ARTIKEL
Commercial leases & Covid-19

Trägårdh law firm has participated in a collaboration of esteemed law firms from all over the world, launching a comparative e-guide: ”Covid-19 & Commercial leases, a tour around the globe”. You will find the Swedish contribution to the e-guide below. The full report and e-guide is published by Florent here and on Linked in.

 

Introduction

Restrictions in Sweden due to the corona pandemic have been somewhat more limited than in most other countries. Consumption has however been heavily impacted and especially the retail sector and hotels and restaurants have exhibited huge losses. An escalating amount of bankruptcies clearly confirm the unsustainable situation for many businesses. A collaboration of esteemed law firms from all over the world are launching a Comparative e-guide: ”Covid-19 & Commercial leases, a tour around the globe”

The Swedish government has introduced a wide range of measures in order to limit the spread of the corona virus and to limit its economic impact. For instance emergency packages have been established for SMEs, temporary reductions of employers’ social security contributions and individual contributions have been presented, short-term layoffs have been strengthened, temporary discounts are given for fixed rental costs in vulnerable sectors, increased loan facilities and credit guarantees are provided and liquidity reinforcement via tax accounts have been introduced.

Some of the most relevant measures which have been taken by the Swedish government are presented below.

  1. Ban on public gatherings and events with more than 50 participants.
  2. Prohibition against visiting retirement homes.
  3. Temporary ban on travel to Sweden until June 15, 2020.
  4. Rules for restaurants, pubs and cafés as regards crowding, queues and serving and eating at tables

In addition, the Swedish government has issued recommendations such us working from home when possible, avoiding social contacts for those over the age of 70 and avoiding trips of more than two hours unless necessary. It is also recommended not to perform education in school premises as regards upper secondary schools, vocational higher education, adult education and higher education institutions. Most people are complying voluntarily with these measures.

What are the legal possibilities for deferred payment of rent?

The right to suspend rent payment is generally not included in most lease agreements. An inability to pay rent to a landlord is not a valid legal ground for deferred payment. If a tenant claims that a landlord has not fulfilled its contractual obligations due to the corona pandemic, it needs to deposit the rent in order to be secured against a premature termination. It should be noted that a landlord might claim force majeure if a situation occurs where it is unable to fulfil its obligations due to the corona pandemic. A deferred payment, without prior consent from the landlord or without deposition enables the landlord to terminate the lease agreement in advance.

What are the legal possibilities for a rent reduction?

A reduction in sales or profitability and liquidity problems are not generally, provided that the premises maintain and correspond to contractual commitments, considered to give rise to a legal right to rent reduction. However, if an insufficiency occurs in the premises or impediments arise which hinder the business to be conducted in the premises due to the corona pandemic, a rent reduction could be attainable.

The Swedish government has adopted a regulation, SFS 2020:237 for a rent relief package which is offered to landlords whose tenants conduct business in defined sectors, specified by SNI-codes. The relief package is mainly aimed towards hotels and restaurants, non-consumables and sectors such as retail, lodging, leisure and entertainment industries, travel agencies, dentists and hair and body care.

With this government aid, the landlords can receive an aid amounting to 50 percent of the agreed rent discounts during the period April 1, 2020 until June 30, 2020. The aid cannot exceed 25 percent of the previously fixed rent and hence only applies to discounts on fixed rent. Rent discounts on turnover rent are not covered by the government. The total aid for each tenant can never exceed EUR 800 000.

In order to be entitled to rent relief the parties must fulfil the following conditions.

  1. the landlord must have entered into a lease agreement at the latest on March 1, 2020 with a tenant covered by the regulation, with a wholly or partially fixed rent in SEK;
  2. the landlord must have leased the premises to the tenant during the entire or part of the period April 1, 2020 until June 30, 2020.
  3. the rental discount on the fixed rent must have been agreed upon between the parties no later than June 30, 2020, for the period April 1, 2020 until June 30, 2020 where the rent is lower than the fixed amount that would have been paid during the same period under the lease agreement. No other adjustments to the terms of the lease agreement are allowed; and
  4. the tenant is not a government agency or the tenant may not have been in financial difficulties as per December 31, 2019, defined in Article 2.18 of the Commission Regulation (EU) No 651/2014 or is subject to a payment order decided upon by the European Commission due to an aid being considered illegal and incompatible with the internal market.

 

What are the legal possibilities to amend the lease?

Lease agreements often entail unilateral force majeure clauses in favor of the landlord. As most force majeure clauses do not release the tenant from fulfilling its obligations under the lease, the force majeure clauses could primarily be applicable if a right to a reduction of rent, damages, repair and/ or termination occurs. A situation could for example arise where the availability of the premises or the conditions for the tenant where to change as a result of the corona pandemic. A general interpretation of the force majeure clause would then be utilized.

If no force majeure clause is included in the lease agreement, a tenant could plead article 36 of the Swedish Contract Law which aims to balance unreasonable agreement clauses. The tenant could state that the current conditions in the lease agreement are unreasonable due to seriously altered prerequisites.

It is very difficult to assess the outcome of a dispute regarding amendment of a lease between a landlord and a tenant as no practice yet has been established.

Relevant literature & case law

https://www.government.se/articles/2020/03/economic-measures-in-response-to-covid-19/

https://www.krisinformation.se/en/hazards-and-risks/disasters-and-incidents/2020/official-information-on-the-new-coronavirus

https://svenskforfattningssamling.se/sites/default/files/sfs/2020-04/SFS2020-237.pdf (In Swedish)

http://www.sni2007.scb.se/_pdf/080530kortversionsnisorterad2007eng.pdf

 

Viviénne Dahlstrand

Viviénne Dahlstrand

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