Covid-19 does not affect rent

The phrase “Force Majeure” is paralyzing. Tenants as well as landlords, believe that they are relieved from their contractual obligations, or are scared to miss out on rental payments. In fact, the Rent Act (chapter 12 of the Land Code) and the commonly used and jointly negotiated rental agreement for business locations/premises (12B.3) published by Fastighetsägarna Sverige pays very little regard to pandemics. The latter only regulates how a landlord may be relieved from its obligations towards its tenants, and then only due to the occurrence of one of the specifically mentioned events, which do not, even by interpretation, include pandemics.

Typically, the consequence of a landlord’s failure to fulfil its obligations under a lease is that a deficiency in the building/premises arises, e.g. that a water leak arises due to poor or omitted maintenance work. The reason that the relevant clause in the 12B.3 agreement is unilateral is that tenants are already afforded extensive protection through the Rent Act, which gives the right to rent reductions, damages etc. in case such deficiencies arise.

Rent must be paid, and premises and buildings must be taken care of. A tenant’s sudden lack of ability to pay rent does not in itself constitute Force Majeure. Not even a drastically changed market or deflation can relieve the tenant of the obligation to pay the agreed rent. The idea is that the rent shall be adjusted to the market through changes in conditions at the end of each rental period, not continuously during the rental period.

A letter from a tenant with the message that the rent will not be paid, or only paid in part, will not be binding on the landlord. Such message is not connected to any time limit, nor does it impose any new rights or obligations on the parties. Rather it is simply a plea for help from the tenant.

We need to talk about the Rent Act § 10

The Rent Act contains a rule that lease agreements expire if an authority, due to the nature of the premises, announces a ban on using the premises for the intended purpose.

That this might happen is no longer a curious thought. In the risk zone are premises that are usually used and intended for meetings and gatherings of people and where the nature of the premises is particularly favourable for the spread of infection.

Hence, with both feet firmly place in the Land Code we can say that covid-19 does not affect rent. However, a decision or ban from an authority, based on the ongoing outbreak, could potentially overturn an entire lease agreement.

Susanna Kihlberg, head of RosholmDell’s real estate group