On 21 May 2020, Law no. 62/2020 on certain facilities related to rent payment during the emergency state period was published in the Romanian Official Gazette (the “Law”) and entered into force as of 24 May 2020.
Purpose
The Law provides for (i) the possibility of tenants to obtain the deferral (without interest or penalties) of rent payment for the spaces registered as headquarters or working points or used as dwellings and (ii) the payment instead by the State along with certain exemptions for landlords, related to income/profit tax derived from the renting of such spaces.
Tenants who can benefit from the rent payment deferral
According to the Law, the tenants benefitting from the Law are the economic operators, practitioners of the liberal professions and legal entities governed by private law, whose activity has been discontinued or whose income or revenue has decreased in the state of emergency period by at least 15% in March 2020 compared to the average of the last calendar year, as well as natural persons directly or indirectly affected economically during the state of emergency period.
Period for which the rent payment deferral applies
The tenants can benefit of the rent deferral for the entire state of emergency period, as well as for the month following the one in which the state of emergency ceased, i.e., effectively by 30 June 2020.
Procedure for applying the rent payment deferral and payment of the rent by the State upon tenant’s request
The immediate effect of rent deferral seems to apply only to the tenants, as the landlords will be paid the deferred rents by the local fiscal body, following a request made by the tenant, which will have to include:
- the lease agreement;
- an addendum concluded between the parties with respect to the rent payment deferral, the duration of deferral and the amount of the deferred rent;
- any act of the tenant proving the impossibility to pay the rent.
After the period of rent deferral, the tenants are obliged to reimburse to the fiscal body the deferred rents paid by the latter in installments, until 31 December 2020.
Payment of the rent by the State upon landlord’s request
The landlord also can ask for the payment of the deferred rent by the local fiscal body, subject to the following conditions:
- the monthly rent specified in the addendum between the lessor and the tenant is lower or equal to the rent for February 2020;
- the maximum amount of the monthly rent specified in the said addendum is (a) RON 10,000 (approx. EUR 2,050) in case of economic undertakings for each location and (b) RON 2,000 (approx. EUR 415) for individuals for a single location.
Fiscal facilities for landlords
As regards the natural persons landlords, the Law provides for a payment exemption from the income tax on rents applicable only for the landlords who reduce the consideration for the use of the immovable assets (i.e., the rent) during 2020, with at least 30% compared to February 2020.
As regards the legal entities landlords, the Law provides that the landlords’ taxable base for the computation of the profit tax will include 80% of the rents' value for 2020, provided the rent is reduced with 20% compared to the level of February 2020.
These facilities are granted only for the period during which the rent was reduced but no more than 31 December 2020.
Within 15 days from the publication date of this Law in the Official Gazette, the competent ministries will approve implementation procedures.
Our views
The Law is unclear on many aspects such as:
- if the landlord needs to consent to the rent deferral, or this is a legal right of the tenant imposed on the landlord by the Law;
- if the rent deferral could apply separately from the payment by the State; or
- if all affected tenants will benefit from the rent deferral and payment by the State, or only those tenants which rent is of maximum RON 2,000 (for individuals) and RON 10,000 (for economic undertakings).
Furthermore, the Law would likely have a limited applicability due to the fact that it still needs implementing norms to be effective (which were not adopted yet) and due to potential unconstitutionality issues raised by the application of the Law for the period before its entry into force.
The Law comes too late in the process and does not seem to be able to successfully solve the real issues it was meant to address, this in the context of a competition to legislate between the Government, who already issued an emergency ordinance on this matter (Emergency Government Ordinance no. 29/2020) and the Parliament.
By Cosmin Stavaru, Partner, and Madalina Arcana, Junior Associate, Bondoc si Asociatii
