EMEA: Updated COVID-19 Global Real Estate Guide - The position for landlords and tenants across EMEA at the start of 2021

In brief

Months after COVID-19 required governments to impose lockdowns and quarantines, the pandemic continues to affect many owners and occupiers of commercial properties.

The Baker McKenzie Real Estate Practice Group is pleased to announce that the COVID-19 Global Real Estate Guide has been updated for the third time.

The Guide is designed to address some common questions that landlords and tenants are considering during this extended period of market disruption.

The Guide looks at both emerging trends in lease negotiation and key issues for landlords and tenants to consider, and users can compare the position across jurisdictions side-by-side. This is particularly useful for multi-national companies facing the challenges of diverse legal responses across multiple jurisdictions.

This short article summarises some of the key differences applicable to commercial real estate across a selection of the 20 EMEA jurisdictions featured in the Guide.


Contents

Key takeaways 

  • Governments across EMEA have shown a strong tendency to support commercial tenants during the COVID-19 crisis.  
  • In some jurisdictions, tenants have benefited from express financial support such as rent-free periods, rent reductions or rent reliefs, hardship loans or business rates relief. This style of intervention has a softer impact on landlords - for example, in Italy, commercial tenants enjoy a tax credit for rents actually paid to their landlords.
  • In other jurisdictions, the government has not intervened in the amount of rent payable by tenants, but has restricted landlords' ability to take action where rent is unpaid. This type of intervention arguably has a greater impact on commercial landlords, who bear the immediate financial impact of the intervention although the debt for unpaid rent continues to accrue. In nearly all EMEA jurisdictions, restrictions on enforcement action by landlords have now been lifted.  However, in the United Kingdom, by the time the moratorium on forfeiture is lifted on 31 March 2021, some tenants may not have paid rent for a full year.

In more detail 

Restrictions on enforcement against tenants

Some EMEA jurisdictions have restricted the ability of landlords to take enforcement action against tenants for non-payment of rent.  Further detail can be found in our Guide

Jurisdiction:

Restriction on landlord enforcement: Date: Comment:
Czech Republic Landlords cannot terminate commercial leases for non-payment of rent. 31 December 2020

Arrears of any rent accrued from 12 March 2020 to 30 June 2020 must be paid by 31 December 2020.

France Landlords cannot terminate commercial leases for non-payment of rent.

2 months from the date on which tenant business is permitted to re-open

The debt continues to accrue during this period.

United Kingdom

Landlords cannot terminate commercial leases for non-payment of rent. 31 March 2021

The debt continues to accrue during this period.  Restrictions on rent recovery by the taking control of goods, and through the use of statutory rent demands and winding-up petitions, are also in place until 31 March 2021. The restrictions are summarised in this alert.

 

In most other EMEA jurisdictions, the restriction on enforcement action by landlords that was imposed earlier in the COVID-19 crisis, has now been lifted.  

Jurisdiction: Restriction on landlord enforcement: Date: Comment:
Switzerland Landlords were required to give at least 90 days’ notice before terminating the lease for non-payment of rent (instead of the usual 30 days’ period). 13 March 2020 to 31 May 2020

The rent arrears must have resulted from the COVID-19 measures imposed by the government (mandatory closures, etc.).

Draft legislation, which would have granted tenants a right to a 60% rent reduction for the period that premises were closed due to Covid-19 restrictions, was withdrawn by the Swiss Parliament in December 2020. However cantonal regulations, with a similar objective, remain reserved.

Germany Landlords could not terminate commercial leases for non-payment of rent. 1 April 2020 to 30 June 2020

If the non-payment was caused by the COVID-19 pandemic and for no other reason.

Hungary

Landlords could not terminate commercial leases for non-payment of rent.

30 June 2020  
Poland Landlords could not terminate commercial leases for non-payment of rent. 30 June 2020

This restriction did not apply where the tenant was otherwise in breach of the lease, or if the landlord wished to develop or renovate the property.

 

Financial support for tenants 

Some EMEA jurisdictions have preferred to support tenants, rather than restricting the means of enforcement available to landlords.  Again, further detail can be found in our Guide, but in summary:

Jurisdiction: Means of support: Sector: Date: Comment:
Bahrain 3-month rent-free period  Commercial tenants of government-owned land TBC

The government has not yet confirmed whether it will continue with this initiative.

Belgium Hardship premiums and loans for affected businesses Primarily focused on the hospitality and leisure sector.  Varies depending on the relief that is claimed.  Further detail set out in the Guide.

Varies depending on the relief that is claimed

Further detail is set out in the Guide.

Czech Republic

Rent relief Commercial tenants affected by the lockdown measures (i.e., heavily restricted in operation or forced to close down).  The program accepts applications until 21 January 2021. The program accepts applications until 21 January 2021 A subsidy equal to 50% of the rent payable for July, August, and September 2020. There may also be a further subsidy available of the full monthly rent for October, November and December 2020, but at the time of publication, the Ministry of Industry and Trade had not released further details on this.
United Kingdom Business rates (tax) relief Occupiers of retail, hospitality and leisure premises 2020 - 2021 tax year

Some essential businesses, which continued to trade during 2020, have now paid the accrued rates for this period due to public pressure.

Italy Rent relief (by tax credit) Primarily retail and hospitality leases

Applies to a percentage of rents actually paid between March and December 2020

Further detail is set out in the Guide.
Russia   Rent relief Expired end October 2020  
Spain Rent relief Commercial tenants of "large holder" landlords During the national "state of alarm" which ran until 22 June 2020

Rent payments were only suspended and must be paid within two years.

Other commercial tenants were entitled to request a suspension, but there was no obligation on landlords to grant this.

Commercial tenants (freelancers or small- and medium-sized companies) For the period of the "state of alarm", its extensions, and up to four additional months

If their business has been suspended or significantly disrupted by COVID-19, a right to request either: (a) a rent reduction of at least 50% (but only where the landlord is a public company or "large holder"; or (b) a deferral in rent payment.

Further detail is set out in the Guide.

Sweden Financial support for landlords granting rent reductions

Initially covered hotels, restaurants and retailers.  Subsequently extended to additional sectors including sports and leisure and education.

1 April to 31 July 2020  
UAE Rent relief

Commercial tenants (Dubai International Financial Centre)

Some hospitality and leisure tenants (Abu Dhabi)
Now ceased

The DIFC gave rent reductions to some tenants, and in Abu Dhabi a 20% rent relief was available for some tenants in the hospitality and leisure sectors.

Ukraine Rent relief    

Some tenants are entitled to a rent reduction if they were unable to use their premises for the permitted use during the quarantine period.

 

Codes of Conduct

In addition, some EMEA jurisdictions have launched voluntary codes of conduct to encourage good practice between landlords and tenants during COVID-19 disruption.  The United Kingdom, the Netherlands and France have introduced broadly similar codes, though the UK code has the longest duration, running to June 2021 (and may be further extended).  This alert summarises the key points of these codes. 

Future re-balancing of risk

The Guide also notes the changing trend towards a re-balancing of risk between landlords and tenants, particularly in the retail sector.  Nearly all jurisdictions reported an increased appetite for turnover rents.  This article reviews current trends in turnover rents from the UK perspective. The Baker McKenzie team will publish a further article in February 2021 focusing on the key trends in turnover rents across EMEA. 

For further information, or to discuss any of the points raised in this article or the COVID-19 Global Real Estate Guide, please get in touch with your usual Baker McKenzie contact.

Contact Information

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