Unconstitutionality of Legislative Decree 34/2020, of October 20, on urgent measures to support the economic activity performed in leased business premises

On 29 November 2022, the Plenary Council of the Constitutional Court issued a decision upholding the unconstitutionality issue raised by the Court of First Instance No. 11 of Barcelona in a proceeding involving a request for a rent review in a lease agreement for business premises, due to the unforeseen and unforeseeable change of circumstances caused by the health crisis resulting from Covid-19.

The purpose of this unconstitutionality issue was to determine whether Article 2.1, letters a) and b) of Legislative Decree 34/2020, of October 20, of the Government of the Generalitat de Cataluña, on urgent measures to support economic activity performed in leased business premises, violated the competence attributed to the State by Article 149.1.8 of the Spanish Constitution in respect of “bases of contractual obligations”.

Specifically, letters a) and b) of Article 2.1 of Legislative Decree 34/2020 provided that:

Article 2. Rules applicable in the absence of agreement between the parties.

“1. In the event that the parties do not reach an agreement through negotiation or mediation within a period of one month from the notice provided for in article 1, the following rules shall apply:

(a) In case of suspension of the performance of the activity, the rent and other amounts due by the lessee party shall be reduced by fifty percent with respect to those currently in force, for the duration of the suspension measure.

b) In case of partial restriction of the material use of the property, the rent and other amounts due by the lessee shall be reduced, for the duration of the restriction measures, in a proportion equal to half of the loss of use of the property, objectively measured by the reduction of capacity or opening hours or by other restrictions imposed by the regulation”.

The unconstitutionality issue was upheld by the Constitutional Court, which considered that the principle of freedom of rent must be respected, this being part of a contractual obligation, for which the State has exclusive competence:

“The challenged precepts of Legislative Decree 34/2020 establish measures aimed at limiting the rent in these contracts, and they therefore have a direct impact on the service that constitutes the main obligation of the lessee, and directly affect the binding structure of private contractual relations. The determination of the rent in this contract is subject to an autonomy of will and to the principle of freedom of agreement, in the terms provided for in art. 4.3 of the Urban Leasing Law, and supplementarily in art. 1255 of the Civil Code. Consequently, similarly to the terms established for housing lease contracts, and in the terms set out in Constitutional Court Ruling nº 37/2022, this respect for the principle of freedom to fix the rent forms part of the bases for contractual obligations, reserved exclusively to the State by art. 149.1.8 of the Spanish Constitution. This means that the autonomous legislator does not have the necessary competence to affect the rules for determining the rent derived from the lease of business premises, and it is therefore appropriate to declare the unconstitutionality and nullity of the challenged precepts.

Regarding the temporal scope of the effects of the declaration of unconstitutionality, it specifies that:

it will not affect consolidated legal situations, since the principle of legal certainty enshrined in art. 9.3 of the Spanish Constitution and the need to meet the legitimate aim of ensuring stability in pre-existing contractual relations, makes it advisable to limit the effects of this judgment, maintaining the terms of the business premise lease contracts entered into prior to the time of this decision, to which the precepts whose unconstitutionality and nullity is declared apply”.

Taking into account that Legislative Decree 34/2020 was repealed with effect from May 19, 2022, by repealing provision 12 of Decree-Law 5/2022, of May 17, on urgent measures to help mitigate the effects of the war in Ukraine on Catalonia and to update certain measures adopted during the Covid-19 pandemic, the effects of the declared unconstitutionality will be minimal since, on the one hand, it does not apply at the present time, since it is not in force and, on the other, agreements signed prior to that date cannot be reviewed.