Moratorium on renting commercial premises for coronavirus

Today, 23 April, Royal Decree Law 15/2020 of 21 April on urgent complementary measures to support the economy and employment has come into force. In this law, a new package of measures has been approved which reinforces, complements and extends those previously adopted and focuses on support for companies and workers.

Lack of or reduced income during the state of emergency may result in the financial inability of the self-employed and SMEs to meet, in whole or in part, their obligations to pay rent for rented premises, thereby seriously jeopardising the continuity of their activities.

Which contracts does it apply to?

The approved moratorium can be applied to the following types of contracts:

  • Non-property leases. According to the LAU, these are contracting whose function is not to satisfy the need for property.

In particular, this consideration will apply to rentals of urban properties entered into for the season, whether it is the summer season or any other, and to those entered into for the purpose of carrying out an industrial, commercial, craft, professional, recreational, welfare, cultural or educational activity on the property, regardless of who enters into them.

  • Industrial leases, which are those contracts by virtue of which the exploitation is transferred to another person, for a certain price and a certain period of time, that is, not only the premises are rented but also the business.

Who can apply for a moratorium on rental payments?

Not all tenants of commercial premises will be eligible for the moratorium on rent approved by the Government, but a number of requirements must be met.

The self-employed and small and medium-sized tenants may apply for these measures if they meet the following requirements:

Self-employed. They must meet the following requirements:

  • Be affiliated to and in a situation of registration on the date of declaration of the State of Alarm in the RETA or in the Special Social Security regime for Sea Workers or, where appropriate, in one of the Mutual Insurance Companies that replace the RETA.
  • That its activity has been suspended as a result of the Declaration of the State of Alarm, or if it has not been suspended, that it has a reduction in turnover of 75% with respect to the quarterly turnover of the previous year.

SMEs may also apply for a moratorium on the payment of rent for commercial premises, provided that they meet the following requirements

That the limits established in Articles 257.1 of the Law on Corporations are not exceeded:

  • That the total of the items of the assets does not exceed four million euros.
  • That the net amount of their annual turnover does not exceed eight million euros.
  • That the average number of workers employed during the year does not exceed fifty.

That its activity has been suspended as a result of the Declaration of the State of Alarm, or in the event that it has not been suspended, that it has a reduction in turnover of 75% with respect to the quarterly turnover of the previous year.

How must compliance with these requirements be proven?

Article 4 of the Royal Decree-Law establishes that, in order to prove that the aforementioned requirements have been met, tenants must provide the following documentation

  • The 75% reduction in turnover may be accredited by means of a responsible declaration. However, if the lessor so requests, the accounting books must be shown to prove the reduction in activity.
  • And the cessation of activity shall be evidenced by a certificate issued by the AEAT or the competent body of the Autonomous Communities.

What is the rent moratorium?

The Royal Decree-Law, in regulating the moratorium on rental payments, makes a distinction according to who is renting:

  • When the landlord is a “large holder”:

A large holder is understood to be a public company and the owner of more than 10 properties (not counting parking spaces or storage rooms or a constructed area of more than 1.500 m2).

In this case, the tenant may request an extension of the payment of the rent due during the State of Alarm and its extensions and to the following monthly payments, which may be extended one by one, if that period is insufficient to combat the economic impact of the Covid-19, the maximum moratorium allowed being 4 months from the end of the State of Alarm.

The rent will be deferred without any penalty or interest, allowing the instalments to be divided over a maximum period of 2 years (or during the term of the contract, if the remaining period for the termination of the contract is less).

When can I apply?

The tenant may request a moratorium from the landlord within one month of the entry into force of this Royal Decree-Law and this must be accepted by the landlord, unless an agreement has already been reached between the two parties on a moratorium or reduction of rent prior to the approval of the Royal Decree.

  • When the lessor is not a “large holder

In the event that the owner of the premises is neither a company, nor a large holder, nor a public entity, in these cases a temporary and extraordinary postponement of the payment of the rent may also be requested, establishing the possibility of charging the deposit paid against the payment of these rents, with the tenant having a period of one year to re-deposit the deposit from the conclusion of the agreement or within the remaining period of validity of the contract, if this period is less than one year.

How should I apply for the moratorium?

The tenant must request the moratorium from the landlord within one month of the entry into force of this Royal Decree-Law, which comes into force on 23 April 2020, i.e. between 23 April 2020 and 23 May 2020.

It is recommended that this communication be made in writing, indicating compliance with the requirements and accompanying the documentation accrediting compliance with the requirements.

This moratorium may be requested provided that no agreement on a moratorium or a rent reduction has already been reached with the lessor prior to the approval of the Royal Decree.