Note: Rent reductions in Catalonia
In Catalonia, the possibility of renegotiating rents for commercial premises is regulated by the measures introduced to tackle COVID-19. Decree-Law 34/2020 of 20 October, on urgent measures to support economic activity in leased business premises in Catalonia, was published today in the DOGC.
As announced by the Catalan Government, a Decree-Law has been passed under which tenants of commercial premises that have been closed or whose use has been restricted as a result of the measures against COVID-19 will be able to renegotiate their rent.
This regulation sets out the procedure by which tenants may enter into negotiations with property owners to agree, by mutual consent, on a reduction in the monthly rent, and what steps must be taken should the parties be unable to reach an agreement.
To whom does this procedure apply?
1) Closed premises (such as bars, restaurants, gyms, beauty salons, bingo halls, casinos, gaming halls and nightclubs)
2) Premises with partially restricted activities (businesses with limited capacity or altered opening hours, such as theatres, shops, 24-hour outlets and hotels).
Takeaway and home delivery excluded
In both cases, it is necessary that (i) the situation of the premises arises as a result of measures suspending business operations or restricting the use of the premises for industrial and commercial activities; i (ii) the contracts must have been entered into on or after 1 January 1995; and (iii) the provision applies to current income and equivalent amounts.
Procedure to be followed for both types of establishment:
(1) Firstly, the tenant must send a notice to the landlord stating their intention to negotiate a reasonable and fair amendment to the tenancy agreement, with the aim of restoring the balance of obligations and in accordance with the principle of good faith.
The notice must be sent by a reliable means of delivery. From the moment the landlord receives the notice, must refrain from issuing an invoice to the tenant for the rent and related charges until the one-month period for negotiating the contractual amendment has elapsed or, if earlier, until the date on which an agreement is reached.
The negotiations will last for a maximum of one month from the date of the aforementioned notification.
(2) If the parties are unable to reach an agreement within one month:
In the case of closed premises with rental agreements in Catalonia
The Decree stipulates that the rent for closed businesses shall be automatically reduced to 50%, with effect from the day on which the tenant has given notice of their intention to negotiate.
This reduction will apply for the duration of the suspension of activities.
Right to withdraw from the contract:
If the suspension measure lasts for more than 3 months in the course of a year from the date this regulation comes into force, the tenant may choose to withdraw from the tenancy agreement without incurring any penalty, whilst the measure remains in force and up to 3 months after its expiry, provided that they give the landlord one month’s notice in a verifiable manner. .
In the case of premises with partially restricted activities
The Decree stipulates that the reduction in the contribution will also be 50% of the unused portion.
In other words, if a business has its capacity halved, the owner will have to pay the full rent for the half of the premises that they can actually use, but will only pay 50% for the part restricted by the public health measures.
For the purposes of this regulation, takeaway sales and home delivery are not taken into account. For example, if this is the only service a restaurant can offer, the decree-law considers the business to be closed and stipulates that the reduction in rent must still be 50%.
Finally, the Government states that, within two years of the Decree-Law coming into force, a draft bill will be drawn up and approved to incorporate into the Catalan Civil Code provisions aimed at restoring the contractual balance in the event of unforeseen changes in circumstances.
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