A restaurant owner in Barcelona recently received the good news that a court has ruled in his favour forcing a reduction in the rent he pays. The sentence obliges the landlord of the restaurant premises to reduce the monthly rental and costs by half. Although legal analysts believe that an appeal is highly likely, the ruling opens the door to financial relief for tenants who own businesses hard hit by the pandemic.
First Ruling in Spanish Court
In June last year, the owner of the restaurant filed a court case against his landlord requesting a reduction in rent. His previous petitions to pay less were met with no response from the landlord who merely offered a moratorium on payments.
The tenant’s lawyer based his allegation on Rebus Sic Stantibus, a doctrine that the Barcelona Court has upheld in its ruling. The doctrine that means “things standing thus” allows for changes in circumstances.
The pandemic has caused a fundamental change in many businesses’ situations and meant that the basis of the original negotiations no longer hold. The tenant requested the application of the Rebus Sic Stantibus doctrine to his particular case.
Landmark Court Ruling
The Barcelona Court ruled in favour of the tenant stating that the doctrine fully applies. The sentence obliges the landlord to reduce the monthly rental rate and all associated charges made to the tenant by half.
Furthermore, the ruling is retroactive. As a result, the landlord must lower the rent rate and costs from April 2020 until March this year.
Background to the Case
Like so many businesses in the food and beverages sector, the Barcelona tenant found himself in serious financial difficulty from March last year. He asked his landlord to reduce the rent but was instead offered the chance to delay payments.
“This measure was not enough for the business to survive,” said the tenant’s lawyer. “Without a reduction in the rent, his business was condemned to bankruptcy, so we filed the court case in June last year.”
The tenant presented solid evidence in support of their request. It included financial figures showing that the business has lost over half its turnover since the declaration of the pandemic.
The figures also made it clear how affordability of the rent had altered for the tenant. When he first signed the lease, rental payments constituted 53% of his monthly income. By the end of 2020, this amount had risen to 144% and is expected to reach 151.27% by the end of this quarter.
This pioneer sentence has a long way to go before it becomes a firm ruling. Sources believe that it is highly likely that the defence will take the case to the Spanish Supreme Court. However, legal experts celebrate the sentence as a victory for Rebus Sic Stantibus.
As yet, few Spanish courts have applied the doctrine in Covid times. In a previous case, a court awarded a business an additional year to repay a bank loan.
The company had been unable to meet its financial obligations because of the change in its circumstances.
The Barcelona sentence opens the door to financial relief for tenants unable to pay monthly rentals because of the dramatic drop in income caused by Covid-19. At Costaluz Lawyers, we believe more cases will enter the courts over the next few months.
Consult the Experts
Our expert legal team has years of experience in resolving issues in favour of the consumer. As champions of consumer rights, we believe firmly in the application of the Rebus doctrine.
If your business circumstances have changed as a result of the pandemic, get in touch for a free consultation to find out how we can help you.