Appeal rulings on Covid-19 and rent payments in Belgium
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Publications: 06 February 2024
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In Brussels, initial appeal decisions are now available concerning the question as to whether retail tenants are entitled to rent payment suspensions / waivers in light of the applicable Covid-19 restrictions. On that basis, it is already possible to draw initial conclusions (noting that the trend could still evolve depending on future case law and/or possible appeals to the Supreme Court).
Generally pro landlord or pro lessee?
In first instance, we noted that there was almost a 50/50 % split between judgements in favour of landlords and judgements in favour of lessees, rendering case law rather unpredictable. Initial appeal decisions in Brussels reveal that the trend seems to move in the pro lessee direction, with lessees being awarded rent reductions in varying amounts depending on the exact circumstances.
What rules apply in case of regulatory restrictions?
Where in first instance, courts ruled in 25% of the cases that rent was fully due during mandatory closure periods, initial appeal decisions in Brussels reveal that the lessee would be entitled to a significant rent reduction (typically between 50 and 100%, depending on the circumstances). This relates to periods of mandatory general lockdowns or mandatory shop closures (for instance in Belgium from 19 March 2020 to 10 May 2020). For those periods, to the extent discussions are still ongoing between landlords and lessees, it is in our view advisable for both parties to enter into discussion on an addendum to the lease agreement clarifying the respective obligations of both parties, including in particular on the rent, but also on service charges and taxes and on the steps that would be undertaken by the landlord to reduce the operation of the premises to a minimum for instance. In our view, this would not be applicable to shops that are exceptionally allowed to remain open (essential shops like for food retailers for instance).
During restriction periods that do not extend to a general mandatory closure, the lessee would be entitled to a partial rent reduction (typically between 25 and 50%, depending on the circumstances). This relates to periods where public access is not completely forbidden but significant restrictions apply, for instance when shops are only authorised for take-away, click-and-collect or appointment-based systems. In Belgium, such measures were applicable in 2020 between 2 November and 13 December. For those periods as well, to the extent discussions are still ongoing between landlords and lessees, it is in our view advisable for both parties to enter into discussion on an addendum to the lease agreement clarifying the respective obligations of both parties, taking into account the aforementioned (indicative) guidelines deducted from case law.
During light restriction periods or period without restrictions, the lessee would not be entitled to rent reductions, without prejudice of course to the specific situation of each lessee and building. This relates to periods where shops are open without restrictions or with restriction that do not significantly restrict the access to the premises, for instance mask mandates or as the case may arise a reasonable limitation of person per square meter. For those periods, it is in our view not required to enter into an addendum to the lease agreement, it being understood that in case of payment default, the lessee remains entitled to invoke standard provisions under the civil code, including payment terms, which have been awarded frequently by courts in first instance already. Consequently, any enforcement of the lease agreement should follow a careful process.
And for offices?
We also note that the above case law is limited to retail lease agreements and is not as such applicable to office surfaces, for which general closures or public access restrictions are less relevant. Consequently, the usual principles under civil law should normally apply. It can however not be excluded that a similar reasoning would be followed in case of significant restrictions to office use (for instance full mandatory tele-working). In any case, organization of the common parts in a manner that enables social distancing (rules display in the property, organization of circulation flows in the best possible manner, etc.) is important in that context to ensure the continued ability to use the building in accordance with applicable regulations.