ANALYSIS OF THE EFFECTS OF THE DECREE 25/2020, OF 1ST APRIL, WHICH MODIFIES THE DECREE 226/1998, OF 30TH DECEMBER, WHICH REGULATES THE REDUCTION OF RENT OF HOUSES ADMINISTERED BY THE INSTITUTE OF HOUSING IN MADRID

On 30th January 2020, the World Health Organisation (WHO) declared the COVID-19 outbreak as an International Health Emergency. On 14th March 2020, this lead to Spain declaring a State of Emergency according to the Royal Decree Law 463/2020, which lead to extraordinary containment measures to try to manage the health crisis caused by COVID-19, which include restrictions to movement of people, temporary requisitions and compulsory personal benefits, as well as containment measures in the educational, labour and commercial fields.

To mitigate the severe economic impact of these measures, especially for those who are self employed who are part of the group that will see their incomes most affected as a result of the health crisis, therefore they may have difficulty meeting their financial obligations, such as their monthly rent payments for their primary residences, On April 1, the Governing Council of the Community of Madrid approved Decree 25/2020, which includes measures that affect certain leases of primary residence, whose tenants are in a situation of economic vulnerability due to COVID-19, and which serve to complement the measures agreed by Royal Decree-Law 11/2020 of March 31.

Therefore, by meanso the the approval of the Decree 25/2020, the amendment of Decree 226/1998 of 30 December was approved, regulating the reduction of the rental price of housing administered by the Social Housing Agency of Madrid (hereinafter, “AVS”).

The amount of reduction will be that provided for the minimum income by the Order of 4 February 1999, of the Department of Public Works, Town Planning and Transport, which implements the Decree regulating the reduction in the price of the rent of housing administered by the Housing Institute of Madrid, and that for the year 2020 is 46.56 euros per month in housing and 4.54 euros per month in the parking spaces linked to the homes. -The rent reductions will be granted for the period of the state of alarm decreed by Royal Decree 463/2020, of March 14, and its possible extensions, counting for full months.

Tenants who find themselves in an economically vulnerable situation as a result of COVID-19 can ask for a reduction in rent. This is regulated in Decree 25/2020 in a different way to that of Royal Decree-Law 11/2020 of 31 March. They can be considered economically vulnerable tenants if the following criterion apply to them:

Employees who, after the declaration of the state of alarm resulting from the health emergency caused by Covid-19, become legally unemployed.

Employees affected by procedures of suspension and reduction of the working day that have their direct cause in losses of activity as a consequence of the COVID-19 within the terms regulated in the Royal Decree-Law 8/2020, of 17 March, of extraordinary urgent measures to face the economic and social impact of the COVID-19.

Self-employed workers who have suffered a substantial loss of income or a fall in income of at least 40%, comparing the average turnover of the quarter prior to the date of application for the reduction with the average turnover of the same quarter in 2019, unless the activity begins later, in which case the average monthly or quarterly turnover available to them will be assessed.

With regard to self-employed workers, we note that the requirement for access to aid will hardly be met in the first quarter of 2020, given that the state of alert was decreed on 14 March, so it can only be assumed that they will access this aid due to the vulnerability that will arise in the second quarter of 2020.

Finally, the Decree also regulates what documentation will be used for the accreditation of the situations of vulnerability mentioned above, documentation that must be presented together with the request for reduction of the housing rent.

The documents to be submitted with the application are the following:

(a) Employees in the situation of vulnerability referred to in point of the previous paragraph, by means of a company certificate with notice of dismissal.

(b) Employees in the situation of vulnerability provided for in point of the preceding paragraph, by means of a company certificate with notification of the suspension of the contract or reduction of the working day, as determined.

c) Self-employed workers in the situation of vulnerability provided for in point of the previous section, by means of the contribution:

1. In the event that the activity has been ceased, a certificate issued by the State Tax Administration Agency or the competent body of the Autonomous Community, as appropriate, must be provided on the basis of the declaration of cessation of activity declared by the interested party.

2. If there has been a loss of income or a substantial fall in sales of at least 40 per cent, it must provide the profit and loss account and the balance sheet for the quarter preceding the date of application for the reduction and for the same quarter in 2019, unless the activity has begun subsequently, in which case it must provide the same documentation for the period of activity it has.
The deadline for submitting the application for income reduction and documentation accrediting the situation of vulnerability, before the General Registry of the AVS or in any of the places provided for in article 16.4 of Law 39/2015, of 1 October, on the Common Procedure of Public Administrations, will expire 1 month after the rise in the state of alarm (which in the case of the self-employed persons we had analysed previously, means that unless the state of alarm is raised in the month of June, they will hardly be able to access the aid provided for in this Decree).

The interested party has the right not to provide documents that are already in the possession of the acting Administration or have been drawn up by any other Administration. The acting administration may consult or obtain said documents unless the interested party opposes it under the terms set out in article 18 of Organic Law 3/2018, of 5 December, on the Protection of Personal Data and the Guarantee of Digital Rights. Likewise, the AVS may carry out, in the exercise of its competences, the necessary verifications to check the accuracy of the personal data that are in the possession of the Public Administrations and that have been declared by the interested party in their application.

If the application or documentation submitted does not meet the established requirements, the applicant shall be required to make good the fault within ten working days or to submit the required documents, with the indication that, if he does not do so, his application shall be deemed to have been withdrawn, subject to an express decision.

Once the request has been submitted, within two months the AVS will issue a decision regarding the request for reduction, which, if considered, will affect the income earned during the state of alarm and since it has become a vulnerable subject. Once the period indicated has elapsed without an express decision being notified, the application will be understood to have been rejected.

 

These are causes for extinction of the reduction provided for in Decree 25/2020:

a) The resignation of the holder.

b) The fulfillment of the term.

c) The termination of the lease for any reason.

Once the state of alarm has ended, those who are still in a situation of economic vulnerability caused by this health emergency may request the reduction of income regulated by Decree 226/1998, under the conditions set out in the aforementioned Order of 4 February 1999.

Finally, Decree 25/2020 establishes in its fourth section that tenants of housing rented under the protection of Royal Decree 1133/1984, of 22 February, on Remodelling and Rehousing actions in certain districts of Madrid, as well as those who have already been granted a rent reduction, may also apply for the rent reduction regulated in this transitional provision.

In the latter case, once the period granted has elapsed, equivalent to the duration of the state of alarm, the initial rent reduction will be resumed under the same conditions in which it was granted.

 

Authors: Angel Lavín, Juan Gonzalo Franch, Paloma Sánchez

 

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