Forced closure of non-essential businesses followed by a gradual re-opening thereof in COVID-19 times. What does this mean for all lease agreements concerned?

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Lieven Peeters

Partner

Updated on Friday 10 August - 10am 

Due to COVID-19 all shops, bars, restaurants and leisure/recreational centres were forced to close as from 18 March 2020. Only essential businesses such as grocery stores, pet food stores, pharmacies, banks, post offices and newspapers shops, petrol stations and fuel suppliers could remain open insofar as social distancing of at least 1.5 meter distance could be guaranteed and if sanitary measures were taken. Since 18 April 2020 specific shops from specific sectors were gradually allowed to re-open again, however conditionally. As of 1 July 2020 all shops are open under such conditions, except for jacuzzis, steam cabins, hammams, discos and dancings that must remain closed until 31 August 2020. What does COVID-19 mean for all lease agreements concerned?

Following the request of the WHO, the Belgian Federal government has imposed intrusive health measures to reduce the risk of the spread of COVID-19 by closing almost all shops as well as leisure and recreational areas, as well as bars, restaurants, and cinemas. The tenants concerned were thus no longer in a position to operate their shops and be open for business during normal business hours.

These measures can be considered as an “act of God/fait du Prince” for both tenant and landlord. The parties have no option but to abide by the government measures. Such forced closure could be considered as a force majeure (whereas the economic impact of fewer visitors during the preceding weeks due to fear of the illness is not as such force majeure). Force majeure implies that both parties are (partially and/or temporarily) relieved from complying with their contractual obligations.

Be aware the suspension of certain obligations does not imply the total suspension of the agreements. In this situation, all parties should look into their lease agreements to review the clauses dealing with hardship and force majeure, in particular concerning "acts of god" and the notification formalities towards their co-contracting parties.

Are the measures to date severe enough to invoke a dissolution or annulment of a lease agreement?

As the measures are for most activities are limited in time, they do not seem, in general, to form a substantial basis for invoking the dissolution or annulment of a lease agreement, except for any lease agreement whose term/duration essentially falls within this period, e.g. an Easter pop-up store lease. Thus in most cases invoking the dissolution or annulment of a lease agreement now would be considered disproportionate or even an abuse of right.

The Flemish Regional Government has decided to grant for an economic indemnity in the amount of €4,000 for closed shops, bars and restaurants. An amount of €160/day is said to be granted for any additional day after 5 April 2020. The Walloon Government has decided to grant EUR 5,000 per company (some additional conditions do apply) that has been completely closed down. In Brussels a payment of a one-off premium of EUR 4,000 for the companies that were obliged to close completely (some additional conditions do apply) as a consequence of the contingency measures and of EUR 2,000 for hairdressing businesses is provided for.

For all support measures please consult this website.

If you have any queries concerning your lease agreements, please do not hesitate to contact your usual ALTIUS contact or Lieven Peeters, Real Estate Partner.

The above information is merely intended as comment on relevant issues of Belgian law and is not intended as legal advice. Before taking action or relying on the comments and the information given, please seek specific advice on the matters that are of concern to you.

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