Romania: The latest legal relief regarding deferral of rental payments
Bill no. 134/2020, which includes relief related to paying rent in the context of Covid-19, as analysed in the article “New regulations on the deferral of rental payments during the state of emergency” (the “Article”), entered into effect on 20 May 2020 by Presidential Decree no. 269/2020 as Law no. 62/2020 on the application of rent payment relief during the state of emergency (the “Law”) and was published in the Official Gazette of Romania, Part I, on 21 May 2020.
According to the Law, tenants that are economic operators, liberal professionals or legal entities under private law and whose operations have been interrupted or whose income or revenue decreased by at least 15% in March 2020 compared to the average of the last calendar year, together with the individuals affected (directly or indirectly) from an economic point of view, can apply for deferral, without interest or penalties, of rental payments for buildings registered as offices, places of business or residences.
As detailed in the Article, the Law offers some advantages over the legislation that has thus far regulated rent-related relief during the state of emergency. It seems to distribute the contractual risks between landlords and tenants in a more balanced way in the context of this phenomenon that affects both contractual partners, satisfying both landlords' need of liquidity in that rent payments are made by competent tax bodies within a reasonable time and tenants’ need for support in financial difficulty. Nevertheless, the Law imposes certain additional procedural requirements on tenants, a disadvantage for them compared to the old regulation (GEO 29/2020 on some economic and tax/budgetary measures).
The documentation which the Law requires of tenants consists of: (a) the request for deferral of rental payments; (b) the lease agreement; (c) an addendum to the lease which includes the personal data of the parties; their agreement on the deferral, its duration and amount; the bank account into which the tax authority is to make the payment; and the date and the signatures of both parties; (d) a deed of any kind entered into by the tenant that documents the tenant’s inability to pay the rent within the period specified in the addendum.
These documents can also be submitted by email to the email address displayed on the website of each local tax authority.
Tenants wishing to claim this deferral must meet both of the following conditions:
a) The monthly rent indicated in the addendum must not be more than that of February 2020;
b) The value of the monthly rent in the addendum must not exceed RON 10,000 for each location of an economic operator or RON 2,000 for a single location of a natural person.
Tenants who claim rent deferral according to the Law are obliged to gradually return the deferred rental amount paid by the competent local tax authority, in equal instalments, after the period for which the deferral has been established, but no later than 31 December 2020. Otherwise, the competent local tax authority can proceed with compulsory enforcement against the debtor.
The benefits provided by the Law remain available for one month after the end of the state of emergency to those that meet the abovementioned conditions and comply with all of the procedural requirements.
As also stated in the Article, as of publication of the Law in the Official Gazette, the government ministries must develop a set of implementation procedures, which are expected to provide clarification and remedies for the shortcomings of the regulatory act in the form in which it was enacted.
In conclusion, we await with interest the publication of these implementation procedures to guide the application of the Law, which is scheduled to enter into force on 24 May 2020.
Practice group: Real Estate Investment Group