Commercial rent payments in Slovakia

To date, we have listed several decisions relating to this issue. However, not as many disputes involving commercial rent proceedings are currently ongoing in Slovakia as might be anticipated after the COVID pandemic. Some of the listed decisions are only first-instance decisions which might be reversed or cancelled by a second-instance court. In addition, most of the courts’ reasoning is contained in the reasoning in court-ordered injunctions, not on the merits of a case. In the absence of a clear Supreme Court decision, it is currently difficult to identify a trend in case law.

We do anticipate that the following questions should be subject to future case law: (i) how a court will deal with the issue of unpaid rent, which did not become due in the period covered by the prohibition on the unilateral termination of property leases on the grounds of a delay in paying rent; and (ii) which arguments, documents or proof are considered sufficient to establish a connection between a delay in paying the rent and the circumstances caused by Covid-19 triggering the prohibition on the unilateral termination of property leases on the grounds of a delay in paying rent.

Under Section 13c of Act No. 71/2013 Coll. on subsidies (the “Act”), and the approved state aid scheme for supporting the economy during the Covid-19, rent subsidies were granted on an application in the amount of the rent discount agreed between a landlord and a tenant. Under Section 13c(18) of the Act, if a tenant and a landlord did not agree a discount, the tenant has the right to pay the due rent in a maximum of 48 instalments. Instalments must be paid on the 15th of each month starting from 15th day of the following the month after the end of the lockdown, but at the latest from 1 April 2021.

An important fact arises under decision No. 5Cob/29/2021 of the District Court Prešov. A tenant rented non-residential premises from the defendant, where he operated a shop. Due to the pandemic and the subsequent lockdown, the tenant failed to pay due rent for February and March 2021. The landlord assessed the tenant’s failure to pay the rent as a material breach of the lease agreement and served the tenant a notice to terminate the lease agreement. The tenant filed a motion for injunctive relief, requesting the court to restrain the landlord from disposing of the property and to enjoin the landlord from evicting tenant. The tenant also pointed out that the failure to pay the rent could not be regarded as a breach of the lease, because Section 13c(18) of the Act allows the due rent to be paid in 48 instalments. The court subsequently granted the interim injunction in which it restrained the landlord from disposing of the property and ordered the landlord not to evict the tenant.

Thus, a landlord cannot automatically consider a failure to pay the rent as a breach of contract. As the tenant is entitled (if they can prove financial hardship in paying the rent due to Covid-19) to pay the rent in up to 48 instalments from the end of the emergency, but at the latest from 1 April 2021.

Under section 3b of Act No.62/2020 Coll. on certain emergency measures concerning the spread of Covid-19 and amending certain acts, a landlord cannot unilaterally terminate a property lease if the tenant is in delay in paying the rent, including payments for related services, and these payments: (i) are due from 1 April 2020 to 30 June 2020; and (ii) the delay is due to circumstances caused by Covid-19. However, the tenant must confirm the connection between the delay in paying and the circumstances caused by Covid-19.

In decision No. 2Cob/140/2020, the Bratislava County Court pointed out that Section 3b prohibits the unilateral termination of property leases on the grounds of a delay in paying the rent due from1 April 2020 to 30 June 2020 due to circumstances caused by Covid-19. Other grounds for the unilateral termination of property leases are not covered by Section 3b, even if caused or triggered by Covid-19. In the highlighted proceedings, the tenant did not pay the rent due to the closure of his business (an airport cafe) during March, April, and May 2020. In addition, due to the poor financial situation because of Covid-19, the tenant went into liquidation in June 2020. The landlord withdrew from the lease agreement due to the tenant filing for liquidation. The commencement of liquidation was agreed as the grounds for withdrawal from the lease agreement. The tenant filed for the lease to continue and noted the application of the Section 3b. However, the Court ruled that Section 3b applied to the payment of rent due and not to other grounds for withdrawal.

In proceedings No. 10C/56/2020 at the District Court, the landlord filed a lawsuit to terminate the tenancy and for the tenant to be evicted from the property due to a breach of the obligation to pay rent and construction changes made to the subject of the lease without the landlord’s consent. Regarding the delay in the payment of the rent, the tenant (operating a fitness centre) did not pay the rent for February and June 2020. The tenant claimed that the landlord could not terminate the lease for the failure to pay the rent as this was caused by the poor economic situation due to the Covid-19 pandemic. The landlord in turn noted that the reasons for the failure to pay the rent (lack of cash flow) was not caused by the pandemic and that the tenant also failed to pay rent for July and August 2020, which was not covered by Section 3b.

These proceedings are still ongoing. Important questions to which the Court must provide answers are, firstly, how the court will deal with the issue of the rent that was not paid outside the period from April to June 2020. Secondly, what arguments, documents or proof are considered sufficient to establish a connection between the delay in paying the rent and circumstances caused by Covid-19.