In this article we are going to address the various circumstances that homeowners/landlords and tenants may be facing due to the COVID 19 Pandemic, and the State of Emergency declared in Spain.
The Spanish Government, via the approval of Royal Decree-Law 11/2020, has effectively introduced measures to aid vulnerable tenants by means of deferment, or even waiver of rental payments for main residences, whilst at the same time striking a balance between the parties in order to prevent the vulnerability of tenants being transferred to landlords.
The first element that we should analyse is the eligibility criteria that tenants must meet to request rent deferment from their landlords.
Eligible persons are those considered to be in a situation of economic vulnerability due to coronavirus and whom, during the month previous to the request for deferment, find themselves:
– Affected by Temporary Employment Regulation Proceedings (ERTE)
– Under the special reduction in working hours scheme in order to care for dependent adults or minors
It is important to clarify that tenants, in addition to the abovementioned circumstances, must also comply with all of the following requirements in order to be considered to be in a situation of economic vulnerability:
– That the joint household income does not reach, in general terms, the limit of three times the Public Indicator of Multiple Effect Incomes (IPREM), which amounts to some 1,614 € per month. Depending on the household members, or circumstances of each household, this amount could increase by applying corrective indexes
– That the rent payable, plus expenses and basic supplies and amenities, is equal to or exceeds 35% of the overall net income received by the household members as a whole
– That no member of the household is a homeowner or usufructuary of a dwelling in Spain
In turn, the regulations stipulate that official documentation must be presented as proof of economic vulnerability. Nonetheless, it is understood that given the circumstances of the State of Emergency, it is complicated, if not impossible, to obtain said documentation. Therefore, tenants are permitted to present an affidavit confirming compliance with the relevant criteria required, in order to be considered to lack sufficient financial resources. Once the alarm state and its extensions have come to an end, the tenant shall have a period of one month to present the required documentation not already provided.
Regarding the landlord’s duty to defer payment of rent, or to waive it, different scenarios have been established depending on the type of landlord in question. Accordingly, a differentiation has been made between:
Landlords and “major real estate holders”, the latter being those that own more than ten urban properties, this excludes parking lots and storage rooms, or a constructed area of more than 1,500 m2.
In the scenario that the parties do not reach a voluntary agreement, the landlord must expressly notify the tenant, within a maximum period of 7 working days, of his decision chosen from the following options:
- a) To reduce rent by 50% for the duration of the State of Emergency, and for the subsequent monthly payments if that period were to prove insufficient in relation to the situation of vulnerability. Under no circumstances shall this period exceed four calendar months
- b) To defer payment of rent, this will be applied automatically and shall be applicable for the duration of the State of Emergency together with subsequent monthly payments, renewable on a monthly basis, in the case that the initial period is insufficient in relation to the vulnerability of the tenant. Under no circumstances shall this period exceed four calendar months
The rent shall be deferred, as from the next monthly rental payment due, by dividing the instalments over a period of at least three years, which shall be counted as from the end of the above-mentioned term of four calendar months, and provided that it falls within the duration of the lease term, or any extensions to the contract.
For the remainder of the landlords, that is to say, those whom are not considered to be “large real estate holders”, being landlords who own less than 10 dwellings, may accept, at the tenant’s request, and on a voluntary basis, the temporary deferment of rental payment or total or partial waiver thereof.
In this case, and once the request has been received, the landlord shall inform the tenant about the deferment conditions within a maximum period of seven working days, or the conditions that he or she considers acceptable for restructuring the debt, or any possible alternatives that he or she wishes to propose.
Given the case that the landlord does not to accept any deferment agreement, and provided that the tenant is considered to be in the aforementioned situation of vulnerability, he or she may have access to a program of transitional financing aid. This aid is provided in the form of loans from financial entities, aimed to cover the payment of rent, guaranteed by the Government, for people who find themselves in a situation of vulnerability.
It is important to highlight that in the case of rent deferment the tenant shall not be liable for any type of penalisation, and the deferred amounts shall be payable to the landlord interest free.
At MSG LEGAL, as highly experienced lawyers specialising in Property Law, we are at your disposal to advise and assist you with any doubts or queries that you may have during this unexpected State of Emergency due to the COVID-19 Pandemic. The scenario is changing on a daily basis, together with the decisions and regulations that the Spanish authorities are adopting. Therefore, in one way or another, it is always possible to find an alternative option or a different solution to any issue that may arise throughout these uncertain times.
Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice.