Extraordinary measures concerning commercial rents

The extraordinary measures concerning commercial rents also derive from RDL 8/2020. When we talk about the Contracts for the rent of commercial premises, a clear question arises: Can the tenant demand their temporary modification due to the Coronavirus crisis?

We are going to try to clarify this question in the clearest way possible, following the opinion of the experts of our Legal Consulting Department.

Extraordinary measures concerning commercial rents

Royal Decree 463/2020, (State of Health Alarm) decreed, among other measures, the suspension of the opening to the public of many retail shops throughout the country. This situation will be maintained until the end of the current State of Alarm. The question that tenants of such premises are asking today is whether the lease can be changed. And how, through the application of moratoriums, shortages or rent reductions.

When the President of the Government explained the package of economic measures decreed to alleviate the effects of the coronavirus crisis, he appealed to solidarity, sacrifice and good faith, referring to the owners of real estate and premises. He implied that the State would not, for the time being, regulate these private-law relationships. And we have confirmed this when we see that Royal Decree 465/2020, published yesterday, does not contain any kind of measure in relation to this issue.

Application to contracts for the rental of commercial premises

We consider that the conditions of these contracts can be modified in application of the principle Rebus sic stantibu. Which can be claimed by the tenant of commercial premises. When at present and until the end of the state of alarm, it cannot be opened to the public due to a legal prohibition. Because:

There is currently a substantial alteration of circumstances with respect to the time of hire. Now the premises cannot be opened for an undetermined period of time. Whereas when the tenant was hired, he planned to keep it open all year round.
The substantial alteration is in every respect extraordinary. It could not therefore have been foreseen by the parties at the time of the contract. In other words, the current situation cannot be considered a “normal contract risk”.
It is also a matter of circumstances beyond the control of the tenant, of force majeure, and decreed by the Spanish Government.
The current circumstances militate against the equivalence of the parties’ performance. Since the tenant would be obliged to pay rent for premises that he cannot use for the purpose for which they were rented.

How should the conditions of the contract be changed?

In our opinion, a reasonable and balanced solution would be to reduce the rent to be paid by the tenant to the landlord. In an amount equal to half of the amount he would have to pay during the period that, by legal imperative, he cannot have the premises open.

It would not be fair for the landlord to bear the entire loss generated by an extraordinary event.

In any case, it will be necessary to carry out a detailed analysis of each specific case. Study the contract, and assess the consequences that may arise from the actions to be taken. Without ever losing sight of the fact that it will always be more interesting to reach an agreement between the parties or, in the event of a disagreement, to resort to professional mediation for this purpose. Since, we reiterate, the application of the jurisprudential principle explained in this article should always be the last resort, to be used only in the case of not being able to reach a negotiated solution between the parties.

Legal Background

Although under the principle of freedom of agreement the parties are free to agree what they are entitled to at any given time (and therefore, after reaching agreement on new conditions to be applied to the contract, these could be applied without any major inconvenience, it being advisable to put such agreement in writing), many tenants consult us these days about their options in the event that the owner does not agree to modify the conditions of the contract in force.

The Rebus sic stantibus principle is a general principle of law by virtue of which it is understood that contractual stipulations or agreements can be modified due to the substantial alteration of the circumstances given at a given moment with respect to those existing at the time of contracting. Provided that such alteration is extraordinary, not foreseen by the parties and whose effects infringe the equivalence of the services originally established at the time of the conclusion of the contract. Serving as a sort of remedy to the imbalance generated between the parties.

Due to the aforementioned requirement of extraordinary nature, this is a principle whose invocation and application is always exceptional. And in whose development the Supreme Court has played a fundamental role. In its ruling No. 64/2015 of 24 February – RJ 2015\1409, the Supreme Court (Civil Chamber, Section 1)

In the words of the High Court: “This is an exceptional legal institute, which must only be applied when there is an extraordinary alteration of circumstances at the time of performance of the contract in relation to those concurrent with its conclusion, an exorbitant disproportion of the benefits that occur with the occurrence of unforeseeable circumstances and that there is no other means of remedying the damage or the absence of foreseeable future revisions, with the refusal that there has been an exorbitant disproportion outside any calculation”.

If you have any questions, please do not hesitate to contact us.