SERIES “LEASE AGREEMENTS IN THE CONTEXT OF COVID-19”
TAKE I – Suspension of Lease Agreements’ Termination Effects
The first measure adopted to aid tenants dealing with the economic and social consequences caused by the pandemic was the suspension of the effects arising from the termination of lease agreements, either with residential or non-residential purposes, when promoted by the landlord or as a result of the contract. This suspension shall take place until the end of the exception scenario of prevention, containment, mitigation and treatment of COVID-19 and during 60 days after the termination of such measures.
Thus, the effects resulting from a contract termination are suspended during this period, namely in case of ordinary termination, expiry or opposition to the automatic renewal of a lease agreement, as well as the deadline for tenants to return the property to landlords(1).
It should be noted that the suspension of such effects only applies to contractual terminations promoted by landlords or derive from a contractual clause term. In other words, one can say that nothing changes for the tenants, as they may terminate a lease agreement during the State of Emergency as before, in accordance with the mechanisms foreseen in the Civil Code and prior notice is given.
This situation may cause some uncertainty as to whether landlords and tenants can sign new lease agreements. Bearing this in mind, for example, what happens if a tenant who is a party to a residential lease agreement has planned to move out and has therefore rented another property? Or the landlord of a commercial establishment who expected to have the property leased until the 31st April 2020 only and thus entered into another lease agreement with a third party for that same property which should take effect on the 1st May?
The law only clarifies that the suspension of effects may not be applicable to fixed-term lease agreements if the tenant agrees with its termination. And what about the other scenarios? Although the law is silent, we believe that it aims to protect the tenants. As such, even in case of ordinary termination and opposition to the automatic renewal of lease agreements promoted by landlords, it seems that if a tenant does not want to benefit from the suspension of effects legally foreseen (for example, because the tenant has already signed another lease agreement), the parties are free to agree on the termination of the current lease contract with all its legal effects.
As regards to landlords that are unable to honour their commitments, such as the handover of a property on time under a new lease agreement (because the current tenant wants to benefit from the suspension of effects) – that is the second example above mentioned – considering that such inability stems from a statutory provision, it is important to find out whether or not the third party with whom the landlord entered into a new lease agreement is still interested in maintaining such an agreement perhaps postponing its starting date until the legal suspension ceases. If not, in principle the lease agreement will terminate and the landlord must return any funds received in advance, such as rents and deposit.
These are some of the issues that suspension of lease agreements termination’s effects may raise. However, these are general considerations and do not remove the need for a case-by-case analysis.
(1) In case of lease agreement’s termination, in accordance with article 1053.º of the Civil Code.
Joana Neto Mestre | Jéssica Ramos