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Three questions regarding the support for rent reductions in relation to Corona  

Published: 2020-04-23 | Updated: 2020-06-17

On April 17, the government announced the SFS 2020:237 regulation on state support when certain commercial tenants received a discount on the rent. The regulation includes provisions to support commercial tenants in exposed sectors in the wake of the outbreak of the new corona virus. In short, the regulation entails that if the landlord and the tenant reach an agreement regarding a rental discount during the period April 1 to June 30, 2020 (the support period), the state is liable to the landlord for part of that discount.

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Below we answer three questions concerning the application of the regulation.*
 

Who is covered by the support?

Landlords to tenants operating business in hotel, restaurant and retail trade as well as certain other businesses, may apply for support. The circle of beneficiaries is based on the SNI-code registered for the tenant's activities during the support period. Landlords intending to apply for the support should therefore ensure the tenant is registered within one of the SNI-codes entitling to the support under the regulation. Support may also be granted in the case of subletting the premises. In such cases, the support is granted to the primary tenant who acts as a landlord towards the subtenant. Furthermore, it should be noted that certain categories of tenants operating as described above are excluded. These are in general public authorities, as well as, enterprises already experiencing financial difficulties as of December 31, 2019. 1
 

Conditions for support

  • Rental agreement, stating a wholly or partly fixed amount in SEK, which has been signed by the tenant in an exposed sector no later than March 1, 2020. In case the rental agreement requires the tenant to pay additional charges for, for example, heating, property tax and index, such additions may be considered fixed rental amounts in case the agreement clearly states how these are to be calculated. For example, it can be clearly stated how additions are to be calculated by means of an index clause attached to the contract. Hence, rental agreements covering only turnover-based rental are not eligible for support. 
  • Agreement regarding reduced rental costs has been signed between the landlord and the tenant no later than June 30, stating the discount to be valid during the period between April 1, and June 30 (the support period).
  • The rental amount according to the discount agreement is required to be less than the fixed amount that would otherwise have been paid according to the rental agreement in force by March 1, 2020. The rental agreement should otherwise be subject to unchanged conditions. However, adjusted conditions that favors the tenant, such as deferral of payment, reduced turnover-based rent, possibility to pay monthly rent instead of quarterly rent and alleviations in opening hours etc. are generally not to be considered changed conditions and would therefore still justify the support.    
     

How does the process and assessment work?  

The landlord applies for the support with the responsible county administrative board based on where the property is located. The support will be applied for through the National Board of Housing, Building and Planning’s e-service during the period between July 1, 2020 and August 31 and is to be paid out as soon as the county administrative board has decided on the case.  The amount of support that may be applied for is limited to 50 percent of the agreed discount on the fixed rental amount during the support period. In addition, the amount of support may not exceed 25percent of the fixed rent originally agreed upon.

An additional limitation is that the total support for the same tenant may not exceed EUR 800,000 in total, which means that support previously granted to other landlords with respect to the same tenant will be considered in the assessment. According to the National Board of Housing, Building and Planning’s clarifications, the term "same tenant" is not limited to one legal person, but may constitute several legal entities within the same corporate group. Accordingly, the maximum amount is calculated based on the total amount of rental support granted to the company group.

The Swedish National Board of Housing, Building and Planning is currently in the processes of producing a form, in which further information on which documents to provide with the application will appear.
 

Deloitte's comment

Since many tenants working in exposed sectors are suffering from reduced liquidity as a result of Covid-19, commercial landlords currently experience increased risks of tenants being unable to fulfil their obligations according to rental agreements. In the light of this, it is important that landlords act proactively and understand the options available to avoid the negative consequences that may arise in this situation. The rental support provided by the new regulation is intended to serve as such an option.

Deloitte will follow the development in this area and are happy to assist landlords and commercial tenants in matters related to the rules regarding temporary rental discounts, as well as, other issues related to commercial contractual relationships.   

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1. What is considered financial difficulties shall be assessed in light of article 2.18 in Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty. 

* The information shall be considered neither advisory nor exhaustive. For advice in individual cases please contact us via the contact details below.  

Contact us

Johan Fjellström
Senior Manager, Legal
jfjellstrom@deloitte.se
+46 70 080 29 52

Fredrik Kvist 
Consultant, Legal
fkvist@deloitte.se
+46 70 080 28 35

 
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