Leases for non-residential use and urgent measures adopted by Royal Legislative Decree 15/2020 to support the economy and employment


The BOE of 22 April 2020 published Royal Legislative Decree 15/2020, which adopted urgent measures to support the economy and employment, including those relating to non-residential leases arranged by SMEs and the self-employed, when their activity has been suspended or drastically reduced as a result of the declaration of the state of emergency by Royal Decree 463/2020.

In the explanatory memorandum to the Royal Legislative Decree in question, which is entitled “Measures to reduce the operating costs of SMEs and the self-employed“, it is stated that the declaration of a state of emergency entails halting or reducing income in a way that seriously jeopardises the continuity of the activities of the self-employed and SMEs, and that such a situation entails the need to provide for specific regulation to allow for the moderation or modification of contractual obligations in line with the “rebus sic stantibus” clause developed in Spanish case law.

However, far from establishing measures to reduce costs, the only measure imposed by the Royal Decree is that of rent deferrals in cases where the landlords hold large property portfolios.

In fact, Royal Legislative Decree 15/2020 distinguishes between leases for non-residential use signed with landlords considered to be large property holders and those signed with the rest of landlords who do not hold large portfolios.

 

LARGE SCALE LEASES

When the landlord is a company or public housing entity, or a large portfolio holder (natural person or business that owns more than 10 urban properties – excluding garages and storage rooms – or a built area of more than 1,500 m2), the tenant who meets the requirements may request, no later than 23 May 2020, a deferral of the payment of their rent.

The postponement provided for by this Royal Legislative Decree refers to the monthly payments due during the state of emergency and its extensions, and if this period is insufficient in relation to the economic impact caused by the health crisis, to subsequent monthly payments, which may under no circumstances exceed four months.

The postponement will not entail any penalties or accrual of interest, and it will take effect, once requested, from the next monthly rental payment, the relevant amounts due being divided up over a period of two years, calculated from the moment that the aforementioned crisis situation is overcome or, in any case, once four months have elapsed following the state of emergency.

This postponement must be accepted by the landlord and will be applied automatically, unless an agreement has already been reached between the parties on a moratorium or reduction of rent.

In other words, the only measure adopted is the postponement of rent under the conditions described above, a measure which in our opinion will be of little help to alleviate the serious consequences that the declaration of the state of emergency, the closure of establishments open to the public, and the confinement of people have had for the self-employed and SMEs that have been brought to a standstill or have seen their activity reduced.

 

OTHER LEASES

Natural persons or businesses that hold rental contracts for purposes other than housing, where the landlord is not a large property holder, may ask the landlord, before 23 May 2020, for a temporary and extraordinary postponement in the payment of the rent, provided that a postponement or reduction has not been previously agreed upon by the parties.

The parties may freely agree to make use of the guarantee deposit for the total or partial payment of the rent, though the tenant must restore this amount within one year of entering into such an agreement or during the remaining term of the contract, if this is less than one year.

Although nothing is said about the rest of the guarantees (additional guarantee, deposit or bond), it is understood that the parties will still be free to negotiate what they consider appropriate in this respect.

In short, for leases signed with landlords that do not hold large property portfolios, no measure is adopted by the Royal Legislative Decree that entails a reduction in costs. It merely allows the parties to reach agreements, a circumstance that is obvious and does not need to be established by any provision.

 

TENANTS AFFECTED BY THE MEASURES TAKEN

The measures adopted by the Royal Legislative Decree are applicable to SMEs and the self-employed who meet the following requirements:

 

THE SELF-EMPLOYED

    • rental contracts must refer to a property used for the business activity carried out by the self-employed person, when this person is affiliated and properly registered, on the date on which the state of emergency was declared by Royal Decree 463/2020 of 14 March, under the Special Social Security Regime for Independent or Self-Employed Workers, or with one of the alternative mutual insurance companies, or under the Special Social Security Regime for Marine Workers.
    • Their activity must have been suspended by Royal Decree 463/2020 or by orders delegated thereunder.
    • If their activity has not been suspended, proof must be given of a reduction of at least 75% in turnover during the month prior to the request to the landlord, based on average monthly turnover for the quarter to which that month belongs, with reference to the previous year.

SMES

The requirements for SMEs are as follows:

    • That the limits established in Article 257.1 of the Spanish Capital Companies Act are not exceeded, namely that (a) its total assets do not exceed 4 million euros, (b) the net amount of its annual turnover does not exceed 8 million euros, and (c) its average number of employees does not exceed 50.
    • Its activity must have been suspended by Royal Decree 463/2020 or by orders delegated under it.
    • If its activity has not been suspended, proof must be given of a reduction of at least 75% in turnover during the month prior to the request to the landlord, based on the average monthly turnover for the quarter to which that month belongs, with reference to the previous year.

 

In conclusion, it will be necessary to make a case by case analysis and look at the conditions met by landlords and tenants to determine the measures applicable to them under Royal Legislative Decree 15/2020, without abandoning the possibility of trying to reach reasonable agreements with the owners in order to share, albeit in part, the serious damage resulting from the health crisis caused by Covid-19. What seems clear is that Royal Legislative Decree 15/2020 will not make such agreements easy, since the measures that have been established will be used by landlords to argue that these are the measures that they must accept, and no others.