New regulations have been published in Spain to address the health crisis caused by the COVID-19 outbreak. We will analyse below the most significant impacts that the new measures will have, essentially included in Royal Decree-law 11/2020, of 31 March, which adopts additional urgent social and economic measures to tackle COVID-19 (“RDL 11/2020”), as well as a number of aspects of Royal Decree-law 10/2020, of 29 March, which establishes a recoverable paid leave for employees that do not provide essential services with the aim of reducing the movement of people in the fight against COVID-19 (“RDL 10/2020”).
Main changes to employment provisions as a result of RDL 11/2020:
- Entitlement of fixed-term workers to unemployment benefit. Fixed-term workers engaged under contracts (including trainee, relief and seasonal contracts) with terms of at least two months that have expired after the announcement of the state of emergency on 14 March 2020, are entitled to an exceptional unemployment benefit even if they have not paid contributions for the minimum required period for entitlement to other benefits, if they do not have an income.
The exceptional benefit will be valid for one month, extendable if so established by royal decree-law. The amount of the exceptional benefit will be 80% of the in force IPREM public income indicator.
- Freeze on the payment of contributions by companies and self-employed workers. The General Treasury of the Social Security may pause, for a period of six months, Social Security contributions or joint company-worker contributions payable by companies or self-employed workers accruing between April and June 2020 (in the case of companies) and May and July (in the case of self-employed workers). Companies and self-employed workers must apply for the freeze on contributions and would be eligible only if the activities that they perform have not been suspended as a result of the state of emergency.
- Deferral in the payment of Social Security debts. Companies and self-employed workers may apply, up to 30 April 2020, for a deferral on the payment of debts to the Social Security that must be paid between April and June 2020.
Interest at a rate of 0.5% will be applied rather than the normal rate. In order to apply for the deferral, no prior deferrals must have been granted.
- Job retention measures for companies in the scenic arts, musical, cinema and audio-visual sectors. Companies’ commitments to retain jobs for a period of six months beyond the date on which business resumes, as established in Royal Decree-law 8/2020, of 17 March, on extraordinary measures to tackle the economic and social impact of COVID-19 (“RDL 8/2020”), will be assessed on the basis of the specific characteristics of the different sectors and applicable labour legislation.
- Temporary incapacity benefit in the event of exceptional total confinement. Exceptionally, with effect from the beginning of the period of confinement and throughout the corresponding period of leave, temporary incapacity benefit will extend to any workers who have to travel between municipalities and who have the obligation to provide essential services as referred to in RDL 10/2020.
This shall apply if a quarantine has been imposed on the place where the worker in question has their home and they have been expressly refused the ability to travel by the competent authority, cannot work remotely for causes not attributable to the worker or company for which they render services and the worker is not entitled to any other public benefit.
- Pension plans may be cashed in the event of unemployment or business closure as a result of the health crisis caused by the COVID-19 outbreak. For a period of six months, members of pension schemes are able to cash their consolidated rights in any of the following scenarios: a) they have been laid off temporarily as a result of the ERTE trigged by the health crisis; b) where an employer owns establishments that have been closed to the public as a result of the state of emergency or; c) in the case of self-employed workers who have been previously registered in the Social Security as such and have stopped performing their business as a result of the health crisis.
This option will also apply to insured pension schemes, company benefits schemes (planes de previsión social empresarial) and mutual provident societies (mutualidades de previsión social).
- Compatibility of the allowance for the care of minors and unemployment benefit or benefit for business closure during the state of emergency. The allowance that employees or self-employed workers were receiving for the care of minors suffering from cancer or another serious illness at 14 March 2020 are not affected by the temporary layoff or reduced working hours on the grounds provided in articles 22 and 23 of RDL 8/2020.
It should be borne in mind that the ERTE adopted by the employer, whether involving temporary layoff or reduced working hours, would only affect the beneficiary of the benefit in question in respect of the portion of the working day not involving the care of the minor.
There is no obligation to pay contributions for the duration of the state of emergency; it shall be understood that contributions have been made for the entire period.
- The special measures established in articles 22 and 23 RDL 8/2020 regarding temporary layoffs and the reduction of working hours due to force majeure or on economic, technical, organisational or productive grounds will apply to companies involved in insolvency proceedings, when the circumstances in those articles are met.
- A distinction is made between unemployment benefit received by seasonal workers and those received by workers who perform set and periodic work that is repeated on certain dates.
- A modification has been made to the conditions for applying for the exceptional benefit for closure of business in the case of self-employed workers and cooperative members connected to how they provide evidence that their billing has fallen by 75%.
- Lengthening of the term for appeal. The term within which to lodge administrative appeals or to file challenges, claims, conciliation, mediation and arbitration proceedings will now be calculated from the business day following the date on which the state of emergency is lifted (irrespective of the time elapsed between the notification of the administrative action appealed against or challenge prior to the state of alarm being announced). The above is understood without prejudice to the effectiveness and enforceability of the administrative act that is being challenged.
RDL 11/2020 establishes that, in general, the measures published in it shall remain in force from 2 April 2020 until one month has elapsed beyond the end of the state of emergency, unless another specific term has been established.
Further details of the measures included in RDL 10/2020 are explained in our newsletter: COVID-19 PEOPLE: latest developments in employment law.
The main developments in the case of disputes as a result of RDL 11/2020 are:
- Suspension on repossessions and evictions in the case of vulnerable households. Repossession and eviction processes will be suspended for a maximum period of six months after RDL 11/2020 entered into force, once the state of emergency concludes and the freeze on procedural deadlines and terms is lifted. The suspension will apply where the tenant provides evidence that they are in a position of social or financial vulnerability as a result of the COVID-19 crisis, making it impossible for them to find alternative accommodation for themselves and for the people living with them.
If the above suspension affects landlords that provide evidence to the court that they are in a position of social or financial vulnerability as a result of the COVID-19 outbreak, the Attorney from the Justice Department (Administración de Justicia) shall inform the respective social services, which shall take this into consideration when establishing the period of the suspension and defining what protection measures to adopt.
- Expedited proceedings in the labour, contentious administrative and commercial courts. Once the state of emergency and any extensions have come to an end, a Plan of Action will be approved as soon as possible, and in any event within 15 days, to expedite proceedings in the labour and contentious administrative courts, as well as the commercial courts, with the aim of encouraging swift economic recovery after overcoming the health crisis.
Developments in corporate law pursuant to RDL 11/2020:
- Remote meetings and written resolutions. For the duration of the state of emergency, and even when not established by a company’s articles of association, meetings of the board, general shareholders meeting (GSM) and other collegiate management bodies (e.g., committees) may be held by videoconference or conference call (provided that it is possible for the secretary to identify the attendees).
- Drafting and approval of the annual accounts. Any entities that had already drawn up their annual accounts before RDL 11/2020 may call the annual general meeting (AGM) to approve them, although the management body shall be able to amend its proposal for the allocation of the year’s results included in the annual report. To do so, the management body must justify the change to its proposal on grounds of the situation caused by the COVID-19 health crisis, and the auditor must issue a document in which it states that it would not have changed the contents of its report had it known of the amended proposal before signing it.
If an AGM had already been called to approve the annual accounts before the state of emergency was announced, the management body may withdraw the item related to the proposed allocation of the year’s results from the agenda; if so, it must submit a new proposal within the legally established term (in this case it would also have to comply with the provisions of the previous paragraph regarding justification for the change and the auditor).
The GSM called to approve the new proposal for allocation of the year’s results must be held within three months following the end of the term established for holding the AGM, i.e., three months after the conclusion of the state of emergency (article 40.5 RDL 8/2020).
- Listed companies. In the case of companies that have chosen to modify the proposed allocation of the year’s results as established above, the new proposal and justification issued by the management body and the auditor must be made public on the company’s website and at the CNMV.
- Supervision by the CNMV of leveraging limits and liquidity risk in the case of collective investment companies. The CNMV may, temporarily and after providing justification that the measure is necessary and proportionate:
- require managers to bolster the liquidity of the portfolios that they manage, in particular, to increase their investment in especially liquid assets; and
- authorise the management entities to establish notice periods to redeem investment funds, despite regulatory provisions containing requirements in respect of term, minimum amounts and prior notice. The CNMV may also establish those prior notice periods.
Foreign Direct Investments (FDI)
Modifications to the rules for screening foreign direct investments included in RDL 8/2020
RDL 11/2020 makes a number of amendments to the rules for screening foreign direct investments established in article 7 bis of Law 19/2003, pursuant to the wording thereof established by RDL 8/2020. Specifically:
- The scope of application is now wider: it includes investments made by EU or EFTA residents whose beneficial owners are, or that are controlled by, non-residents)
- The authorization obligation can no longer be lifted by Resolution of the Council of Ministers)
- Exemption from the authorization regime for investments of less than €1 million (threshold may be modified by implementing regulations at any time
- A simplified (to be completed in 30 days) authorisation process has been established for: i) investments of up to €5 million and ii) investments where a price agreement had already been reached before 18 March 2020
The modifications to the rules for foreign direct investments are analysed in greater detail in our newsletter: COVID-19 PRESSURE POINTS: Additional modifications to the rules governing foreign investments in Spain as a result of the crisis caused by the COVID-19 outbreak (Spain).
Public Law, Energy and Water, Pharmaceutical Sector
A number of developments should be highlighted from the perspective of public law.
- Modification of article 34 of RDL 8/2020. Paragraph 10 of the First Final Provision modifies a number of aspects of article 34 RDL 8/2020. Firstly, it removes the reference in article 34.1 to the automatic suspension of public services contracts and continuous supply contracts; the new wording establishes that “they will be suspended, totally or partially, from the event taking place that prevents them from being performed and until such performance can be resumed”.
Suspension will only apply when the procuring authority, at the contractor’s request, understands that it is impossible to perform the contract; the procuring authority would have to authorise the suspension within five days from the contractor’s request (lack of response will constitute denial of the suspension).
The suspension of the contract can now be either total or partial and, depending on that factor, the compensation payable will be proportionate to the scope of the contract that has been suspended.
In the case of article 34.3, paragraph four, of RDL 8/2020, it has been clarified that the suspensions do not only apply to construction contracts in which delivery is due to take place during the state of emergency, but also those that are ongoing; a new obligation is also included for contractors under construction contracts that apply for an extension to the final delivery date, which will now have to “fill in the corresponding application justifying the request”.
Article 34.6.b) RDL 8/2020 includes a new paragraph establishing that security and cleaning services contracts may be suspended totally or partially, whether at the request of the contractor or automatically, if some of the public installations or buildings are totally or partially closed as a result of the measures adopted to fight COVID-19 and it is therefore impossible for the contractor to perform its services, that be totally or partially.
In the event of partial suspension, the contract will be suspended partially in connection with the services connected to the public installations or buildings that have been closed, whether totally or partially, from the date on which that total or partial closure took place and until it is reopened. The procuring body will notify the contractor as to the security or cleaning services that it must continue to provide. It must also notify the contractor of the date on which the public installation or building or parts thereof will reopen so that the contractor can resume the services on the agreed terms.
Two new paragraphs (7 and 8) are included in article 34 RDL 8/2020. Paragraph 7 defines the contracts that constitute “public contracts” for the purposes of RDL 8/2020; it establishes that public contracts are those that, in accordance with their terms and conditions, are subject to (i) the Spanish Public Procurement Law 9/2017, of 8 November, which transposes into Spanish legislation Directives 2014/23/EU and 2014/24/EU of the European Parliament and of the Council, of 26 February 2014 (the “LCSP”); or (ii) Legislative Royal Decree 3/2011, of 14 November, which approves the recast Spanish Public Sector Contracts Law (“RDL 3/2011”); or (iii) Law 31/2007, of 30 October, on public procurement procedures in the water, energy, transport and postal services sectors; or (iv) Book I of Royal Decree-law 3/2020, of 4 February, on urgent measures to transpose certain European public procurement directives related to certain sectors into Spanish legislation; private insurance; pension schemes and funds; tax and tax disputes; or (v) Law 24/2011, of 1 August, on public procurement in the defence and security sectors.
Therefore, according to the literal wording of RDL 11/2020, it could be interpreted that public contracts awarded before December 2011 (e.g. those awarded on the basis of public procurement regulations prior to 3/2011) are not included.
As for paragraph 8, it establishes that the salary expenditure alluded to in article 34 includes those “related to the corresponding Social Security contributions.”
- Amendment of the LSCP. The Seventh Final Provision, paragraph one, of RDL 11/2020 amends the second paragraph of article 29.4 LCSP whereby, the exceptional possibility to establish a longer term than initially agreed in the case of continuous service contracts now also applies to supply contracts.
In turn, paragraph two of the Seventh Final Provision includes a fifty-fifth additional provision to the LCSP, on the legal regime applicable to Hulleras del Norte S.A., S.M.E. (HUNOSA) and its subsidiaries and the Spanish Mint (Fábrica Nacional de Moneda y Timbre), establishing that both are public entities that, in an "in-house providing" scheme, can render supplies, works or services to a contracting authority that exercises control over them.
Extension of the term for appeal
The term for lodging administrative appeals or to bring any challenge, claim, conciliation, mediation or arbitration proceedings that may replace them in accordance with legal provisions, in the context of any proceedings that could have a detrimental impact or impose a burden on the party thereto, shall be calculated from the working day following the date on which the state of emergency is lifted, irrespective of the time that elapsed between the notice of the appealed or challenged administrative action and the state of emergency being announced.
Without prejudice to the above, the appealed or challenged administrative action shall continue to be effective and enforceable.
Where public subsidies and funding have already been awarded by orders and decisions, as provided in article 22.1 of the Spanish General Subsidies Law 38/2003, of 17 November (the “LGS”), before the announcement of the state of emergency, they can be modified to extend the term for performing the subsidised activity and, as applicable, for providing evidence of and verifying the subsidised activity, even when this was not provided for in the terms and conditions for awarding the subsidy.
To do so, the awarding authority need only verify that it is impossible to perform the subsidised activity during the state of emergency and that there is insufficient time after it concludes to perform that activity, or to provide justification thereof or to verify that it has taken place in accordance with the terms.
At the beneficiary’s request and on the same terms and subject to the same requirements as stated above, resolutions and decisions for the award of subsidies, as per article 22.2 LGS, may also be modified. These are:
- those established in the General State Budget, and in the budgets of the autonomous regions or local entities;
- those that the public authorities must award, or the amount of which is established, by provisions with the rank of law; and
- any other subsidies for which evidence is provided that they are in the public, social, economic or humanitarian interest, and other properly justified subsidies.
If the subsidy is to finance an entity’s operating expenses, the initial term of performance cannot be modified.
These modifications are not subject to the requirements established in paragraph four of the third additional provision of Royal Decree 463/2020 and does not affect the suspension of terms established in paragraph one of that additional provision.
Energy and Water
Temporary widening of the consumers eligible to receive the bono social: eligibility now extends to the self-employed workers who are entitled to unemployment benefit due to business closure or fall in business, as established by article 17 RDL 8/2020
The group of potential beneficiaries of the electricity discount known as the bono social has exceptionally and temporarily broadened. Consumers are now eligible to the discount for a period of six months if they provide evidence, after the state of emergency was announced, that the owner of the connection point or any member of the family unit is a self-employed professional or self-employed worker who is entitled to receive to the benefit for business closure or fall in billing as established by article 17 RDL 8/2020.
If so, a series of discount eligibility income requirements are established that are less strict than established by general regulations (in essence, the ordinary income threshold is increased by a multiplier of 1 x the IPREM public income indicator). Specifically, the income of the connection point owner or, as applicable, the aggregate annual income of the family unit of which the owner is a member, must be equal to or less than:
- 2.5 times the IPREM index in 14 instalments, if the connection point owner is not part of a family unit or there are no minors in the family unit;
- 3 times the IPREM index in 14 instalments, if there is a minor in the family unit;
- 3.5 times the IPREM index over 14 instalments, if there are two minors in the family. A family unit is defined as per Law 35/2006, of 28 November, on Personal Income Tax and the partial modification of Corporate Income Tax Law, the Law on the Income of Non-Residents and Wealth Tax Law.
When a utility contract for the normal place of residence of a self-employed professional or self-employed worker is in the name of an entity, the discount should be applied for by the individual. Therefore the electricity supply contract would have to be transferred into the name of the individual.
The right to receive the electricity discount by meeting the above requirements cannot exceed six months; however, this is notwithstanding the consumer’s eligibility to receive the discount at any time prior to or after that date by meeting any other eligibility criteria established by Royal Decree 897/2017, of 6 October, which regulates vulnerable consumers, the bono social and other measures to protect domestic electricity consumers.
Guaranteed supply of electricity, petroleum derivatives, natural gas and water
The supply of household energy and water is guaranteed. During the state of emergency it is prohibited to cut off the supply of (i) electricity, (ii) petroleum derivatives, including manufactured gases and liquefied petroleum gases (LPG), (iii) natural gas and (iv) water from individual domestic consumers in their habitual places of residence for reasons other than the security of supply, the safety of persons and the security of facilities, even if that possibility exists under supply and access contracts signed by consumers in accordance with applicable sector regulations.
This measures absorbs and adds to the measure established by article 4.1 RDL 8/2020 (which prohibits the supply of electricity, natural gas and water (not petroleum derivatives) being cut off from consumers that are classified, from the perspective of electricity regulations, as vulnerable, especially vulnerable or at risk of social exclusion (now that prohibition applies to all domestic consumers in their habitual places of residence, without distinction as to income).
The period of state of emergency will not count when calculating the term between the demand for payment and the supply cut-off due to default established by in force regulations or supply contracts.
Relaxation of electricity and natural gas supply contracts for self-employed workers and companies
During the state of emergency, self-employed workers and companies that own electricity supply points (without any apparent distinction as to their size) may be eligible to the following measures:
- they may request the electricity supplier to temporarily suspend or modify their electricity supply contracts, or to choose an alternative offer with their own supplier, to adapt them to their new consumption needs. They may do so without penalty.
- They may ask their distributor for a change to their access tariff or to adjust the power capacity they have contracted either upward or downward, irrespective of them having made any other change to the technical conditions of their access contract in the preceding 12 months (which, in principle, would have otherwise allowed the distributor to refuse the change, in accordance with article 79.6 of Royal Decree 1955/2000, of 1 December, which regulates the transmission, distribution, commercialisation, supply and the authorisations procedures for electricity facilities, and article 5 of Royal Decree 1164/2001, of 26 October, which establishes the access tariffs for the electricity transmission and distribution networks).
If the consumer has been authorised to apply a single access tariff, they may request a change of power capacity or access tariff without requiring an express resolution by the Directorate General of Energy Policy and Mining.
Within three months after the state of emergency coming to an end, consumers may request the resumption of their contracts if they had requested a suspension, or they may request a further modification to the contract or to the technical parameters of third party network access contracts, depending on which option they chose, if any. There is no mention as to whether the suspension of a supply contract, if chosen, would also trigger the suspension of the access contract; however, it can be understood that this is the case.
Where supply contracts are resumed or modifications are made as indicated above, this shall take place within five calendar days from the request; they shall also be performed free of charge, except for applicable payments for increasing power capacity above the threshold held before the state of emergency came into effect, payments for the supervision of leased installations, if any, and payments for any work necessary in respect of control and metering equipment.
No provision is made for a scenario in which three months elapse without a request having been made to resume the suspended contract or to apply a new modification. It is difficult to offer a solution to this legal void in the case of the former. However, in the case of the latter, although not established explicitly, it seems evident that after those three months have elapsed, the modification ultimately made to the contract would be subject to the ordinary regime in place, whereby costs will be determined on the basis of that ordinary regime.
Given that the measure will trigger a significant fall in the income received by the electricity sector, it has been established that upcoming General State Budget laws approved will include compensation payable to the electricity sector equivalent to the fall in income caused by the measures in the preceding year.
Supply of natural gas
During the state of emergency, self-employed workers and companies owning supply points (without any apparent distinction as to their size) may be eligible to the following measures:
- The supply point owner will be able to request their supplier (i) to change the contracted daily flow of natural gas, (ii) to apply a tariff that would otherwise apply to a lower annual consumption, or (iii) the temporary suspension of the supply contract without penalty.
- The supplier may ask the distributor or transporter to apply one of the following measures:
- a change of bracket in respect of the transport and distribution tariff.
- a reduction of gas flow contracted in standard-term and indefinite gas output products, in the latter case without 12 months needing to have elapsed since the latest change of contracted gas flow and without that modification counting towards the minimum term for requesting a further modification.
- The cancellation of contracted gas output products and the temporary suspension of indefinite access contracts, without restriction.
- All savings generated by the lower tariffs paid as a result of applying the above measures shall be passed on from the supplier to the owner of the supply point.
Modifications to the above contracts will be made without distributors or transporters being able to pass on the cost to suppliers or consumers.
Within three months from the state of emergency coming to an end, supply point owners that have requested a modification of capacity or to their access tariff bracket may request an increase to the gas flow or a change of tariff bracket to Group 3 without time limit and at no cost. If an access contract has been suspended temporarily, it will be resumed within five calendar days and no start-up or connection charges will be levied unless commissioning is necessary due to prior closure and to start the equipment safely. There is no express mention as to the term for requesting the resumption of suspended contracts, although it is assumed that this will be within the aforementioned period of three months. Neither is there a mention as to the consequences of the three-month term elapsing without a request having been made to resume the contract or for a new modification; the same explanation mentioned above in the case of electricity applies in this case.
Upcoming General State Budget laws will be approved to include compensation payable to the gas sector equivalent to the fall in income caused by the measures.
Suspension of electricity, natural gas and petroleum derivate bills for companies and self-employed workers
When the supply point is owned by a self-employed worker or an SME, it will be possible to request a freeze on the obligation to pay electricity, natural gas, manufactured gas and piped LPG bills corresponding to billing periods falling within the period of state of emergency; this suspension includes all billing items.
Equally, suppliers are released from (i) paying the tariffs corresponding to those contracts until the consumers pay each bill in full; and (ii) paying direct taxes levied on those supplies for the period of the suspension (suppliers will not have to pay those taxes until consumers have paid the suspended bills in full or until six months have elapsed from the end of the state of emergency).
Once the state of emergency has been lifted, amounts owed will be charged in the bills issued over the next six months; in the meantime the consumers cannot change supplier until they have made all overdue payments.
Suppliers and distributors whose income falls as a result of the above measures may request the guarantees defined in article 29 RDL 8/2020 or any other line of guarantees created specifically for that purpose, for the amount by which their income has fallen.
Modification of article 4.3 RDL 8/2020 to allow the review, for the consumer’s benefit, the regulated price of bottled LPG and the gas last resort tariff rate
Article 4.3 RDL 8/2020 froze the regulated price of bottled LPG and the last resort tariff rate (tarifa de último recurso, or “TUR”) for gas for a period of six months, indicating that the values established, respectively, by resolutions issued by the Directorate General of Energy Policy and Mining on 14 January 2020 and 23 December 2019 would remain in force
Given the sharp fall suffered by hydrocarbon pricing indicators, RDL 11/2020 allows either prices to be reviewed within the period of six months according to generally applied formulae if this would result in lower prices than those applicable when RDL 8/2020 entered into force.
Extension of network access rights granted prior to the Spanish Electricity Sector Law
The expiry dates for access and connection rights granted before the entry into force of the Spanish Electricity Sector Law 24/2013, of 26 December, will be pushed back. After the extension applied in Royal Decree-law 15/2018, of 5 October, on the urgent measures for energy transition and for the protection of consumers, those access and connection rights would expire if the associated generation facility had not obtained a commissioning certificate before 31 March 2020. Under RDL 11/2020, those rights would expire if that certificate has not been obtained within two months from the end of the state of emergency (including any extensions).
RDL 10/2020 establishes that workers who do not perform essential services must take recoverable paid leave with the aim of reducing the movement of people in the fight against COVID-19.
Workers who fall within the scope of application of RDL 10/2020 must take recoverable paid leave from 30 March to 9 April 2020, both included, during which they will continue to receive their salary.
In particular, this leave does not apply to workers who render services in sectors considered to be essential, which are listed in the annex to the RDL 10/2020. These include:
- Workers who perform activities that must continue to be performed pursuant to articles 10.1, 10.4, 14.4, 16, 17 and 18, of Royal Decree 463/2020, of 14 March, and the regulations approved by the Competent Authority and Delegated Competent Authorities. Article 10.1 refers to pharmaceutical and medical establishments, opticians and establishments that provide orthopaedic products, hygiene products, etc.
- Workers who work in activities that are part of the market supply chain and the operation of centres that produce necessity goods and provide basic services, including food, beverages, animal feed, hygiene products, medicines, medical devices and any other product necessary to safeguard health, and enable their distribution from point of origin through to final destination.
- Those who perform services in the production and distribution chain of medical technology, goods, services, medical material, protective equipment, medical and hospital equipment and any other items necessary to provide medical services.
- Workers who are essential for maintaining the production processes in the manufacturing industry that provides the supplies, equipment and material necessary for the proper performance of the essential activities listed in the annex.
- Workers who provide the passenger and goods transport services that continue to be provided since the state of emergency was announced, as well as the workers responsible for ensuring the maintenance of the resources used for those services, in accordance with the regulations approved by the Competent Authority or Delegated Competent Authority since the state of emergency was announced.
- Workers in medical and health centres, services and establishments, as well as the people who (i) care for the elderly, minors, dependent and disabled persons, and people who work in companies, R&D&I and biotechnology centres linked to COVID-19, (ii) the animal centres linked to them, (iii) those who provide the minimum required services in facilities linked to them and the entities that supply the products necessary for that research, and (iv) the people who work in funeral services and connected activities...
- The workers who render services in the sectors or subsectors involved in the import and supply of medical supplies, as well as logistics, transport, storage and customs transit companies and in general anyone who is involved in medical air routes (called corredores sanitarios).
The provision therefore established clearly that the supply chain of medicines constitutes an essential service.
There are further details of employment measures in the employment section and in our newsletter: COVID-19 PEOPLE: latest developments in employment law.
Until RDL 11/2020 was approved, an application could only be made to pause mortgage payments in the case of housing mortgages. However, entrepreneurs and professionals are now able to apply for a freeze on mortgages granted to acquire real estate linked to their business (such as commercial premises or logistic warehouses), provided that the following requirements are met:
- Who can benefit from the freeze on mortgage payments: entrepreneurs and professionals that suffer a substantial loss of income or a substantial fall in their billing of at least 40%. Entrepreneurs and professionals are exclusively understood to be the individuals who meet the requirements established in article 5 of the Spanish Value Added Tax Law 37/1992, of 28 December. In other words, the mortgage relief applies to self-employed workers.
- Up to 15 days after the end of the month following the conclusion of the state of emergency, debtors are able to apply to their creditors for a freeze on their mortgage payments.
- Once the application has been submitted, the creditor will apply the payment freeze within 15 days from the application.
- Once the payment freeze has been granted, the creditor will notify the Bank of Spain of its existence and how long it will last. The amounts that the debtor would have had to pay but for the payment freeze will not be overdue. No interest will accrue during the mortgage freeze.
- The application will not require an agreement between the parties for contractual modification to be valid; nevertheless, it must be formalised in a public deed and be registered at the Land Registry. According to RDL 11/2020, it is not possible to execute public deeds during the state of emergency. However, this will not suspend the application of the payment freeze, irrespective of whether or not it has been formalised in a public deed. Once the public deed has been formalised, it will be sent by the authorising notary to the Land Registry by any means permitted by the Spanish Mortgage Law.
- The application for a mortgage payment freeze will trigger: a) a pause in payment of the mortgage for a period of three months and b) the resulting inapplicability of the acceleration clause in the mortgage agreement for the period of the payment freeze.
Extension and pause in the payment of rent under housing rental agreements
- Extraordinary extension. In the case of residential leases for homes used as main place of residence (as described in the Urban Leases Law (LAU)), when the mandatory or tacit extension periods under those agreements expire after RDL 11/2020 has entered into force and until two months have elapsed after the conclusion of the state of emergency, the tenant is able to ask the landlord (who must accept unless other terms and conditions are agreed between the parties) for an extraordinary extension of up to six months.
- Freeze in the payment of rent. Tenants under residential leases for their main place of residence that find themselves in financial difficulty due to the health crisis caused by the COVID-19 outbreak may ask their landlords for an extraordinary and temporary freeze on their rent payments, subject to the following requirements:
- Landlord: for the rent payment freeze to apply, the landlord must be a company or public entity, or an individual or company that owns more than 10 residential properties (excluding parking spaces and storage rooms) or a building of more than 1,500 m2. RDL 11/2020 establishes different provisions for landlords that do not meet those requirements.
- Procedure: the freeze must be requested by the tenant within the month following the entry into force of RDL 11/2020 (provided that the postponement or total or partial freeze has not already been agreed voluntarily between the parties). If the parties do not reach an agreement, the landlord may within seven working days from the request choose one of the following options:
- Apply a 50% reduction on the rent during the term of the state of emergency, as well as subsequent monthly rent payments if that period is insufficient as a result of the financial impairment caused by the COVID-19 outbreak, up to a maximum aggregate period of four months; or
- Apply a freeze on the payment of rent, which would apply automatically for the period of the state of emergency, as well as subsequent monthly rent payments if that period is insufficient as a result of the financial impairment caused by the COVID-19 outbreak. That deferral on monthly rent payments shall apply for a maximum aggregate period of four months. The monthly rent payments will be deferred, from the first monthly payment accrued during the payment freeze, by fractioning those monthly rent payments over at least three years, which will begin to run as soon as the COVID-19 situation has been overcome or from the end of the above period of four months; nevertheless, those payments must be made within the term of the rental agreement or any extension thereof.
The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2021