THE GOVERNMENT APPROVED THE PROPOSAL OF THE ACT TARGETED ON PROTECTION OF TENANTS OF BUSINESS PREMISES
On April 1, 2020, the Czech government approved the proposed Act on Certain Measures to Mitigate the Impact of the SARS CoV-2 Coronavirus Epidemic on Tenants of Business Premises, submitted by the Ministry of Industry and Trade, headed by the Minister of the Minister Karel Havlíček (hereinafter referred to as the “Proposal”).
According to Havlíček, the Proposal primarily concerns on retail businesses and service providers. Tenants should now have two years to pay the rent and service charges (i.e. by 31 March 2022 at latest).
The final version of the Proposal, prepared by the Ministry of Industry and Trade, will be soon submitted to the Parliament of the Czech Republic for short discussion in the state of legislative emergency.
The Proposal should apply to the lease or sublease of a space or room where the purpose of the lease is to carry on a business activity. At the same time, subject to certain conditions, it will also cover leaseholds.
According to the Proposal, the Landlord shall not be allowed to unilaterally terminate the lease relationship during the protective period (which means the period from the effective date of this Act until March 31, 2022 (hereinafter referred to as the “Protective Period”), on the grounds that the Tenant is in in default of payment of rent or service charges related to the use of business premises, if the default occurred:
(i) at the decisive period, i.e. from March 12, 2020, to June 30, 2020 (hereinafter the “Decisive Period”), and
(ii) largely as a result of restrictions resulting from the anti-epidemic emergency measures that made it impossible or significantly hindered for the Tenant to carry on with its business.
However, the right to terminate the lease for other reasons or any other rights of the Landlord arising from the Tenant´s default in payments shall not be affected. The Landlord thus remains fully entitled to the interest on late payments or contractual penalties, even if the Landlord has acquired such right during the duration of emergency measures that make the Tenant’s business activity impossible or substantially impeded.
If the Tenant fails to pay all debts (that have become due at the Decisive Period) during the Protection Period, the Landlord has the right to terminate the lease; the notice period in such case is 5 days. The Landlord shall have this right even if the Tenant declares or otherwise becomes unquestionable that the Tenant will not pay these claims even during the Protection Period.
Once the restrictions that made it impossible or substantially hindered to operate the Tenant’s business are ceased, the Landlord shall be then entitled to demand the termination of the lease if it cannot reasonably be required to tolerate the proposed lease restrictions, especially if the rent is the sole source of its livelihood.
With regard to the urgent need to ensure the protection of Tenants of business premises, the Proposal shall become effective on the day of publication of the final Act.
It needs to be mentioned that the Proposal does not in any way address the issue of the Landlord´s obligation to pay the VAT, even if the rent or service charges are not actually being paid by the Tenant due to the extraordinary situation.
For more information on this subject, please feel free to contact:
Mgr. Ing. Michael Novák, partner
rutland & partners, law firm
tel: +420 226 226 026
email: michael.novak@rutlands.cz
