THE CHAMBER OF DEPUTIES APPROVED THE POSTPONEMENT OF RENT PAYMENTS FOR APARTMENTS AND BUSINESS PREMISES IN THE ORIGINAL WORDING
On April 22, 2020, the Chamber of Deputies approved the original version of the government proposed two Act concerning the postponement of rent payments for the lease of apartments or premises used for business purposes. The deputies thus outvoted the Senate proposal, according to which the Czech Republic was supposed to provide landlords with a state guarantee to secure 80% of all tenants’ debts aroused from the unpaid rent. Both Acts are currently only waiting for their confirmation by the president.
Given that both Acts will become effective as soon as they are published, we provide below an overview of the most important changes that will significantly affect the relationship between tenants and landlords, not only during the current crisis caused by the new type of coronavirus SARS-CoV- 2.
LEASE OF BUSINESS PREMISES
The landlord cannot unilaterally terminate the lease relationship during the protection period (which means the period from the date of entry into force of the Act until December 31, 2020), only due to the fact that the tenant is behind in payments of rent for the use of business premises, provided that the delay occurred at a decisive period, i.e. from March 12, 2020, to June 30, 2020, and at the same time mainly as a result of restrictions resulting from anti-epidemic state of emergency, which made it impossible or significantly difficult for the tenant to run its business. The postponement of the rent payment does not apply to the payment of service charges related to the use of the space used for business.
The tenant is obliged to submit to the landlord (no later than fifteen days from the date on which the first delay in payment of rent occurred) documents proving that the delay occurred mainly as a result of restrictions resulting from state of emergency. However, the landlord is not limited to terminate the lease for other reasons and at the same time, he retains other rights arising from the tenant’s default in payments.
If the tenant does not pay all the rent owed during the decisive period until 31 December 2020, the landlord is then entitled to terminate the lease; the notice period, in this case, is 5 days. The landlord has this right even if the tenant declares that he will not pay its debts until December 31, 2020. If the lease expires before December 31, 2020, the tenant is obliged to pay all its debts that became due in the decisive period within 30 days after the termination of the lease.
Finally, the landlord may, after the restrictions arising from the state of emergency expired, but not before the end of the state of emergency, request the cancellation of the lease, if he cannot be fairly required to tolerate the restrictions to an extent specified by the Act (e.g. endanger of the landlord´s livelihood).
LEASES OF APARTMENT, HOUSE OR THEIR PARTS
The new rules relating to the lease of apartments, houses, or their parts are similar in principle (provided that the purpose of the lease is to satisfy the tenant’s housing needs), except for some specific differences.
The landlord cannot unilaterally terminate the lease during the period starting from the entry into force of the Act until December 31, 2020, only because the tenant is in default with the payment of rent. This applies only if the delay occurred in the period from March 12, 2020, to the day following the end of the extraordinary measure (but 31 July 2020 at the latest), and mainly as a result of restrictions resulting from extraordinary measures which made it impossible or significantly difficult for the tenant to pay its rent properly. The obligation to pay the service charges remains intact as well.
A tenant who asks the landlord to postpone the payment of rent must without undue delay and with certainty prove the circumstances concerning the delay in rent payment due to extraordinary measures, by presenting the confirmation issued the relevant Labor Office. To obtain such confirmation, the tenant must provide to the Labor Office documents listed in a methodological guideline. However, the content of the intended methodological guideline is not yet known.
Same as the case of lease of business premises, the landlord retains the right to terminate the lease for other reasons and other rights relating to the tenant’s delay in payments.
If the tenant does not pay by December 31, 2020, all its debts that became due between March 31, 2020, and the day following the day of the end of the extraordinary measure (but no later than 31 July 2020), the landlord has the right terminate the lease without notice. The landlord has this right even if the tenant declares or otherwise becomes unquestionable that he will not pay these debts even within the protection period.
The landlord may, after the effects of the emergency measures are terminated, but not before the end of the state of emergency, request the cancellation of the lease, unless he can justifiably be required to tolerate the restrictions to a specified extent, especially if such measure could endanger its livelihood.
CONSEQUENCES OF POSTPONED RENT PAYMENT
However, in connection with the postponement of the payment of rent, it is not possible to omit the consequences associated with the late payment of monetary debts.
According to the Act on Certain Measures to Mitigate the Impact of the SARS CoV-2 Coronavirus Epidemic on Persons Participant on Court Proceedings, Victims of Crime and Legal Entities and on Amendments to the Insolvency Act and the Enforcement Act (the “Impact Mitigation Act”), which have already been approved by the Senate and signed by the president, when the debtor proves that the restrictions resulting from extraordinary measures made it impossible or significantly difficult for him to fulfill the monetary debt in time, the creditor can only demand the late payment interest in the amount set out by the legal regulation. As a result of this provision, the landlord of business premises is not entitled, e.g. to request the contractually agreed penalty in the event of a delay in the payment of rent. However, the question remains as to the relationship between these Acts.
These effects shall cease by June 30, 2020, at the latest. The provision shall apply to delays that have occurred since March 12, 2020. However, they shall not apply to obligations arising from contracts concluded after the date of entry into force of the Impact Mitigation Act.
For more information on this subject, please feel free to contact:
JUDr. Monika Rutland, partner
rutland & partners, law firm
tel: +420 226 226 026
email: monika.rutland@rutlands.cz
