The legislative process concerning statutory reduction of rents in shopping centers during periods of mandatory Covid-19 closures has come to an end. The new regulations will come into force on July 23rd, 2021.
New regulations on rents during mandatory closures due to Covid-19
As we reported in previous editions of our LEGALIO’s Latest, legislative work had been underway to improve the situation of shopping centers’ tenants during closures imposed to prevent the spread of the pandemic. This process has recently resulted in enactment of new regulations in this regard. According to them, rents for premises in shopping centers with an area of more than 2,000 sq. m. will be reduced by 80% for the duration of mandatory closures and by 50% for three months after the closure is lifted.
This reduction will only apply to lease agreements concluded before March 14th, 2020 and, according to the legislator’s intentions, only for periods of mandatory closures falling after July 23rd, 2021. The reduction will be based on the rate of rent that a tenant was obliged to pay as of March 14th, 2020.
Either party to the lease will be entitled to apply for a court ruling adjusting the rate of the reduction. The court will grant such application if it is demonstrated that a different (higher or lower) rate is more appropriate in the circumstances of a particular case.
Repeal of the previous tenant protection regime
As of July 23rd, 2021, the new regime will replace the existing one. The current provisions offer tenants a possibility to obtain exemption from the entire rent due for the time of the closure on the condition that they make an offer to the landlord to extend the lease by a period corresponding to the time during which the stores had to be closed plus six months. Such offer must be made within 3 months as of the date of lifting of a mandatory closure.
The Government came to a conclusion that this system does not provide sufficient support for tenants and should be replaced with a more effective one. It is worth noting that until the new regulations come into force, i.e. until July 23rd, 2021, tenants can still obtain a rent exemption for the time of the recent lockdown (which ended on May 3rd), if they make an offer extending the lease period.
Possibility to withdraw statements on extension of lease
Of particular interest are the transitional provisions of the new legislation. Subject to some limitations, they allow tenants to withdraw statements extending the lease period made under the previous regime. At the same time, it is expressly stipulated that such withdrawal will not affect the rent exemption obtained in exchange for this extension. In order to withdraw the extension, tenants will have to file a separate statement and deliver it to the landlord within 14 days since the new law enters into force. It seems that the new regime is no less controversial or marred by interpretation issues than the previous one, particularly with respect to the transitional provisions. The latter part of the new legislation deserves special and immediate attention from tenants, as it gives them a chance to avoid unwanted lease extensions providing them with a relatively short time to decide and file a required statement.