia to support the economic activity developed in leased business premises

Written on 25 Nov 2020

The health crisis caused by the pandemic of Covid-19 has forced the competent authorities, the Government among them, to adopt measures of suspension and restriction of economic activities. These measures have impacted directly on some sectors, whose loss of revenue have caused difficulties or the impossibility to comply with their contractual obligations, in particular, of the business premises rent payments. As a consequence, the Autonomous Government of Catalonia have adopted urgent and extraordinary measures to avoid or mitigate these effects.

On 15 October 2020 the Autonomous Government of Catalonia issued the SLT/2546/2020 Resolution by virtue of which new public health measures were approved in order to contain the Covid-19 outbreak in the Catalan territory ("Resolution SLT/2546/2020"). Some of the measures adopted were:

(i) the suspension of restaurant activities in all type of business premises and establishments (except for take away services with prior appointment);

(ii) 50% reduction in the capacity of hotel establishments, cultural activities or shows, with time limit up until 23:00pm; and

(iii) 30% reduction in the capacity of establishments and retail business premises (except those selling food, drinks, sanitary products or any other first aid products, chemist's and optician's shops, among others, that shall reduce their capacity by 50%.).

As a result of Resolution SLT/2546/2020, the Autonomous Government of Catalonia adopted urgent and extraordinary measures to avoid or mitigate the negative impact on sectors affected by the loss of revenue by approving Law Decree 34/2020. This Law Decree, of 20 October, which entered into effect on 22 October 2020, refers to urgent measures aimed at helping business owners of the leased premises (the "Law Decree").

According to the Law Decree, tenants whose use of premises are intended for industrial or commercial activities which have been suspended or restricted as a consequence of the Resolution SLT/2546/2020 and have signed a lease agreement after 1 January 1995, shall be entitled to request their landlord, by certified fax, or by any other certified means, to reasonably and equitable modify the terms of the lease agreement in order to restore the balance between the obligations included in the agreement according to the contractual good faith principle.

In the event the landlord and the tenant do not reach an agreement within a period of 1 month, as from the requirement date specified above, and in case of economic activity is suspended, a 50% reduction shall be applied to the rent and other amounts owed during the period the suspension of the activity is in place.

On the other hand, and applicable to activities that have been partially restricted and, as stated above, in the event the parties do not reach an agreement within 1 month from the requirement, rent and other amounts shall be reduced, for as long as such limiting measures are in place, in a proportion equal to half of the revenue loss because of the restrictions to the activity carried out in the premises. This will be objectively based on the limitation on the capacity or opening hours or other rules set out in the regulation.

Concerning the above, it is worth mentioning that the application of said limitations does not affect the provision of home delivery or take away services carried out at the premises; and, therefore, restoration businesses may provide home delivery or take away services, for example, and also take advantage of these measures.

Additionally, the tenant is granted with the right to request the landlord to charge, totally or partially, any warranties deposited (except for the legal deposit and any other guarantees that have been deposited within official bodies) to the rent or any other similar amounts owed. In any case, by accepting this measure, the tenant must reimburse these warranties within 1 year as from the date the restrictions on industrial or commercial activities disappeared, unless the lease agreement has terminated before said year in which case they must pay them back before the termination date.

In case the suspension of the activity is extended for more than 3 months within a year from the publication of the Law Decree (this is, 22 October 2020), as long as such measures are in place, and up to 3 months after its termination, the tenant shall be entitled to terminate the lease agreement without the obligation to compensate, as long as the landlord has been notified by certified means 1 month prior the date of the Resolution.

Finally, limitations will be applicable from the date in which the tenant requests the modification of the terms of the agreement. Therefore, the landlord may not issue any invoices until one month has passed to negotiate the terms of the lease agreement or, if before, until the date the parties reach an agreement.