Measures regarding rent of properties during Coronavirus crisis.

 

The Government has provided some measures regarding the rental of properties. We will cover the main points here, distinguishing between rental for residential use and for business use. As the Royal Decree-law 11/2020, of 31 March, which adopts additional urgent social and economic measures to tackle COVID-19 (“RDL11/2020”),says on the preamble:  in Spain 85% of landlords are not legal entities but small landlords who owns one or two properties. I hope you will find this info useful.

What´s the situation regarding tenancy agreements for family home

Firstly, there are two possible scenarios depending on who the landlord is:

1. If the landlord has more than 10 properties (case of vulture funds for example): Is the Landlord choice but must make one. Landlord must choose between a 50% rent reduction or a moratorium on the payment while the state of alarm lasts and up to a maximum of four months later.  The rent is to be paid back on installments during the next three years and without interests.
2. If the landlord has less than 10 properties: Upon the request of the tenant, the landlord shall communicate whether he provides a reduction or a moratorium. In case that both parties don’t reach an agreement, the tenant could ask for one of the subsidies the government has provided.  If you are a tenant, you cannot obligate the owner to reduce the rental.

There is no direct help regarding Landlords (even when lot of them have their only income through the rent), but the Spanish government will grant loans to tenants so they can pay the rent.

What are the public subsidies we are talking about?

The government will regulate soon measures in order to grant loans to tenants who fail to pay their rent due to Coronavirus. The Spanish government would be the main guarantor of these loans. These subsidies will cover a six months period of the rental, to being paid back within six years, without any interest. However, tenants will have to proof they are eligible to this kind of help from the government, being in a position of social or financial vulnerability as a result of the COVID-19 crisis.

To prove that the tenant is vulnerable, he must provide the following evidences, as is said at art. 5 and 6 of the royal decree.

1. Being unemployed, by means of a certificate issued by the entity that manages the benefits, which shows the monthly amount received as unemployment benefits or subsidies.
2. In case of cessation of activity of self-employed workers, a certificate issued Tax Administration or the competent body of the Autonomous Community, where appropriate, based on the declaration of cessation of activity.
3. Number of people living in the habitual residence: registration certificate relating to the persons registered in the dwelling in the previous six months. (Certificate de empadronamiento) Declaration of disability, dependency or permanent disability.
4. In case of not being able to provide any of the documents, a responsible statement (declaracion responsable) that includes the express justification of the reasons that prevent the contribution of the rent would suffice.
5. The monthly rent, plus basic expenses and supplies must be greater than or equal to 35% of the net income received by all the members of the family unit.
6. e) That none of the members of the family unit owns a home or has a home in Spain in usufruct. You will have to prove that you cannot access that property to receive the rental aid.
7. After the end of the state of alarm and its extensions, you will have a period of one month to provide the documents that have not been provided.

Suspension on repossessions and evictions in the case of vulnerable households

Landlords cannot evict tenants during the alarm period within a maximum period of six months. Of course, all unpaid rents will have to be paid in the future, but landlords can´t sue at the moment in order to evict the tenant.

Extension of rental agreements for residential purpose.

Those rental agreements which are to finish on the period within the state of alarm and two months after it´s finished, will be extended another six months.

However, this extension is non mandatory for any of the parties involved. This means that it requires the acceptance of the landlord.

However, another interpretation could be made regarding the mandatory extension provided at the regulatory ordinary law (tenant can renew as his pleasure the first 5 years without acceptance of the landlord). Time will tell once this particular case reaches the courts.

What about commercial lease agreement regarding business premises?

Nothing as being regulated on this aspect.

However, there is a law principle to be taken into account: Rebus sic stantibus . This concept stipulates that, since there is a change of circumstances due to force majeure, a party may withdraw from or terminate the contract in question. Is kind of a hardship clause.

However, please notice that the Landlord could sue you for breach of contract if you do not pay.  This is not clear yet. This cases haven´t reach court yet, and there is a huge uncertainty related. In time, judicial precedents will tell what the solution was.

These times of Coronavirus outbreak are uncertain regarding legal aspect. Also, this crisis has affected all of us, tenants and landlords. That’s why I strongly recommend all of you who are affected to reach a solution amicably. Try to leave courts out of this whenever is possible, try to understand each other, and reach a settlement. We are all suffering this situation.