Rent Moratorium Proposal

Last April 7^th, Irene Campos, the Housing Minister submitted a bill for the consideration and discussion of the senators. This bill proposes three types of rent moratoriums (commercial and residential), as a measure to aid those who have lost or had their income reduced due to the COVID-19 sanitary crisis.

This bill states that the tenant and property owner must negotiate a payment arrangement, in the following scenarios:

1. If the tenant has had a significant loss of income. The terms of the arrangement would be valid for six months and would have different conditions, as follows:
2. If the tenant lost his/her job or his employment contract was suspended, both parties would have to sign a contract to establish a total moratorium on payment for a maximum of six months and exceptionally applicable to that period of time.
3. If the income of the tenant was reduced by 50%, the rent payment will have to be reduced by half of the original amount and, if the income was reduced by less than 50%, the amount to be paid should be negotiated between the parties.
4. For commercial rents, the total moratorium on the lease will be authorized if the tenant has had to close the premises due to a sanitary order issued by the Ministry of Health.
5. Also, for commercial rents if there is no sanitary order:
6. If the store reduced its income by 50%, the lease payment should also be cut in half.
7. If the income decreased by less than 50%, the payment of the lease must be agreed between the parties.

Regarding the reimbursement of money to the property owners, this bill proposes the following:

1. In the event of a total moratorium on payment, the fees not paid during the six months that the law applies must be delivered no later than January 2021.
2. In the event that only 50% has been canceled for six months, the tenants will have to pay no later than October of 2020 and,
3. If a lower amount was the one that was not paid, it would have to be canceled in July of 2020.

In addition, the initiative orders the suspension of increases in all rent contracts this year, as well as in the execution of evictions.

Furthermore, as also proposed by this bill, for the tenants to negotiate with the owners of the properties they rent, they must present a certification from the employer regarding the reduction of their hours, the suspension of the contract or their dismissal.

If they are self-employed, they must provide a declaration of value added tax (VAT) that demonstrates the reduction in income and, if they are informal workers, they must submit an affidavit authenticated by a Notary Public to their landlords.

And in the event that a tenant of a commercial property should need to  negotiate with his/her lessor, he/she must deliver the sanitary order which led to the store closing, or a comparison between the VAT declarations of February and that of March of this year.

Opinion of the Senators

There is really no unified opinion on this matter. A great number of senators did mention that they agree with the initiative as “the new version of the bill does include much-needed inputs to reach the balance between owners and tenants”; however, that “it may not be necessary for the moratorium to extend as long as six months, as well as the need to take into account the impact on landlords, who also have commitments to pay for public services, loans and municipal services”.

We will have to see if this bill passes as proposed, or if several amendments will be included in the end. What is certain is that even if this bill does not pass, this matter will continue to be under discussion until some sort of measure is enforced to alleviate those whose incomes have been affected and continue to be affected by this crisis.