New moratorium on renting business establishments and industrial premises

At the end of last year, the Government published the Royal-Decree-Law 35/2020, which regulates a new moratorium on renting property used for purposes other than housing (business establishments) or industrial premises, as long as the following prerequisites are fulfilled:

Lessees, (self-employed workers and SMEs that submit abbreviated accounts) can benefit from it, if they have not filed for bankruptcy and as long as their business activities have been suspended due to the state of alarm declared in October or their turnover has dropped by at least 75%, using the turnover of the month before they ask to be covered under this moratorium as a reference and comparing it with the average turnover of the same quarter of the previous year.

  • Furthermore, the lessor must be a company, a public entity or a “big property owner” (the owner of more than ten urban properties-excluding garages and storage rooms– or a gross floor area of more than 1500 m2).
  • And, of course, that no prior agreements between the parties to reduce or defer the rent have been reached.

If these requirements are fulfilled and before the 31st of January, 2021, the lessee can ask the lessor to do one of the following two things:

  • Reduce the rent by 50% for as long as the current state of alarm lasts (in principle it ends on the 9th of May) and for up to another 4 months after it ends.
  • A moratorium in the payment during the state of alarm (which can also be extended for another 4 months afterwards). The amount deferred can be paid in the next two years, without any penalties being imposed or interest being charged.

The lessor has seven working days to inform the lessee about which of these two options has been chosen (if the lessor does not make a decision, the option chosen by the lessee will be used)..

If the lessor is not a large property owner according to the aforesaid definition, they can refuse to comply with the lessee’s request. In this case the law establishes that the interested parties can use a deposit to pay monthly rent payments, which must be topped up within a year.

As we can see, this new regulation does not provide any solutions that are very different to those of the previous moratorium on rent declared by the Government, which means that when it comes to property that is rented from lessors that are not considered to be big property owners, basically it will be up to the parties to come to an agreement on the matter.

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