Moratorium on business premises leases by COVID19

Following the declaration by the World Health Organization of the international pandemic caused by COVID-19 on March 11, the rapid spread, both nationally and internationally, has motivated the need to react quickly and to adopt urgent and forceful measures with the aim of cushioning the impact of this unprecedented crisis.Royal Decree 463/2020 of March 14 declared a state of alarm for the management of the health crisis situation caused by COVID-19, which includes, among other issues, limitations on freedom of movement, with the effects this entails for workers, companies and citizens. In this article I will try to explain the scope of the moratorium on the payment of rents approved in RD-law 15/2020, of April 21, on urgent complementary measures to support the economy and employment, with the aim of checking the impact that it may have on all businesses through leases of business premises.In this regard, the moratorium will be examined from different perspectives:1.- Rents affected; 2.- One of the measures adopted to reduce costs for SMEs and the self-employed contained in RDL 15/2020, of April 21, consists of the possibility of requesting a moratorium on the payment of rent for leases for use other than as a dwelling, i.e., leases of business premises.The provisions of the law must be complied with, provided that all the requirements set forth therein are met, and it is articulated as a basic rule, since it does not prevent the parties, lessor and lessee, from reaching a different agreement that allows for longer moratoriums than those provided for in this law, or even rent waivers or reductions in the agreed rent amounts; in fact, the approval of the law will not allow the revision of those agreements reached prior to the entry into force of the law.This rule applies to leases for uses other than housing, essentially to leases of business premises, provided that the lessor is a company or public housing entity, or a "large tenant". A large tenant is a natural or legal person who is the lessee of more than 10 urban properties, excluding garages, storage rooms, or a built-up area of more than 1,500 m2. In the case of a large tenant, the moratorium will be mandatory, and will apply automatically, without the lessor being able to object.On the other hand, when the lessor is not a large tenant, and despite the fact that article 2 of the law makes mention of leases held by a lessor who is not a "large tenant", the fact is that, as the rule is drafted, it is not articulated as an obligation that must be accepted by the lessor. If the lessee makes use of the possibility established in this article to request a temporary and extraordinary postponement in the payment of the debt, and the lessor does not accept it, he will not be able to demand it by other means, since the automatic application of this moratorium is not contemplated, so it depends on the agreement of the parties.Another measure that is articulated is the possibility of using the deposit delivered as guarantee of the lease obligations, which as we know, is of two months for leases for use other than housing for the payment of the rent. However, this measure will depend on the agreement reached between the parties; in practice, in the absence of an agreement, if the tenant requests that the security deposit be imputed to the rent and the tenant does not accept it, an eviction action for non-payment may be brought in court, which can only be reversed if the tenant proceeds to pay the security deposit.As for the requirements to be met by the lessee, in order to benefit from the mandatory moratorium provided for in Article 1 of RDL 15/2020, the lessee must be a self-employed or an SME, and we remind you that, in general, the following companies fall into this category:

• Microenterprises: They have less than 10 people and their annual turnover or annual balance sheet total does not exceed two million euros.
• Small companies: They have less than 50 people and their annual turnover or annual balance sheet does not exceed 10 million euros.
• Medium-sized companies: They have less than 250 people and their annual turnover does not exceed 50 million euros or their annual balance sheet does not exceed 43 million euros.

In the case of self-employed hoteliers, they must be affiliated and registered on the date of declaration of the state of alarm, i.e. March 14, 2020.In addition, it is required that the activity has been suspended by the state of alarm or by any of the subsequent resolutions, which is applicable to the hotel establishment, whose activity of opening to the public is suspended according to the order of the Ministry of Health SND/257/2020.Thus, the request for moratorium must be made within one month from the entry into force of RDL 15/2020, so it can be made until May 23, 2020, and will last for a maximum of four months. As it is a moratorium, i.e., a deferral of payment, and not a waiver of rent, it must be paid within a maximum period of two years, which will be counted once the state of alarm has ended, or of the four months deferred, by means of installment payments. In any case, if the lease is for a term of less than two years, the rent must be paid before the end of the lease term. If the parties have agreed to use the security deposit as payment of rent, the lessee must replace it within one year after the agreement has been reached, or within the remaining term of the lease if it is less.In any case, the lessee must prove to the lessor that he complies with the requirements of the law; however, if the lessee benefits from the moratorium without complying with the requirements, he will be liable for the damages that he may have caused as well as the expenses that may have been generated.

José Luis Valencia (Lawyer T&L)