Hotels: renegotiating remains the best option in times of COVID

Destinations

The months that have elapsed show, yes, a greater insight into the possibilities that are in the hands of hoteliers. “I have been in all kinds of negotiations,” explains the cabinet partner Monlex, José Antonio Fernández de Alarcón regarding the experience since the pandemic began. “What they have basically done is some kind of reduction, reduction of this year’s rent or the cancellation of it, which is forgiven for a few months and the payments for future months are fixed in a proportional part.”

It has also been common to find a third solution “in which there is a fixed component and a variable component so as not to make the mistake again in the future”. The variable component can be based on occupation or GOP, gross operating profit (Gross Operating Profit ), explains Fernández de Alarcón

But in general the contracts are not being extinguished because they are usually of successive tract, that is, for several years. In this case, the jurisdiction establishes that, if the situation is extraordinary as now but temporary, there is a forecast that in one or two years this situation will change, the renegotiation of the contract is sought rather than termination. “

The renegotiation is taking place in all tourist areas, not only for hotels, but also in agencies, restaurants or even golf courses, and the historical jurisprudence that marks the clause has been applied in many cases Rebus sic stantibus, by which Roman law established that, “if the circumstances changed substantially, the contract would become unbalanced and, therefore, to re-balance it had to be renegotiated.”

About said clause, Hortensio Santos lawyer of Tourism & Law He comments that, although it is not included in our regulations, it began to be used especially after the Civil War and then it was applied at various times. “At the beginning the courts understood that it was something that had to be applied with great caution, and going case by case, since it implies breaking one of our principles of law, that the contract must be fulfilled in its fair terms (pacta sum servanda) and therefore there was that caution regarding its application. “During the past crisis, around 2010, it was being applied in relation to mortgage loans or other purchase contracts with an associated loan.

Many hotels have remained closed and in others the occupancy is minimal. Experts recommend renegotiating contracts avoiding going to court.

Now we will have to see what happens because “the situation that has occurred with the Covid is very new and” if this type of matter begins to be brought to court, we will have to see where the courts go “, at least” until the Court Supreme will not pronounce itself “, says Santos

“I particularly think that the requirements established by the Supreme Court are applicable for this type of assumption and therefore it would be completely viable to go to court to request the suspension of the contract or a rent reduction, establishing that yes, and Basing very well, the general circumstances but would also have to take into account the economic situation in which the tenant is“.

Redirect in the face of uncertainty

It is considering redirecting some contracts, “at least for this year,” he says. Luis Huerta, partner of Office Buades. “Today no one knows exactly what is going to happen, if it is something totally specific and it is only necessary to save this year or next year, and in that context renegotiate the conditions or they see that it is a situation that is going to be consolidated” and therefore those contracts would have to be resolved. “But for now, the usual thing is to renegotiate including 2021.

The owner cannot pretend to collect the rent in a normal situation, so the conditions are being renegotiated, suspending or reducing the rents, each negotiation is a world“.

By way of the Rebus clause, the parties “are almost obliged to understand each other to avoid prosecuting this issue” and notes that “common sense” is being applied.

“At no time have I seen threats of eviction or legal claims for income. In the end, the parties assume that it is a difficult situation for everyone and that, therefore, everyone has to participate in the economic losses that this entails and, in in a way, risk is socialized, so to speak, and the tenant is not forced to carry the full weight of a contract that was agreed under conditions that are not current, “says Huerta

Avoid collapsed courts

The operator of a hotel “when it is a lease, not in management contracts, if he cannot reach an agreement with the owner, he can take him to court to demand that renegotiation”, explains Fernández de Alarcón. But Avoiding it benefits the tenant and also the landlord, because “if the hotelier has to go to court, the owner may not see the rent for a long time, they could deposit the rent with the court and the landlord would not see it. And until the lawsuit is resolved, which can take years. So I think everything is working out in a reasonable way. “

Good faith is key so that later if you have to go to court later, it can be shown that you have tried, that you have sought solutions. Because “it is not worth saying I do not pay the rent.”

“We must find solutions, prove that there is no income this year, that there has not been for reasons completely outside the management of the hotel, it has nothing to do with the management that you have done in the hotel, you are not guilty of anything. What you cannot do is not simply not pay the rent. This would lead you to be asked for compensation for breach of contract, you have to be careful “, explains the Monlex expert

“You have to explain what your accounting situation is, in what situation you have stayed, and what is the comparable that can solve that situation,” says Santos. “What is very important with respect to the Rebus is that all the solutions are raised, that the court is not only asked to terminate the contract, that is, early termination, but that various options are asked because, as it is a possibility that it will always be empowered at the mercy of what the judge indicates, these different options must be exposed, from the maximum that is the termination of the contract without any type of debt to that, in case of early termination if a penalty is foreseen, propose the reduction of that penalty, and then let the judge decide “.

The Tourism & Law lawyer also comments that there are those who are wanting to apply by analogy the law of rustic leases that, unlike that of urban, it is foreseen that in the case of unforeseen events in which the tenant is unable to obtain a income from the leased rustic land, the suspension or reduction of the rent is allowed “but he considers that it is not the most appropriate. In any case, he argues that avoiding the courts is the best.

“The courts have been paralyzed for three months, they already had a monumental traffic jam in general in the jurisdiction; a judicial procedure of this type under normal circumstances could be resolved in six months, being very optimistic, but the truth is that up to two and three years will be can lengthen, not counting the delay that has occurred “, says the Tourism & Law expert

For his part, Monlex’s lawyer also draws attention to thethe situation of travel agencies or restaurants that also work with premises for rent. “There are some regulations that have come out during the Covid era by the government looking for solutions, which the truth is that they solve almost nothing. Probably There, yes, there are contract resolutions, either via bankruptcy strategies or via any other strategy because the self-employed or the micro-entrepreneur will not lose everything. In this area there can be a lot of legal conflict starting in the autumn.