Are there any temporary measures applicable to lease agreements or the exploitation of real estate in shopping centres?

Until 31 December 2020, it is suspended:

  • The effects of termination of residential and non-residential lease agreements made by the landlord;
  • The lapsing due to the course of time of residential and non-residential lease agreements, unless the tenant does not object to the end of the lease;
  • The effects of the termination and of the opposition to the renewal of residential and non-residential lease agreements made by the landlord;
  • The six-month period to reinstate the leased property after the end of the lease term, whenever this six-month period term fails while said measures are in force.
  • The foreclosure of a mortgage on a property that is the permanent residence of the foreclosed party.

This suspension applies to rents due from October to December 2020 and from January to June 2021 and depends on the regular payment of the rent due that month (except in the case of non-residential tenants who have adhered to the moratorium on rent payment).

In the case of a lease agreement for non-residential purposes relating to premises which, by legal or administrative decision from the Government, were closed in March 2020 and remain closed on 1st January 2021, the duration of the respective agreement is extended for a period equal to the duration of the closure measure, and this suspension of effect applies for the new duration of the agreement. This extension is counted from the original term of the agreement and may never result in a new period of duration of the agreement which ends before six months have elapsed from the lifting of the closure measure, and depends on the actual payment of rents falling due from the date of reopening of the premises, unless they have been deferred.

The suspension of effects and the extension of the duration of the lease shall cease if, at any time, the tenant declares to the landlord that he does not wish to benefit from them or if the tenant is in default as regards the payment of the rent due as from the date of reopening of the premises, unless they have deferred the payment thereof.

While the transitional measures are in force, eviction legal actions or special eviction procedures for the return of leased properties are also suspended when the tenant, by virtue of the final court decision to be issued, may be placed in a situation of fragility due to lack of own housing or any other relevant reason that deserves social protection.

In cases where specific forms of contracts for the exploitation of real estate for commerce and services in shopping centres are applicable, no minimum rental amounts are due from 13th March to 31st December 2020, being only due to the owners of the shopping centres the variable part of the rent, calculated on sales made by the shopkeeper, being the latter still responsible for the payment of all contractually agreed expenses, namely those related to common expenses and charges (under article 168-A/5, of Law 2/2020, of 31 March, as amended by Law 27-A/2020, of 24 July, with the interpretative rule provided by Law no. 4-A/2021). Afterwards and until 30th June 2021, the fixed or minimum monthly rental payment by shopkeepers of premises open to the public in shopping centres is reduced in proportion to the reduction in monthly revenue (with a limit of up to 50% of such minimum monthly rent), when such premises have a drop in their monthly sales volume compared to2019´s same month's sales volume (or, if not applicable, the average sales volume of the last six months preceding the Decree from the President of the Republic - of 18th March - declaring the state of emergency, or a shorter period, if applicable).

An exceptional regime was also approved for situations of delay in the payment of rents due under residential and non-residential lease agreements (and other similar contractual regimes for commercial purposes). This regime does not prejudice the existence of more favourable regimes to the tenant, resulting from the law or an agreement, entered into or to be executed by the parties, namely debt write-offs or rent payment deferral agreements. In the case of a non-residential lease, if there is a previous  agreement that establishes less favourable conditions for the tenant, the same is void upon communication to be sent by the tenant to the landlord by 20 September, 2020 (the clauses of waiver of rights attributed by law or waiver of recourse to judicial means and acceptance of increases in rent or the period of the contract are void, and the amounts that have already been paid as rent shall not be returned).

On the other hand, compensation for late payment of rent falling due in the months when deferment is possible is not payable when the requirements of such deferment are met.

 


What measures of moratorium in the payment of rents have been created?

Provided certain conditions are met, residential tenants may defer the payment of rents due from April to June 2020.

The rents deferred by residential tenants shall be paid within 12 months after the end of such period, in monthly instalments not lower than one-twelfth of the total amount, together with the monthly rent due under the agreement.

Non-residential tenants may defer the payment of rent due (i) in the months in which the state of emergency was in force and in May 2021 (the first month thereafter), (ii) during the months in which their premises are closed or their activities suspended following a legal or administrative measure approved within the context of the COVID-19 pandemic and (ii) in the three month-period following the end of the mandatory closure of its premises or suspension of activities, provided that such deferral does not apply, in any case, to rents due after 31st December, 2020. In this case, the deferred rents shall be paid in equal monthly instalments within 24 months’ period, as of 1st January 2021 to 31st December 2022.

The (non-residential) tenant whose premises have been closed (by legal or administrative decision of the Government) since at least March 2020 and which still remain closed on 1st January 2021, may also, without this being considered a default or delay in the payment of the rents in question for any legal purposes:

(i)                  defer again the payment of rents due in 2020 (which payment has already been deferred);

(ii)                defer the payment of rents due in 2021 corresponding to the months in which the establishment is closed.

In these cases, the deferred rent regularisation period is from 1st January 2022 to 31st December 2023. In any case, the monthly instalments correspond to the total amount due split by 24, to be paid together with the rent of the month in question or up to the eighth calendar day of each month, in the case of non-monthly rent. Rents already paid are not considered for the purposes of calculating the total amount due.

As an alternative to this solution, the non-residential tenant may propose to the landlord a rental payment agreement for the payment of rents overdue and falling due.

If the tenant (residential or non-residential) terminates the lease, the payment of the pending instalments becomes immediately due.

 

Who can access to this moratorium?

As regards residential lease agreements, tenants can benefit from the moratorium when there is a drop of more than 20% of the household's income compared to the income of February 2020, the previous month or the same period of the previous year, and the household effort rate, calculated as a percentage of the income of all household members, is equal to or greater than 35%.

As regards non-residential lease agreements, tenants can benefit from the moratorium in respect of:

  • Premises leased for retail or services purposes open to the public that have been closed or which activities have been suspended by virtue of the execution of the state of emergency, namely under Decree no. 2-A/2020, of 20th March, as well as, following the end of the state of emergency, by virtue of legal or administrative order issued in the context of the Covid-19 outbreak demanding for the closure of the leased premises or the suspension of the tenants’ activity, including those that maintain their activity through e-commerce channels, or be means of the provision of services remotely or through an electronic platform; or
  • Premises leased for food & beverage or similar purposes closed pursuant to the legal or administrative orders referred above, including those that maintain their activity limited to take-away or home delivery, under the terms provided for in Decree no. 2- A/2020, of 20th March, or any other similar provision

The above-mentioned rent payment deferral regime does not apply to premises located in shopping centres that either benefit from a rent reduction or a discount regime or from the minimum rent exemption, as per article 168-A/5, of Law 2/2020, of 31 March, best described above.

 

What is the procedure to adopt in order to benefit from this moratorium or to present an alternative proposal of rent payment agreement?

Residential tenants have a duty to inform the landlord that they intend to benefit from the moratorium regime, in writing, up to 5 days before the due date of the first rent in relation to which they intend to benefit from this regime, attaching supporting documentation of such situation (under the terms of Ordinance no. 91/2020 of 14th April as amended by Ordinance no. 26-A/2021 of 2nd February). If the tenant intends to benefit from the moratorium regime in relation to the rent due on 1st April 2020, the tenant shall notify the landlord of this intention within 20 days after this law comes into force.

Non-residential tenants intending to (i) benefit from this regime (the moratorium, the new deferral of rents due in 2020 or the deferral of rents due in 2021) or, alternatively, (ii) present a proposal for a rental payment agreement other than this solution (applicable to rents due between 1st July and 31st December 2020), must notify the landlord of their intention.

Non-residential tenants must make this communication in writing, and remit the same by registered mail with acknowledgment of receipt to the address foreseen in the lease agreement or in the immediately previous communication received from the landlord, up to five days before the first rent in which they intend to benefit from this regime becomes due, or, in the case of rent payable from July, up until 10th September, 2020.

Within the same period, non-residential tenants may submit a proposal for a payment agreement different from this regime. The acceptance of the agreement or the refusal thereof must be expressed by the landlord, in writing, by registered mail with acknowledgment of receipt to the address of the leased property, within 10 days upon receiving the proposal from the tenant (under penalty of being considered that the landlord expresses his agreement to the proposal). The landlord may, within the same period, present a counteroffer to the tenant, to which the latter must respond within 10 days. Its rejection by the tenant or the lack of  response (within the deadline) determines the application of the moratorium regime provided for by law.

The aforementioned communications by the non-residential tenant must also make express reference to (i) the 10-day response deadline for the landlord, (ii) the landlord’s possibility to accept, refuse or present a counteroffer, and (iii) the consequences to the landlord’s lack of response, under penalty of this communication being considered ineffective.

 

Does this moratorium regime have other impacts over lease agreements?

Landlords cannot demand the payment of the compensation legally provided in case of delay in the payment of rents (i.e., 20% on the value of the rent in arrears), in relation to rents under the moratorium regime.

Landlords of residential lease agreements are only entitled to terminate the lease due to non-payment of rent if the tenant, having deferred the payment of rents due from April to June 2020, does not make its payment, within 12 months from the end of that period, in monthly instalments of not less than one twelfth of the total amount, paid together with the rent for each month. Landlords of non-residential lease agreements under the moratorium regime cannot invoke as grounds for termination or for eviction of the leased premises the default on payment of rents due in the months that benefit from the moratorium regime, nor as grounds for the obligation to vacate the properties.

In the course of the exceptional situation of prevention, containment, mitigation and treatment of the epidemiological infection caused by SARS-CoV-2 and the COVID-19 disease, the landlord cannot execute bank guarantees due to non-payment of non-residential rent.

 

Is there any other financial support for the payment of rent?

For the payment of rents due from 1st April 2020 to 1st July 2021, residential tenants, as well as, in the case of students who do not earn income from work, their guarantors, who have a proven drop in income that allows them to benefit from the moratorium (under the terms of Ordinance no. 91/2020 of 14th April, as amended by Ordinance no. 26-A/2021 of 2nd February), and are unable to pay the rent of the properties used as their permanent residency or, in the case of students thattheir educational establishments are located at a distance greater than 50 km from their household, can apply to the Institute of Housing and Urban Renovation, P.I. (IHRU, I.P.), for the granting of an interest-free loan to support the difference between the amount of monthly rent due and the amount resulting from the application of a maximum effort rate of 35% to the household income, in order to allow the payment of the rent due, being that the remaining disposable income of the household cannot be lower than the social support index (IAS). In the case of low-income borrowers, whose effort rate to pay the rent is or becomes bigger than 35% and lower than 100%, the loan is converted in its entirety, upon application, into non-repayable financial assistance.

Those who benefit of this support must send quarterly updated information proving such drop in income. This measure applies to rents due from 1st April 2020 to 1st September 2020. This measure is not applicable to residential tenants whose income drop origins a reduction in the rent amount due, under the terms of special lease or rental regimes, such as supported leasing, supported rent and social rent.

On the other hand, non-residential tenants who suffered a revenue drop between 25% and 40% in 2020, receive a non-repayable grant equivalent to 30% of the rent amount, with a ceiling of 1200 (euro) per month. Those who have lost more than 40% of their revenue receive a non-repayable grant equivalent to 50% of the rent amount, with a ceiling of 2000 (euro) per month.

 

Is there any measure to support the landlords?

Landlords of non-residential lease agreements whose tenants (i) fail to make the rent, (ii) defer again the payment of rent due in 2020 and/or (iii) defer the payment of rent due in 2021, may legally apply for a reduced cost credit line to support the difference between the amount of monthly rent due and the amount resulting from the application to the monthly income, or to the landlord's monthly invoicing, of a maximum debt-to-income ratio of 35%, the demonstration of which is made under the terms of the ordinance to be approved by the member of the government responsible for the area of ​​economy.

 

__________________________

This information is being updated on a regular basis.

All information contained herein and all opinions expressed are of a general nature and are not intended to substitute recourse to expert legal advice for the resolution of real cases.