COVID-19 in Slovakia: State aid to tenants for rent payment

By Katarína Pfeffer, Robert Cuperka

06-2020

On 9 June 2020, the Slovak parliament adopted an amendment to Act No. 71/2013 Coll. on the provision of subsidies within the competence of the Ministry of Economy of the Slovak Republic, on the basis of which the state will assist with the payment of rent by providing a subsidy for mostly rents of entrepreneurs who were forced to close their businesses due the COVID-19 pandemic.

The law establishes a legal framework for providing support mainly to entrepreneurs carrying out business activities, or providing services to customers on the basis of a lease agreement, which as a result of extraordinary measures (e.g., by means of decisions of the government, the Chief State Hygienic Officer, etc.) have suffered significant limitation in the use of their premises. As an example, this would include stores whose use was substantially limited by the prohibition of the public entering shopping areas. Therefore, the ability to sell goods or provide services was reduced, and thus also the ability to generate profit and pay rent.

The subject of the lease may be non-residential premises that the tenant uses to sell goods or provide services to end consumers, or market places. Non-residential premises also include related service areas and warehouses.

The subsidy is provided in the amount equal to the rental discount provided by the landlord on the basis of an agreement between the landlord and the tenant. The highest possible subsidy is 50% of the rent, with a 50% discount on rent for the period of restricted use of the leased object. For example, if the landlord agrees to reduce rent by 50% for the tenant, the state will provide a subsidy for the other 50% of the rent. Thus, the tenant would not be paying any rent in this case.

It is important to note that one of the conditions for receiving the subsidy is that the relevant lease agreement had to be concluded before 1 February 2020.

Applications for a rent subsidy (together with all the required documentation) should generally be submitted by the landlord on behalf of the tenant, but on his own account, i.e. the formal beneficiary of the aid is the tenant. However, the landlord and the tenant may both sign the application. If the application is signed jointly by the landlord and the tenant (by means of certified electronic signature), this could replace the agreement on the discount of the rent. The application is submitted electronically using a form that will be published on the Ministry of Economy’s website.

A special requirement in case of the subsidy exceeding EUR 100,000, is the obligation identify the beneficial owner (in Slovak:“konečný užívateľ výhod”).

For the purposes of the subsidy, any changes in the lease agreement that occurred after 12 March 2020 are not taken into account. Therefore, if an adjustment to the amount of rent has been agreed after that date, such change would not affect the amount of the subsidy.

The tenant should also have the right to spread the payment of rent for up to four years into 48 monthly instalments. This should generally be possible irrespective of whether the tenant and the landlord have agreed on a discount on the rent.

The law provides a mechanism to ensure that subsidies are provided in a transparent and efficient manner, so that the subsidy reaches the beneficiary as soon as possible.

The state is expected to spend EUR 200 million on this support. The law will come into effect in the next few days.

To conclude, the new law is intended to mitigate the negative impacts of the COVID-19 pandemic on entities in the Slovak Republic. We sincerely hope that will be achieved to the broadest and maximum extent possible. Although this subsidy may be officially categorised as support to the real estate sector, in reality it will help businesses across the full spectrum of the economy in the country.