Negotiating leases in the days of COVID-19
Exceptional circumstances require exceptional skills and measures, and contractual relationships are no exception to these desideratums.
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The lease contract is regulated by law – the Civil Code, the legal provisions of art. 1,777 Civil Code, if we refer to the rental of other buildings than those with residential use and 1.824 Civil Code, if the building has a residential destination.
Of course, the parties may provide additional rights and obligations to those regulated by law, the legal provisions having, with some exceptions, the nature of a recommendation.
Among these legal obligations, regarding the owner, we refer to:
the obligation to maintain the property in a proper state of use throughout the lease – to carry out repairs and interventions when necessary;
to ensure the quiet and useful use of the building – pending lawsuits, disputes with the Owners Association, etc.
The main obligations of the tenants refer to:
- rent payment – in the amount and term of the lease;
- the use of the building with prudence and diligence, according to its destination – housing, commercial / industrial space, etc .;
- payment of utilities and common contribution quotas to the Owners Association;
- At this moment, the state of emergency declared by the Decree of 16.03.2020, published in the Official Gazette. no. 0212 of 16.03.2020 as well as the Military Ordinances no. 1 of 18.03.2020, no. 2 / 21.03.2020, no. 3 / 24.03.2020 affects to a greater or lesser extent the possibility of fulfilling the obligations of landlords and tenants.
The most used measures to counteract the effects of the pandemic generated by Coronavirus Covid – 19 can take the form of the following solutions:
- Suspension of rent payment, during the declaration of the State of Emergency – the tenant will not pay the rent normally due to the landlord, for the period of the state of emergency – 30 days initially, and for its extension, if necessary;
In this situation, an additional deed to the lease will be concluded, signed by both parties (digital or handwritten signature and scanned – sent by email) stating that for the period of declaration of state of emergency, the tenant is exempt from payment rent related to the use of the property
- Postponement of the rent payment, during the declaration of the State of Emergency – the tenant will not pay the rent normally due to the landlord, for the period of the state of emergency, but he will still owe it to the landlord, to pay it in monthly installments;
The difference from the suspension of the rent payment is the fact that in case of postponement, the rent must be paid, but not at the dates mentioned in the contract, but later, in monthly installments calculated for a period of 6-12 months, in addition to the rent for those months.
This situation is similar to that of bank loans, where there is the possibility of postponing the payment of installments to banks.
Likewise, an additional act will be concluded to the lease contract, where it will be mentioned:
- the duration of the deferred payment;
- calculation of rent payment due;
- the monthly installments to be paid, after the cessation of the state of Emergency
- Reduction of the amount of rent, during the declaration of the State of Emergency – the tenant will pay a part of the rent normally due to the landlord, for the period of the state of emergency
This solution may be the most suitable for the parties involved, given the cash flow required for both tenants and landlords. At the same time, a balance is maintained between the situation of the landlord and that of the tenant, good faith being the best prevention for the occurrence of misunderstandings between them.
The tenant will receive assistance for the period when his income is drastically reduced and will allow him to allocate the money he would have paid for rent for the purchase of food and other things of urgent need, and the landlord will still have an income of following the rental of his home, which would allow him, for example, to pay part of the loan contracted for the purchase of the rented property.
And in the latter case, the parties will conclude an additional act for recording the new agreement reached, where they will pass the period in which only part of the rent due will be paid as well as the exact amount to be paid.
Regarding the repairs to be made by the owner to the rented building, he may refuse to move, the restrictions imposed by the authorities making it difficult or even impossible to make repairs. These activities do not constitute exceptions provided by the Military Ordinances, reason for which the refusal can be considered as well-founded.
On the other hand, the companies that offer repair and maintenance services (property management) can intervene to carry out the repairs, their professional activity falling within the exceptions provided by law for the movement of persons during the declaration of the State of Emergency.
In conclusion, both the tenant and the landlord have at hand solutions to overcome this crisis caused by the Covid-19 Coronavirus pandemic and accentuated by the measures ordered by the Romanian Government, the basic condition being the good faith of those involved and access to credible sources of information.
lemonaid – property management solutions.