All shopping centres and retail stores of more than 20,000 sqm have been closed to the public since 30 January 2021, only supermarkets, pharmacies and food retailers (for delivery only and no "click and collect") are allowed to open in these shopping centres. Other shopping centres remain open except restaurants and leisure activities but are subject to governmental restrictions.
Shopping centres and all retail stores which are open must comply with the restrictions limiting trading hours. Since 16 January 2021, a 6pm-6am curfew has been imposed in all territories, meaning people must stay at home (apart from exceptional reasons) and all stores are closed including food retailers, supermarkets, etc. between these hours. Since 27 February 2021, a weekend lockdown is also imposed in certain regions (including several cities such as Nice and Cannes).
In addition, stores including in shopping centres and supermarkets which remain open have to apply the restrictions limiting the number of visitors and oblige to monitoring visitor numbers in real time so as to remain within the applicable limits at all times, 1 customer every 10 sqm for all stores of more than 400 sqm.
A third lockdown is currently under review due to the rebound of the pandemic situation until the end of February 2021 but the French government resists to impose again such strict measures at a national level and has put 20 more regions under monitoring (including Paris region) where a weekend or full lockdown may be imposed in March 2021.
The above are only examples of issues that need to be considered and addressed in relation to the legal position of the parties to specific commercial leases affected by the pandemic. The interdisciplinary and multi-jurisdictional retail team at DWF can support you on the full range of issues arising from the COVID-19 pandemic, from protecting your business and your people, to supply chain issues and interacting with your customers. Please get in touch with our country experts today.
Germany is currently in its second hard lockdown after the first in spring last year. Restaurants, gyms, cinemas have been closed since November 2020 (takeaway only), followed by retail and personal services such as hairdressers and cosmetics since December 16, 2020. Shopping malls are open, but only for supermarkets, pharmacy, drugstores and stationery stores and respective hygiene regulations apply. "Click and collect" is allowed for all.
Responsibility for the closure orders lies with the respective federal states, which currently apply the restrictions very uniformly throughout Germany. Most of the measures are extended to 6 March 2021. Initial opening scenarios are under discussion, but manner and timing are currently controversial and it is unclear if the lockdown will – perhaps only partially – be extended again.
The current closures are resulting in significant revenue losses for retailers and service providers, leading to adverse effects for the commercial lease market, such as:
It was highly controversial from a legal point of view that COVID-19 related official orders for closures were considered as a "cessation of the basis" of a lease. Since 1 January 2021 this issue is clarified and forces landlords to negotiate with the tenant about a rent reduction. The new provision does not lead to an automatic rent reduction. A tenant must provide detailed information and figures about the deterioration of their financial situation due to the closure of the rented premises. It is highly controversial which information a tenant has to present and to prove.
The law does not contain a statement on a central question with regard to lessor's financing.
The suspension of the obligation to file for insolvency because of illiquidity ended on 30 September 2020 and because of overindebtness on 31 December 2020. The legislator has extended these obligations from 1 January until April 2021. This only applies to businesses that applied by 28 February 2021 for Coronavirus state aid and under the condition that the aid obtained is suitable for eliminating insolvency. In principle, the suspension of the insolvency application obligation can (again) only be considered if the crisis is pandemic related and payment of the aid is to be expected. The regulations are quite complicated and difficult for many directors to examine.
Since 1 January 2021, there has been a new restructuring law in Germany. Germany has thus implemented the EU directive on preventive restructuring faster than planned. There is praise but also some criticism, e.g. that the regulations are not comprehensive enough or that the procedure is not suitable for SMEs because it is too complicated. Irrespective of this, the new restructuring law might help to restructure companies that fulfil the requirements for access, to restructure themselves without insolvency proceedings. The first procedures have started.
If you have any questions or would like to discuss your COVID-19 response strategy in Germany please contact Christiane Huismans.
The above are only examples of issues that need to be considered and addressed in relation to the legal position of the parties to specific commercial leases affected by the pandemic. The interdisciplinary and multi-jurisdictional retail team at DWF can support you on the full range of issues arising from the COVID-19 pandemic, from protecting your business and your people, to supply chain issues and interacting with your customers. Please get in touch with our country experts today.
Trade resumption in shopping centres
Since 1 February 2021, most tenants have been able to resume their activities in shopping malls, following the third lockdown (this time 5 week long) in Poland. As was the case during the previous lockdowns in the spring and autumn, only certain activities were permitted in shopping centres, including the sale of food, cosmetics and cleaning products. These restrictions have been reintroduced in one province (currently the most affected by new infections) since 27 February and will be binding until 14 March (unless extended).
The easing of restrictions still does not apply to certain businesses, such as restaurants (allowed to operate as takeaways only) or gyms (cinemas have been allowed to open from 12 February, subject to the limit of 50% seats occupation). Shopping centres must operate in compliance with the given sanitary regime.
Recurring restrictions on retail and service activities are adversely affecting the commercial lease market. The major challenges are:
The "anti-crisis shield" suspended the binding force of lease agreements for the duration of the ban on operating in shopping centres, provided that a tenant who has been subject to the ban submits to the landlord, within 3 months from the lifting the ban, an offer to extend the lease on the hitherto existing terms, for a period equal to the duration of the ban plus 6 months. The regulation is being criticized by both tenants and landlords as unsuitable to a situation in which the bans are reintroduced periodically.
Many tenants are seeking further remedies through judicial modification or termination of their lease on the grounds of an "extraordinary change of circumstances" (rebus sic stantibus). In many cases, the courts have already issued injunctive relief in favour of tenants, e.g. by setting reduced rent for the duration of the dispute, or have dismissed such applications. Does this remedy apply in every situation? What is the likelihood of a lease being terminated under this procedure? In what circumstances may a motion for injunctive relief be justified?
Faced with months of struggling with the economic effects of the pandemic, many entities are choosing to initiate restructuring proceedings, especially under the simplified procedure introduced within the "anti-crisis shields". Experts also predict more bankruptcy petitions than before. Parties to lease agreements should be aware of how their legal situation changes may change under such proceedings.
If you have any questions or would like to discuss your COVID-19 response strategy in Poland please contact Małgorzata Lesiak-Ćwikowska.
The above are only examples of issues that need to be considered and addressed in relation to the legal position of the parties to specific commercial leases affected by the pandemic. The interdisciplinary and multi-jurisdictional retail team at DWF can support you on the full range of issues arising from the COVID-19 pandemic, from protecting your business and your people, to supply chain issues and interacting with your customers. Please get in touch with our country experts today.
The Spanish Government declared a second state of alarm on the 25th October 2020 which is currently in force. Compared with the previous declaration (which lasted from the 14th of March to the 21st June 2020 and implied very strict measures for the population and businesses), the current state of alarm is more decentralized and gives the Governments of the 17 autonomous regions (plus the two autonomous cities of Ceuta and Melilla) of Spain the competencies to apply, supervise and adapt the measures in their respective regions and accordingly to the evolution of the pandemic in their territories. In practice, this has resulted in different degrees of restrictions depending on the territory with regards to the activity in shopping centers. As an example, some regions have seen their shopping malls closed (only retail stores allowed to open from Monday to Friday) while in other regions there were no restrictions at all. These measures change regionally and are adapted to the particular situation of each territory.
The diversity of the measures applied is implying that businesses are unable to perform equally across the Spanish territory. Furthermore, e-commerce has increased significantly in Spain during lockdown (which has led to an increase in investment of logistics assets). This has changed the shopping habits of the costumer, especially from the perspective of shopping centres which have experienced a loss of visitors even after the restrictions were eased.
Despite the possibility for some lessees to request a reduction or a moratorium in the payment of the rent of the leased businesses under certain circumstances (a measure approved by the Spanish Government in the first stages of the pandemic), a number of business are facing serious risk of imminent bankruptcy as a result of the economic context and the continuous disruptions in their activity. This is in spite of the extension of the deadline to enter into a voluntary arrangement with creditors (14 March 2021).
The main issue in Spain right now are the huge problems between big malls and the lease agreements. Leasers are not allowed to open due to the pandemic and the lease agreements are still in force. Thus, big efforts are needed to renegotiate the lease agreements or to defend the owner or the leaser with regard to the termination of the agreements or the reduction on the price to be paid each month.
If you have any questions or would like to discuss your COVID-19 response strategy in Spain please contact Iñaki Frías or Jordi Sánchez.
The above are only examples of issues that need to be considered and addressed in relation to the legal position of the parties to specific commercial leases affected by the pandemic. The interdisciplinary and multi-jurisdictional retail team at DWF can support you on the full range of issues arising from the COVID-19 pandemic, from protecting your business and your people, to supply chain issues and interacting with your customers. Please get in touch with our country experts today.
The UK is currently in its third lockdown although the governments of England, Wales, Scotland and Northern Ireland are each setting out their plans for easing restrictions over the coming weeks and months, the plan is that:
Given the lockdown was imposed at the end of December, the loss of Christmas and January sales trading has affected bricks and mortar non-essential retailers significantly despite the fact that many have accelerated or improved their online offering.
COVID-19 has accelerated changes that were already happening in the UK retail market. The key challenges are:
Currently commercial landlords cannot bring leases in England, Wales or Northern Ireland to an end by way of forfeiture for non-payment of rent. This measure was put in place last year and is due to end on 31 March 2021 although it may be extended. Additionally, landlords in England and Wales cannot rely on the use of the Commercial Rent Arrears Recovery provisions which would normally permit landlords to recover unpaid rents by seizing goods.
In Scotland, the position is different. Forfeiture for non-payment of rent was not excluded, but made subject to an extended 14-week notice period for tenants to settle arrears before forfeiture could occur. News is currently awaited on whether the Scottish government will exercise its powers to extend this measure otherwise due to end on 31 March 2021 to 30 September 2021. There are not the same restrictions on other landlord remedies for non-payment as exist in England.
Although these measures have provided some additional protection for retailers, no legislation has been introduced to relieve non-essential retailers from paying rents during periods of national lockdown; the national governments have left it to landlords and tenants to work out a compromise between themselves and many landlords and tenants have agreed a series of rent concessions (for example rent free periods or rent deferments) since March 2020.
In light of this, many retailers are seeking to future-proof their leases by either adopting a turnover-based model for rent calculation, incorporating a form of rent suspension in the event of future pandemic-related closures or building in more flexible break options.
If you have any questions or would like to discuss your COVID-19 response strategy in the UK please contact Rachel Lawler.
The above are only examples of issues that need to be considered and addressed in relation to the legal position of the parties to specific commercial leases affected by the pandemic. The interdisciplinary and multi-jurisdictional retail team at DWF can support you on the full range of issues arising from the COVID-19 pandemic, from protecting your business and your people, to supply chain issues and interacting with your customers. Please get in touch with our country experts today.