Hospitality sector and COVID-19

Some hospitality business owners, such as Javier Senese, of La Vaca Atada, are filing lawsuits against the property owners of their premises due to their refusal to accept a rent reduction to an amount they can afford during the pandemic. There is already at least one court ruling in Spain in which the judge ruled in favor of the plaintiff. Lawyer José Colón explains the reasons and legal grounds for this judicial mechanism.

“We have filed a lawsuit requesting a 50% reduction in the rent amount. After the two months of nightmare during lockdown, my client attempted to negotiate based on what the Government dictated in the Royal Decree-Law 15/2020, to address the problems of tenants, which did not solve anything, because it was only stipulated for the issues faced by large tenants with large landlords.”

“My client tried to reach an agreement with the property owner, because if the establishment was closed for two months, if it reopened with restrictions, if there are no customers, these conditions were not taken into account, nor could they have been foreseen when they signed the lease agreement at the time”, Colón explains. “The only concession they were willing to make was a moratorium: do not pay these two or three months and I will add them to the following installments. But that is not the solution for a bar owner. Given the current situation, they live day to day. They cannot commit to a payment they may not be able to afford tomorrow.It is not about not wanting to pay, but about adapting the situation to what we are experiencing”, argues the lawyer.“

In Cádiz it is evident, with the cascading closure of businesses, that this situation will lead to the city's ruin. The short-sighted view of a property owner, who insists, this is the rent for my property and I will not budge, despite being informed of the situation, is a suicidal economic policy that deserves serious political intervention, as is being done in Catalonia. There, a recent decree law has been published mandating that negotiations must take place between tenant and landlord and supports the idea of sharing the loss, so that rents are reduced by 50%.”The lawsuit is based on a clause known as ‘rebus sic stantibus’

, which translates to “things thus standing”. “It is an exception to the general principle of contract maintenance,” explains Colón. “A contract is law: what I sign with you must be fulfilled. No matter what happens, unless there are truly exceptional circumstances, unforeseeable and altering all the conditions we had when we signed the contract.” Some pioneering courts in its application are those in Barcelona. About twenty days ago, on January 8th, the first court ruling in Spain was published that obliges the landlord to reduce the rent by 50% for a tourism apartment business owner. The judge of the Court of First Instance Number 20 of Barcelona understands that Royal Decree-Law 15/2020 and 35/2020 are not sufficient to address the problems faced by those part of the country's industrial fabric. And it understands that this clause should be applied, which essentially states that if there is a powerful, serious, and unforeseeable circumstance altering the entire social and economic situation at the time of contracting, contracts can be modified.”“Along with the lawsuit, we requested precautionary measures in which we urge the judge, if it is likely that I may be right and you grant it, in the context of a collapsed justice system and given other court rulings and regulations, to decide that the property owner accept 50% of the rent while this powerful and exceptional circumstance that could not be foreseen persists. Today [Thursday], we had the hearing for the precautionary measures and it may take two or three weeks

”, Colón concludes.