On 17 June 2020, Act No. 155/2020 Coll. introducing the governmental subsidy to cover rent paid by tenants in commercial premises took effect.
We have prepared answers to some of the most frequently asked questions:
Who is eligible for a subsidy for rent?
The subsidy scheme is aimed at undertakings (both legal persons and sole proprietors) that sell goods or provide services to end consumers and that, due to epidemiological measures related to the COVID-19 pandemic, could not have used their leased premises for the agreed purpose or were significantly restricted in such use. Subsidy can be then provided to tenants whose businesses were either fully closed or substantially restricted for operation as a result of the general prohibition to enter such premises. At the same time, the tenant must have used the leased premises under a lease agreement not later than from 1 February 2020. All other circumstances will be assessed case by case, given that the measures that were taken step by step affected a great variety of businesses. Providers of out-patient health care that are reimbursed for healthcare provided are not eligible for such subsidy.
What types of commercial premises/establishments are eligible for a subsidy for rent?
Tenants can apply for the subsidy in respect of (i) a room, a part of a room, or a set of rooms whose designated purpose is other than dwelling (non-residential premises), and where the tenant sells goods or provides services to end consumers; and (ii) marketplace stalls. Also, they can apply for the subsidy in respect of associated service and storage areas that come with the leased property. The lawmaker lists car parks as an example of such service areas. In general, this subsidy does not apply to office spaces, production or manufacturing premises, or logistic centres.
Is a tenant entitled for the subsidy if he lets commercial premises from a natural person who is not a sole proprietor?
Yes. The landlord can be (i) a natural person who is not a sole proprietor, (ii) sole proprietor, (iii) non-undertaking legal person, and (iv) undertaking legal person. That means that a tenant can apply for this subsidy even if his landlord is an institution governed by public law (such as municipality or local self-government) or the government.
How and when at the latest can I apply for a subsidy for rent?
Application for the subsidy can be filed by the landlord on tenant's behalf, where the tenant must give his assistance. Application is filed on an electronic form to be published on the website of the Ministry of Economy of the Slovak Republic. The form must be signed by secure electronic signature of both the landlord and tenant; so authorised signatories of both the landlord and the tenant must have the capacity to sign by secure electronic signatures.
At the time of preparing this notice, no time limit was set for filing this application nor any additional information were available about electronic system for filing and processing of such applications.
What amount of subsidy can be applied for?
The amount of subsidy will be conditional on agreement in place between the landlord and the tenant about the amount of discount on rent. This is because the subsidy will be given in an amount equal to such discount given by the landlord under such agreement. At the same time, the law prescribes that the subsidy must not be higher than 50% of the rent for a period of what is called 'impaired use'. If the landlord and the tenant have agreed on a 50% discount on rent, the other 50% will be paid by the Government, meaning that the tenant will not be required to pay any rent at all. If the landlord is an entity managing state-owned assets, the rent is reduced to one half by operation of law, as a result of which the subsidy amounts to 50% of rent, and the tenant pays no rent.
What if no agreement is made between the landlord and tenant about rent discount?
In that case, they cannot apply for this subsidy. However, the tenant has the right to pay to the landlord the full outstanding rent for relevant period by monthly instalments that can be spread over not more than 48 months. First instalment is due in the month immediately following the month when the state of emergency, declared due to outbreak of COVID-19 pandemic, was ended.
What if the landlord and the tenant agree on a discount of less than 50% of rent?
In that case, the tenant must pay to the landlord the rent reduced by (i) agreed discount and (ii) amount of subsidy received (which always equals the amount of discount given). The tenant may pay the remaining rent amount in monthly instalments, as in the case where he received no discount on rent from the landlord.
What if the tenant has already paid full rent for the period of impaired use of leased premises?
If the tenant has already paid the rent for the period of impaired use of leased premises (or for a part of such period), the tenant and the landlord may apply for a subsidy for rent for the same period in the future, after they have agreed on a rent discount. In fact, this will compensate, in the future, for what the tenant would have become entitled to, had he not paid the rent for the period of impaired use.
Can the landlord unilaterally increase the amount of rent during the period in which the tenant repays any outstanding rent?
No. The landlord cannot unilaterally increase the rent in that period. Exception to this is an adjustment to rent on which the parties agreed prior to 1 February 2020.
Can the subsidy be applied to pay for utilities supplied to leased premises?
No. This subsidy is aimed solely for payments of rent, and does not apply to any other obligations of the tenant that are customarily associated with lease (such as payments for utilities, use of common areas, etc.). If such payments cannot be severed from the rent amount, the law defines that such payments amount to 5% of rent.
During the state of emergency, the landlord and the tenant signed an amendment to lease agreement to adjust the amount of rent. Does such agreement have any effect on the amount of subsidy?
No. This, however, only if the landlord and the tenant amended the lease agreement after 12 March 2020. If the amendment signed after this date concerns adjustment of rent, then such amendment has no effect on the amount of subsidy. Tenant's entitlement to the subsidy is derived from the original lease agreement.
Can a subtenant apply for the subsidy for rent?
Yes. Undertakings that use their business premises under a sublease agreement may also apply for this subsidy on the same conditions as are described above.
