This measure of state aid is intended to assist the businesses that have suffered the biggest blow due to the quarantine, i.e. the companies that could not engage in their economic activities due to the quarantine prohibitions in Lithuania by the Government. Examples of such businesses would be entities rendering cultural, leisure, entertainment, food, and health care services prior to quarantine, that were forced to shut down due to the prohibitions put in place temporarily.
Landlord’s solidarity is one of the main conditions in the rent relief program. Following the announcement of quarantine, the landlord should reduce the rent by at least 30% compared to February of this year. One can only take joy in the fact that both separate real estate players and associations representing real estate developers seem to be actively reporting that landlords are willing to work together with their tenants or are already doing so. In any case, tenants can expect compensations of rent no higher than 50% compared to the rent of February of this year.
The rent relief program also has several restrictions. For example, the tenant must have no reported financial difficulties as of December 31, 2019. Company financial indicators play a significant role as well, as the annual income of the tenant (legal entity) in 2019 must not exceed 50 million euros and the asset value in the balance sheet must not exceed 43 million euros. The compensation of the rent shall also not be awarded in cases when tenants rent the property that belongs to the same group of companies, or to a natural person with a controlling interest in the tenant.
One should also remember that the compensations are not awarded automatically. INVEGA is responsible for checking the data submitted by the tenants. Therefore, compliance with administrative requirements is mandatory. The tenant must have submitted the financial statement for 2019 to the Center of Registers before applying for rent relief. Another requirement stated is that the rental agreement must be registered in the Real Estate Register of the Center of Registers. As generally the tenants and landlords are not required to register rental contracts, tenants should first check whether their agreements have been submitted to the Center of Registers.
The tenants who decide to submit their applications for rent relief should first make sure that they comply with all the applicable requirements. In case of a groundless refusal to allocate the compensation by INVEGA, tenants are entitled to filing a complaint with the court regarding the unfavourable decision by INVEGA.
It should be noted that the new measure of state aid also raises doubts regarding its target subjects. For example, the rent cannot be partially compensated not only to companies that are undergoing bankruptcy, but also restructuring.
Restructuring does not equal the termination of economic activities. On the contrary, restructuring is aimed at overcoming the financial difficulties of the respective legal entity, preserving its ability to operate and avoiding bankruptcy by receiving assistance from creditors and employing various economic, technical, organizational, and other means. Despite certain disadvantages discussed herein, all state initiatives geared towards helping businesses impacted by COVID-19 are most welcome.
Translated by MP Translations Agency in Kaunas.
