What to do if you can't trade but you have to pay rent?

12.02.2021 Aleksandrs Koposovs, the member of the board

As you know, the emergency regime in Latvia and the laws adopted in connection with this banned retail trade in basic consumer goods, excluding food and a number of other goods. The list of permitted products is very small. As a result, many shops in shopping centers were forced to close and suspend their activities. But what about the rent? Nobody canceled the obligation to pay under the rent agreement. If it is impossible for the parties to reach the agreement, then what to do and what legal provisions can protect the tenant?

If the concluded contract does not stipulate the conditions by which the parties could be guided in order to avoid a disputable situation, then the only way out may be to use the norms of the Civil Law of the Republic of Latvia and a court decision.

There is no other option.

In accordance with Section 2147 of the Civil Law, the duty to pay the rent shall cease and the payments that have been made shall be returned if the property to be rented has not been used due to such event as was not caused by the tenant and as occurred without the fault of the tenant. Such events include the case when the tenant, due to force majeure, is deprived of the opportunity to use the thing.

Unfortunately, the law does not provide a definition of the concept of “force majeure”. Quite often, such a concept can be seen in contracts, where the parties themselves determine the list of circumstances that they consider force majeure and upon the occurrence of which they can withdraw from the contract. First of all, it is necessary to look at the terms of the contract, and if force majeure is determined, then it is necessary to be guided when withdrawing from the contract precisely on the basis of what is indicated in the contract. But what if the contract says nothing about it? Is the introduced emergency regime recognized as a force majeure circumstance, as a result of which the use of the rented premises for the purposes stipulated by the contract has become impossible?

The legislator, when introducing the emergency regime, did not mention this in any law.

Therefore, the only option, if the parties cannot agree on acceptable conditions for further cooperation, may be to go to court with a request to recognize the circumstances that have arisen as force majeure circumstances and to release the tenant from paying rent until the ban on trade in a particular type of product is lifted. Only a court decision can establish the truth in this case.

Since litigation takes a lot of time and the final decision of the court has to wait for more than one year, you can file claims now, thus transferring the dispute with the landlord to court and without paying rent. Of course, there is a risk that the landlord will consider the tenant’s arguments unlawful and begin the procedure for terminating the contract. But there is a rule of law and it can be used.

The only question is whether the court recognizes these circumstances as force majeure or not.

The correct first step is to prepare and provide the landlord with a legally sound and substantiated statement in which the tenant declares his or her right not to pay the rent until the force majeure ends. In case of disagreement – to resolve the dispute through the court.

It is not so important how long the process will take. A dispute over a specific rent period (whether it was necessary to pay or not) should not affect further rent legal relationships. After the ban is lifted, the rent can continue, and the rent payment can continue to be paid, but over the disputed period, the parties can go to court and seek for an appropriate court decision.

If the court takes the side of the tenant, then the obligation to pay will disappear. If the court does not consider the existence of the tenant’s right not to pay in this case, then the rent must be paid. The overdue amount may be supplemented by legal interest for late payment (6% per year) and a contractual penalty, but not more than 10% of the principal amount of the debt.

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