Application of the exceptional measures set-up due to covid 19 for leases of business premises to rentals of houses with a commercial activity

As a result of the emergency situation caused by the COVID 19 pandemic, the Consell General (Andorran Parliament) had to approve a series of measures to limit the economic impact that the pandemic would have on the companies and population of the Principality. These measures adopted by Law 3/2020, of 23 March, on exceptional and urgent measures due to the sanitary emergency situation caused by the SARS-CoV-2 pandemic, which came into force on 1 April 2020.

The reduction of the rent of business premises is one of said measures. Article 14.1 of Law 3/2020 states the rent for business premises is reduced pursuant to the following percentages during the period between 14 March 2020 inclusive, and the day after the Government declares the end of the situation of health emergency caused by SARS-CoV2:

a) 100% in the case of business premises corresponding to activities that have completely suspended/interrupted their activity.

b) 80% in the case of business premises corresponding to activities subject to a guard or permanence regime, pursuant to the applicable Government decree.

c) 50% in the case of business premises corresponding to activities that must remain open.

Subsequently, the Consell General approved Law 5/2020, of 18 April, regarding new exceptional and urgent measures due to the situation of health emergency caused by the SARS-CoV-2 pandemic, which entered into force on 30 April 2020. This Law amends the aforementioned rules regarding the reduction of the rent of business premises. Thus, Article 36.1 provides that the rent for all business leases is reduced pursuant to the following percentages during the period comprised between 30 April 2020 and the day on which the compulsory suspension of the activity (or the regime of guard or permanence) are lifted:

a) 100% in the case of business premises corresponding to activities suspended both on a compulsory basis by Government decree and voluntarily, and to activities subject to a guard or permanence regime by Government decree.

b) 80% in the case of business premises corresponding to open activities and authorized to open by Government decree.

Although the wording of Laws 3/2020 and 5/2020 is clear and only provides the reduction of rent in the case of leases related to business premises, the question immediately arose as to whether this measure could be extended to the leases of housing in which a business activity is located. Although at first this was not allowed, finally the Government of Andorra recognized the discriminatory nature of its position and also allowed the reduction of rent in said cases. Therefore, the tenant of a home that includes its business activity is also entitled to a reduction of the proportional part of the rent attributable to said business activity.

Lluís Barrios

Corporate Lawyer