Summary on state aid for rental discounts due to COVID-19

The outbreak of COVID-19 has hit most industries hard, and the hotel and restaurant industries as well as the retail industry have been particularly affected. A major expense for these industries is the rent that many tenants now find difficult to pay. With the aim to facilitate for landlords to agree upon temporary rent discounts during this critical time with tenants in the aforementioned industries, the government is allocating SEK 5 billion in state aid through a special regulation issued on April 16, 2020 (see Regulation (SFS 2020:237) on state aid when certain tenants receive a rental discount). The regulation enters into force on July 1, 2020. The scope and substance of the aid is briefly described below.

Extent of the aid

The aid allows the government to cover half of the agreed rent discounts for the period April 1, 2020 until June 30, 2020. However, the aid may never exceed 25 percent of the previously fixed rent. Note that the aid only applies to discounts on fixed rent,. rent discounts on turnover rent are not covered.

Included industries and conditions for compensation

Landlords who grant rent discounts during the aforementioned period to tenants active in the hotel and restaurant industries, the retail industry, the leisure and entertainment industries and certain other industries such as travel agencies and dentists, are eligible for obtaining the aid from the government. The complete list of the concerned industries can be found here.

In order to receive the aid, the following conditions shall be fulfilled:

1. the landlord shall have entered into a lease agreement no later than March 1, 2020 with a tenant covered by the regulation, with a wholly or partially fixed rent in SEK (which according to Boverket includes additional rent for e.g. heat and property tax as long as the basis of the calculation is clear by e.g. an index clause);
2. the tenant has leased the premises during the entire or part of the period April 1, 2020 until June 30, 2020;
3. an agreement regarding the rental discount has been entered into between the parties no later than June 30, 2020, pursuant to which the parties have agreed upon a discount on the fixed rent for the aforementioned period, for future payment or retroactively, and have not otherwise amended the terms of the lease agreement (which, according to Boverket, should not impede the changing of other conditions facilitating for the tenant);
4. the tenant is not a government agency; and
5. the tenant, as of December 31, 2019, has not been in financial difficulties within the meaning of Article 2.18 of the Commission Regulation (EU) No 651/2014 or is subject to a payment order due to a resolution made by the European Commission declaring an aid illegal and incompatible with the internal market (according to Boverket, a landlord’s financial difficulties may also constitute an obstacle to receive the aid).

The rent discount aid is capped at EUR 800,000 for each tenant. The maximum amount to any one tenant will be calculated based on the aid provided to companies within the same group according to the definition in the Commission Regulation (EU) No 1407/2013 on de minimis aid Article 2 paragraph 2., see here. Hence, when applying for the aid, the authorities will take into account if and to what extent the tenant has already been granted aid for other leases. In other words, the cap applies to the total amount per tenant and not per lease agreement. This implies a “first come, first served” principle (Sw. “först till kvarn-princip”). There may come further clarifications on how the provision shall be interpreted. The amount allocated is SEK 5 billion, but the intention is that all who meets the criterias shall receive the aid. However, an increase of the allocated amount requires a resolution from the Swedish Parliament.

Application

An application of aid is done retroactively through an application to the relevant County Administrative Board via an e-service, currently being developed by Boverket. The application must include, i.a., a certificate from the tenant stating that the company was not in financial difficulties on December 31, 2019. Applications can be submitted between July 1, 2020 and August 31, 2020 and disbursements will be made after the County Administrative Board has decided on the matter. We understand that the County Administrative Board will issue clarifications on how the regulation shall be understood and applied but until then there are, as mentioned, some uncertainties on when the aid will be granted. Cederquist continues to monitor the matter and this article is updated continuously.

Separate state aid due to loss of revenue

Please note that companies that suffered loss of revenue due to COVID-19 in March and April 2020 compared to the same period 2019 will be able to apply for a separate state aid for parts of the loss. See here.

Updated 2020-06 12