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Housing lease contracts in the current State of Alarm

What in principle could be a good starting point, since the measures related to leasing contracts and adopted by the Government of Spain through Royal Decree-Law 11/2020, of the 31st of March, are intended to preserve compliance of the agreements; the rule does not contemplate any special regulation regarding the leases of business premises.

Juan Carlos López-Morago

Date 12/04/2020

What in principle could be a good starting point, since the measures related to leasing contracts and adopted by the Government of Spain through Royal Decree-Law 11/2020, of the 31st of March, are intended to preserve compliance of the agreements; the rule does not contemplate any special regulation regarding the leases of business premises.

In this article we analyse the content of the measures adopted in RDL 11/2020, leaving, for a second part, how to respond to those affected by the Alert State whose lease contracts, as they are different from housing, they have been excluded from the Royal Decree-law.

 

PART I

ANALYSIS OF MEASURES RELATED TO LEASE CONTRACTS UNDER ROYAL DECREE-LAW 11/2020, OF THE 31st OF MARCH.

The aforementioned norm aims to support the most vulnerable families and groups, which have been affected by the paralysis of a large part of economic activity as a consequence of COVID-19, referring exclusively to the rental of habitual housing regulated in the Law of Urban Leases. , ignoring any other mention to the leases of business premises or seasonal housing rentals.

And fo this, it considers five measures that we list below;

1.- Suspends eviction procedures and launches for vulnerable homes and/or without occupational alternatives, that have been started or are starting, for a maximum period of 6 months from the 1st of April 2020.

Thus, once the lessee alleges the situation of economic vulnerability, which can be carried out at any time from the end of the state of alarm, if the Lawyer of the Administration of Justice understands that he is concurring, he will decree the suspension retroactively from the date on which it occurred and with a duration for the time strictly necessary, following the report of the social services.

Exceptionally, if the landlord proves, before the Court, that he is also in a situation of special vulnerability caused by COVID 19, it will be decided whether or not the extraordinary suspension is pertinent or other social protection measures can be adopted.

2.- Extraordinary extension of the leases of habitual residence.

Regardless of the situation of the lessee or the lessor, those habitual residence contracts that expire due to the expiration of the legal term within the period between the entry into force of the RDL and the two months following the end of the state of alarm, they may be extended, at the request of the lessee, a maximum period of 6 months, and under the same contractual conditions.

3.- Deferral of rent.

The rule distinguishes between two cases in which deferment of rent payment can be requested:

a) When the lessor owns more than ten properties or a constructed area of more than 1,500 square meters - public or private entities -:

The lessor will only have two alternatives to choose from, with a mandatory nature:

(i) reduce the rent to 50% while the alarm lasts and up to a maximum of 4 monthly payments

(ii) a deferment of the payment of the income accrued during the alarm period and up to a maximum of four months, by dividing the instalments, for at least three years and without interest.

If the lessee agrees to the financing program provided in this RD, from the moment he obtains the aid, the deferment of payment to the lessor will be ineffective.

b) When the lessor, whether a natural or legal person, has less than ten properties:

The tenant in a vulnerable situation may request temporary and extraordinary deferment measures, which in the event that they are not adopted, since they are not mandatory for the lessor, they will grant the lessee the right to resort to bank loans guaranteed by the ICO to finance six months of rent, without expenses or interest, to return within a maximum period of ten years.

4.- Definition of the situation of economic vulnerability:

As indicated, these measures have been issued only for tenants who are in a vulnerable situation and who have signed a lease contract for their usual home. So second homes or vacation homes are ruled out.

The definition and accreditation of the vulnerability situation will require;

 

  • That the tenant becomes permanently or temporarily unemployed (ERTE), or has reduced his workday due to care or, in the case of being an entrepreneur or professional, has suffered a substantial loss in his income.
  • That the total income of the family unit does not exceed in the previous month three times the IPREM (Public Indicator of Multiple Effects Income).
  • In addition to the previous requirement, the vulnerability situation regulated by the RDL requires that, in addition, the sum of the rental income, expenses and basic supplies, be equal to or greater than 35 per cent of the "net income" received by all household members.

It is worth mentioning that the rule excludes from the scope of economic vulnerability, those tenants who are owners or usufructuaries, they or any member of the same family unit, of any dwelling in Spain. Although not excluded from vulnerability, those tenants who, owning another home, are unable to access or access it, due to separation or divorce.

5.- Aid for tenants:

The rule establishes two types of aid:

  • Guarantees with full coverage of the state to guarantee the return of transitory financing aid that banks may offer to tenants in vulnerable situations as a result of COVID-19. Said aid must be used to pay the rental income for the use of housing, up to a maximum of 6 monthly payments. They must be returned within a maximum period of 10 years and do not accrue interest or expenses.
  • The granting of rental aids through direct awarding to individuals who are tenants of their habitual residence in situations of vulnerability as a consequence of COVID-19, who have temporary problems to attend to the partial or total payment of the rent. Its amount will be up to € 900 per month and up to 100% of the rental income or, where appropriate, up to 100% of the loan that has been subscribed for the satisfaction of the rental payment of the habitual residence.
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