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Czech Republic: Measures to mitigate the effects of the COVID-19 pandemic on tenants

3 April 2020 – The Government has published draft acts on certain measures to mitigate the effects of the COVID-19 pandemic on tenants of (i) business premises and (ii) premises used for housing needs. The proposals are not yet in effect and will likely be submitted to Parliament for approval on 7 April 2020.

1. Act on Certain Measures to Mitigate the Effects of the COVID-19 Pandemic on Tenants of Business Premises

The measures proposed in the draft apply to all business premises (i.e. any lease or sublease of premises for the purpose of engaging in business activities), not merely retail premises, as stated in previous motions.

Under the abovementioned Act, the landlord may not terminate a lease unilaterally during the protection period (until 31 March 2022) solely on the grounds that the tenant is in arrears with the payment of rent or services related to the use of the business premises, if the delay occurred:

(i) between 12 March 2020 and 30 June 2020;

(ii) chiefly as a result of restrictions resulting from the emergency measures in the event of an epidemic, which made it impossible or substantially hindered the pursuit of its business.

In the event the tenant fails to pay rent even after the termination of the protection period, the landlord may terminate a lease with a 5-day termination period. Contrary to information originally disseminated in the media, the current draft does not include any rent deferral payment provisions. Moreover, the proposed draft does not deprive the landlord of the right to late interest payments or contractual penalties. The landlords right to claim compensation from the deposits/bank guarantees or other security remains also unaffected.

2. Act on Certain Measures to Mitigate the Effects of the COVID -19 Pandemic on Tenants of Premises Used for Housing Needs

The measures proposed in the draft apply to all leases or subleases of premises used to meet the housing needs of the tenant/subtenant.

As with the previous example, under the Act regulating housing needs, the landlord may not terminate a lease unilaterally during the protection period (until 31 May 2021) solely on the grounds that the tenant is in arrears with the payment of rent related to the use of the premises used to meet the housing needs, if the delay occurred:

(i) between 12 March 2020 and the day following the end of the emergency measures (but no later than on 30 September 2020);

(ii) chiefly as a result of restrictions resulting from the emergency measures in the event of an epidemic, which made it impossible or substantially hindered the proper payment of the rent.

In the event the tenant fails to pay the rent even after the termination of the protection period, the landlord may terminate the lease without a termination period.

Moreover, the due day for the payment of services related to the use of the premises used to meet the housing needs to the service provider is being postponed (invoices delivered after the effectivity of this Act and prior to 31 August 2020 will not become payable before 1 September 2020).

For more information, please contact Klára Štěpánková, Partner, at

e-mail

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