1) PURPOSE OF THIS NOTE
Below is a summary of the main measures approved by the Government of Catalonia on October 20, 2020, through Decree Law 34/2020, on urgent measures to support economic activity in leased business premises, whose contracts were signed from January 1, 1995.
It came into force on October 22, 2020 and the aim of the Catalan Government was to intervene in the rental market of industrial and commercial establishments (bars, restaurants, stores, gyms, hotels, etc.) in Catalonia, in order to counteract the suspension of economic activities that the Government may dictate as a result of the COVID-19.
2) MEASURES OF THE CATALAN GOVERNMENT
In order to economically relieve the establishments, in view of the total or partial restrictions of their activities that have been introduced by the Administrations to fight the health crisis, the Government has decided to adopt an ad hoc regulation.
The position it has taken is based on a “criterion of distribution of the negative consequences of prohibitions, suspensions and restrictions imposed to prevent the spread of the pandemic”, as well as “an equal and equitable distribution of the negative consequences, thus socializing the risk and avoiding to make it burden only on one of the contracting parties”. All this without accepting any responsibility on the part of the Administration, nor assuming any obligation to help.
Taking into account these bases, we have broken down the main aspects of the new regulation:
2.1 Previous considerations
As announced in the explanatory memorandum of the Decree Law, the measures adopted limit their effectiveness to the duration of the prohibitions or restrictions issued by the competent authority, and are established as default rules in case the parties do not reach a satisfactory agreement within a reasonable period of time.
Lessees may request from the lessor by ‘burofax’ or other reliable means, “a reasonable and equitable modification of the conditions of the contract” and from the moment the lessor receives such notification, he is prohibited from sending rental invoices to the lessee.
The Decree Law forces an express negotiation of 1 month (counting from the mentioned requirement) between tenants and landlords that, in case of failure, will derive in the measures exposed below.
2.2 Suspension of the activity
The rent and other amounts owed by the tenant will be reduced by 50% compared to those in force during the suspension.
2.3 Partial restriction
The rents must be reduced in a proportion equal to half of the loss of useful space of the property, measured both in terms of capacity and hours.
2.4 Delivery/Take Away
Home delivery or collection of products in the establishment does not affect the above-mentioned reductions.
This means that income from home delivery or collection on the premises will not affect the reductions in payments provided for.
2.5 Guarantees
The tenant may require the owner to collect the rent and other expenses due from the guarantees deposited, except for the obligatory legal deposit and other guarantees deposited with the competent official body.
However, the tenant must return the guarantees that have been charged within one year of the end of the suspension of the activity or the restriction of the material use of the rented property, and in any case before the end of the contract if its duration is shorter.
2.6 Resolution
If the Government’s restrictions are extended for more than 3 months, the tenant may terminate the contract without penalty, provided that he gives the landlord 1 month’s notice.
3) REBUS SIC STANTIBUS CLAUSE
Initially the Government had announced a modification of the Catalan Civil Code with the intention of including a legislative regulation of the Rebus Sic Stantibus clause.
This clause is a general principle of law (not a rule) that can come into play when there is: 1) an extraordinary alteration of circumstances between the time of conclusion of the contract and the time of performance; 2) there is an exorbitant disproportion between the services provided by the parties; 3) the cause is radically unforeseeable; 4) there is no other means of saving the damage.
But finally, the Government has chosen to extrapolate the essence of this clause to a future Bill, which will establish in a concrete manner the general regulation necessary to re-establish contractual balance in the event of unforeseen changes in circumstances.
4) Final considerations
The above is a brief summary of the main novelties in relation to the recently approved regulations in force. However, this decree law must be ratified by Parliament and can be appealed to the Constitutional Court. We will keep you informed of any new legislative developments related to the effects of the COVID-19.
If you have any queries regarding the effects of COVID-19, please do not hesitate to contact this firm by e-mail at info@busquets-abogados.com.