Royal Decree Law 11/2020 on measures to address the economic and social impact of the COVID-10.

On April 2, Royal Decree-Law 11/2020, of March 31, on urgent complementary measures to address the economic and social impact of COVID-19 comes into force.

The following are those issues that may be of greater interest or relevance.

1.- Urgent measures regarding urban leases.

1.1.- Deferral of payment of rents.

A moratorium on lease debt is established for tenants of primary residences in a situation of economic vulnerability.

However, it should be noted that this moratorium does not apply in the case of leases subject to the current LAU for use other than the habitual residence – such as commercial premises, offices, industrial warehouses and second homes or seasonal homes (in any case, we will have to wait for the development of events in relation to the treatment of leases for use other than dwellings, not excluding the adaptation of possible complementary measures in favor of lessees, without prejudice that they may be channeled through aid or the granting of financing).

In this regard, a distinction should be made between measures for cases where the lessor is a “large landlord” and those where the lessor or landlord is a small landlord.

• Automatic application of the moratorium on leasehold debt in case the lessor is a “large holder”.

• A “large holder” is defined as an individual or legal entity that owns more than 10 urban properties (rustic properties are not included), excluding garages and storage rooms, or a built-up area of more than 1,500 m2. The moratorium is applicable provided that a prior agreement has been reached between the parties. One month after the entry into force of the Royal Decree-Law (until May 2), the tenant may request the moratorium and the lessor must decide between one of the two options:

1ª.- Reduction of 50% of the rent for the duration of the state of alarm, and the following monthly payments if that period is insufficient to alleviate the situation of vulnerability, up to a maximum of four months.

2ª.- Deferment and payment in installments, with a moratorium on the payment of the rent corresponding to the period of time that the state of alarm lasts and the following monthly payments, extendable one by one, if the term is insufficient to alleviate the situation of vulnerability, without exceeding, in any case, four months.

Said rent will be recovered by means of installments for at least three years, or as of the end of the aforementioned four-month period, and always within the term of the contract or any of its extensions.

In this situation, the lessee will not have any type of penalty, nor will interest be applied.

• When the lessor is not a “large tenant”, the lessee may request a temporary and extraordinary deferral of the payment of rent, within one month (until May 2). Following such request, the lessor shall inform the lessee, within a maximum period of 7 working days, of the conditions of deferment or installment that he accepts or, failing that, of the possible alternatives.

• If the individual lessor does not accept any agreement on the deferral, the lessee may have access to the transitory financing aid program. Thus, if the lessor is a small landlord (the Explanatory Memorandum of the Royal Decree mentions that in Spain, in 85% of the housing leases, the landlord is a natural person, a small landlord), the lessor may refuse to grant such moratorium. In this context, if the small landlord refuses to grant such moratorium, the tenant may choose to apply for a loan through the ICO (interest-free microcredit to be repaid in up to 6 years, extendable in 4 years), if the tenant is a person in a vulnerable situation. Additionally, a line of guarantees will be approved to cover, on behalf of the State, the financing of tenants in vulnerable situations. Direct aid is also established to meet these payments (up to 900 €/month and 100% of the rent, as well as 200 €/month for supplies and maintenance expenses), or, if applicable, up to 100% of the principal and interest of the loan obtained for the payment of the rent of the habitual residence, which will be processed through the Autonomous Communities.
• The lessee must prove to the lessor its situation of economic vulnerability, including a “very broad” definition of the cases considered as vulnerable (unemployed, workers in ERTE or reduction of working hours, self-employed with reduced income as a result of the Covid-19…). Specifically, the following assumptions are established in which the situation of vulnerability may arise:
• That the total income of the members of the family unit does not exceed, in the month prior to the application for the moratorium, in general, three times the monthly IPREM (i.e. less than €1,613.50 gross).

This limit will increase depending on the number of children, elderly people, as well as disabled people living in the household (four or five times the IPREM, depending on the degree of disability and/or dependency).

• The rental income, plus basic expenses and supplies, must be greater than or equal to 35% of the net income received by all the members of the family unit.

In any case, the tenant must prove to the lessor his situation of vulnerability. Thus, the tenant who benefits from a moratorium improperly, will be liable for the damages and prejudices produced, as well as for all the expenses generated by the application of these exceptional measures, without prejudice to liabilities of other nature. In any case, the amount of damages and expenses shall not be less than the benefit unduly obtained.

1.2.- Suspension of evictions

The suspension of the eviction procedure for vulnerable households without housing alternatives is extended for an additional period of 6 months, beyond the general suspension during the state of alarm.

In any case, the tenant must prove his situation of vulnerability, either prior or supervening, before the competent judicial body.

1.3.- Extraordinary extension of habitual residence lease contracts.

An extraordinary extension of the term of the lease contract for a maximum period of 6 months, during which the terms and conditions established for the contract in force will continue to apply, may be applied, upon request of the lessee, for those habitual residence lease contracts whose expiration occurs between April 2 and up to two months after the end of the state of alarm.

This request for an extraordinary extension must be accepted by the lessor, unless other terms or conditions are fixed by agreement between the parties.

Finally, it is important to mention that this extraordinary forced extension will be applicable to all leases of habitual residence, without requiring the lessee to be in a situation of economic vulnerability. However, it is possible to replace it by another agreement between the lessor and the lessee, and therefore it is not inalienable for the lessee.

1.4.- Mortgage moratorium and non-mortgage financing credit.

Those tenants in a vulnerable situation, who meet the following conditions, will be eligible for the mortgage moratorium:

• That the potential beneficiary becomes unemployed or, in the case of an entrepreneur or professional, suffers a substantial loss of income and/or turnover equal to or greater than 40%.
• That the total income of the members of the family unit does not exceed, in the month prior to the application for the moratorium, in general, three times the monthly IPREM (i.e., less than €1,613.50 gross per month). This limit will increase depending on the number of children, elderly and disabled persons living in the household (four or five times the IPREM, depending on the degree of disability and/or dependency).
• That the total of the mortgage payments of the real estate, plus the expenses and basic supplies is greater or equal to 35% of the net income received by all the members of the family unit. Only those expenses and basic supplies will be considered as “basic expenses and supplies” provided in the habitual residence of the family unit.
• That, as a consequence of the health emergency, the family unit has suffered a significant alteration of its economic circumstances in terms of effort to access housing.

The mortgage debt moratorium will apply to mortgage loans contracted for the acquisition of:

• The habitual residence.
• Properties used for the economic activity of businessmen or professionals.
• Dwellings other than the habitual residence, in a rental situation and for which the mortgagor individual (owner and lessor of said dwellings), has stopped receiving the rental rent since March 14 or has stopped receiving it up to one month after the end of said period.

It should be noted that the suspension and moratorium of mortgage debts will have a duration of three (3) months.

1.5.- Guarantees for financing.

A line of guarantees – fully covered by the State and for a period of up to fourteen years – is established so that banks may offer temporary financing aid for the payment of rent for all tenants who are in a situation of supervening vulnerability.

The repayment period will be up to six years, extendable for another four years and without, in any case, accruing any type of expenses and interest for the applicant. In turn, the grants may cover a maximum amount of six months’ rent.

2.- Moratorium and deferral of Social Security contributions.

2.1.- Six-month moratorium on Social Security contributions.

The General Treasury of the Social Security is empowered to grant moratoriums – that is, deferrals (not exoneration) – of six months, without interest, on social security contributions, to companies and self-employed workers who can continue working and do not have to close, as long as they request it and meet the requirements established in the Ministerial Order (pending development and to be enacted in the next few days).

The moratorium, if granted, will affect the payment of social security contributions accrued in the periods of April, May and June of this year (and the periods of May, June and July for self-employed workers).

Requests for moratoriums must be communicated to the General Treasury of the Social Security within the first 10 calendar days of the regulatory payment periods corresponding to the accrual periods, and the granting of the moratorium must be communicated within three months following the request.

This moratorium does not apply to activities that have been suspended due to the “state of alarm” declared by the Government on March 14 (if this were the case, companies could benefit from the ERTE with exemption from social security contributions, and the workers under these circumstances could receive unemployment benefits, without the period consumed being computed).

2.2.- Deferral of Social Security payments.

In other matters, the possibility of deferring the payment of social security contributions, whose payment deadline is between April and June 2020, is established under the terms and conditions set forth in the general social security regulations, limiting the applicable interest to 0.5%.

Such requests for deferral must be made before the expiration of the first ten days of the statutory deadline for payment.

3.- Right to terminate certain contracts.

In relation to contracts for the sale of goods and the provision of services, whether or not of successive tract, whose execution is impossible due to the declaration of the state of alarm, consumers and users may exercise the right to terminate the contract during a period of 14 days.

In those cases in which the performance of the contract is impossible to fulfill – unless the customer expressly accepts different conditions -, the contract may not be fulfilled consumer and user -, the entrepreneur shall return the sums paid by the consumer or user, except for the expenses incurred duly itemized, in the same form in which the payment was made within a maximum period of 14 days.

In successive tract contracts, the collection of new installments shall be paralyzed until the service can be rendered normally again, without prejudice that the contract is not terminated.

In the case of the provision of services involving several suppliers, such as package tours, the consumer or user may choose to request reimbursement or make use of the voucher provided by the organizer or, where appropriate, the retailer. This voucher may be used within one year of the end of the state of alarm. If it is not used within this period, the consumer may exercise the right of reimbursement.

Tax measures.

4.1.- Suspension of deadlines in the tax field.

The deadlines in the tax sphere of the Autonomous Communities and Local Entities are suspended, in general until April 30, 2020.

4.2.- Extension of the time limit for appeals in the tax area.

The computation of the term to file appeals in administrative proceedings or to initiate any other procedures of challenge, claim, conciliation, mediation and arbitration that may replace them in accordance with the provisions of the Laws, in any procedure from which unfavorable or burdensome effects may arise for the interested party, shall be computed from the business day following the date of the end of the declaration of the state of alarm, regardless of the time elapsed since the notification of the administrative action.

In particular, from March 14 to April 30, 2020, the term to file appeals for reconsideration or economic-administrative claims will start on April 30, 2020 and will apply both in those cases where the term to file an appeal had started before April 30, 2020 and in those cases where the term to file an appeal had started before April 30, 2020.

After March 13, 2020, as in cases where the administrative act or resolution subject to appeal or claim has not yet been notified.

4.3.- Computation of tax deadlines.

The period from March 14 to April 30, 2020 will not be counted for the purposes of the maximum duration of the term for the execution of the resolutions of economic-administrative bodies.

Likewise, during said period, the statute of limitations and expiration periods of any actions and rights contemplated in the tax regulations are suspended.

4.4.- Deferral of customs debts.

Possibility of deferment without guarantee for those submitted from April 2 to May 30.

5.- Other Measures.

The following is a list of other measures included in the Royal Decree on measures to address COVID-19:

• A moratorium is provided in relation to consumer loans and credits in relation to people in a situation of economic vulnerability.
• The supply of electricity, oil products, natural gas and water is guaranteed in relation to the habitual residence. The suspension of the aforementioned supply is prohibited during the state of alarm.
• The possibility is opened, exceptionally, to partially or totally dispose of the accumulated savings in pension plans, with respect to the workers affected by ERTE’s, businessmen owners of establishments whose opening to the public has been suspended by the state of emergency decree, as well as the cessation of activity of self-employed workers.
• An extraordinary unemployment subsidy is created for domestic employees, as well as for certain workers with temporary contracts.
• The regulation for access to the extraordinary benefit for cessation of activity reduction of at least 75% of the turnover by self-employed workers is completed.
• Corrections or nuances are made in relation to the requirement of a 6-month term for the maintenance of employment by the companies that take advantage of the ERTE.