PROTECTING TENANTS FROM BEING EVICTED FOR RENT ARREARS

This article was written in 2020. If you are looking for up-to-date information on this topic, please contact us at office@arws.cz or by phone on +420 245 007 740. We will be happy to advise you.

Update as of 27.4.2020

The laws protecting against termination of tenancy are valid and effective from 27 April 2020, when they were published in the Collection of Laws under No. 209/2020 Coll. (lease of residential premises) and No. 210/2020 Coll. (business lease). 

The so-called lex covid (Act No. 191/2020 Coll.) has already been published in the Collection of Laws and is valid and effective as of 24 April 2020.

Update as of 24.4.2020

I.

As part of the law relating to the rental of residential premises, the rules regarding the billing and financial settlement for 2019, or for the past billing period between the owner of the apartment and the tenant (and also between the association of unit owners and the individual owners) have been changed.

The billing (i.e. the calculation of the actual amount of service costs and advances for individual services in the billing period) that should have been delivered to the recipient of the services (owner, tenant) between the time the law came into force and 31 August 2020 can be delivered without penalty until 1 September 2020. 

II.

It follows from the so-called lex covid (Act No.191/2020 Coll.) that for a debt on rent (sublease, rent) covered by the above-mentioned Act, no higher interest on late payment (or other penalty for late payment) can be applied for the period of delay from 12 March to 30 June 2020 than the amount set by Government Decree No. 351/2013 Coll. (currently 10% per annum for debts due in March and April; for debts due in June, the CNB repo rate in force on 1 June 2020 + 8% is applied to determine the amount of the limit). This restriction does not apply to contracts concluded after the promulgation of the Act. 

Who is protected

• The lessee, or
• subtenant,

a person who rents or sublets an apartment or house (or part thereof) in which he/she also actually lives,  

and

• The tenant, 
• a tenant, or
• subtenant,

who rents, leases or subleases premises which he uses principally for his business (this purpose need not necessarily be expressed in the contract), and

who has fallen or will fall into arrears in the payment of rent (rent, sub-rent) between 12 March 2020 and 30 June 2020 (the so-called 'grace period'), if 

the default is due to an emergency epidemic measure.

In the case of business premises, the protection applies to both natural and legal persons.  For simplicity, this text uses the term 'tenant' for all protected persons. 

Without evidence, it won't work

The tenant of an apartment or house will be required to prove to the landlord that he or she is unable to pay rent on time as a result of the emergency measures by a certificate issued by the Employment Service. The more detailed conditions for issuing this certificate (e.g. the documents to be provided) will be dealt with in a methodological guideline and are not yet known. The tenant of the business premises will also have to provide the landlord with documentary evidence, which is not specified by law. 

Who is not protected

Under the text of the Act, protection does not apply, for example, to a tenant who sublets a flat that they have a lease on and do not actually live in. However, if the subtenant falls into arrears, the tenant is usually also late in paying rent to the landlord. However, the tenant in this case should not be protected from notice as he does not actually live in the flat. However, the termination of the lease also terminates the sublease; this consequence follows directly from the law (the Civil Code) and the 'protection law' now under discussion does not change this. 

On the contrary, natural persons who occupy as subtenants an apartment or house rented by a legal person should be protected. From the point of view of the legal entity, the business is usually a business and will be protected from being evicted from the lease of the flat or house in question for rent arrears by the prohibition on eviction from premises used for business purposes.

What the "tenant" is protected against

In the period until 31 December 2020, a tenant cannot be served with a notice of termination of tenancy for rent arrears that occurred during the protection period (i.e. between 12 March and 30 June 2020).  

However, for non-payment of rent in the period before 12 March and after 30 June 2020, notice can be given without limitation. 

What the "tenant" is NOT protected against

• from the obligation to pay deposits and charges for supplies and services connected with the use of the flat (e.g. electricity, gas, water, heat, cleaning of common areas, lift, waste removal, etc.): The tenant is obliged to pay these payments properly and on time even during the protection period.  This is where landlords who have these deposits and reimbursements included as a lump sum directly in the rent will find themselves in difficulty; they are therefore not quantified separately.  
• before terminating the tenancy for a reason other than rent arrears during the protection period (e.g. termination for arrears of deposits/utility payments will still be possible). Thus, the landlord may lawfully terminate the tenancy for any lawful reason (e.g. providing housing needs for himself or relatives) except for non-payment of rent during the protection period. Subsequently, the landlord may also initiate proceedings to evict the property. The landlord is not limited in this respect.Before default interest: a tenant who is in default in the payment of rent is obliged to pay default interest on the amount due in the amount agreed in the contract or - if not agreed - in the amount set by Government Decree No. 351/2013 Coll. lex covid, interest on default (or any other default penalty) cannot be applied for the period of default from 12 March to 30 June 2020 at a higher rate than the interest rate set by the Government Decree (10% per annum; for debt due in June 2020, the CNB repo rate applicable on 1 June 2020 plus 8%).   
• from contractual penalties related to non-payment of rent (if validly agreed in the contract) or the obligation to compensate for damages
• before the due date of the rent due and before the initiation of proceedings for payment of the debt or any other act to obtain a writ of execution and before its enforcement: if the so-called lex covid adopted by the Senate on 17 April 2020 is signed by the President, it will not be possible to enforce the lex covid until 30 April 2020. June 2020, the execution (enforcement of a judgment) must be carried out by selling the debtor's movable property or by selling the real estate in which the debtor resides, and in the case of an execution affecting a bank account, the debtor must keep in the account an amount equivalent to 4 times the minimum subsistence level of an individual in the period until 31 December 2020. The rent due shall become payable in accordance with the lease agreement and may be recovered by the landlord as standard.
• prior to a previously served valid notice of termination of the lease for non-payment of rent.
• prior to the termination of the fixed-term tenancy at the expiry of the agreed term

Non-payment of debts = immediate termination

All rent arrears that were due during the protection period and remain unpaid in whole or in part must be paid by the tenant by 31 December 2020 (or within 30 days of the end of the tenancy if it ends before that date).

If the tenant fails to comply with this obligation, he/she is threatened with immediate termination without notice (from the house or apartment) or with 5 days' notice (from the business premises).

In the case of business premises, this notice is also threatened if it becomes certain that the tenant will not pay the rent by 31 December 2020 (e.g. the tenant is adjudicated bankrupt or faces foreclosure proceedings, etc.). 

Termination of the lease by the court

A landlord whose tenant has failed to pay rent during the protection period may seek to cancel the tenancy after the end of the state of emergency (i.e. before 31 December 2020) if the tenant cannot fairly be required to continue to bear the restriction on his right.  

However, the practicability of this option is somewhat doubtful. If no agreement is reached with the tenant, the landlord will be forced to go to court and will have to continue to face the unfavourable situation that led him to take this step during the proceedings.