The impact of COVID-19 on leases

The impact of COVID-19 on leases

As part of the measures implemented by the Federal Government in response to the health crisis generated by the SARS-CoV2 virus (COVID-19), the public, private and social sectors are currently, and until April 30, 2020, under mandatory suspension of all their non-essential activities.

This suspension has impacted, for the most part, the rights and obligations arising from lease agreements over real property, potentially generating a contractual imbalance and/or the impossibility of performing the contract. Currently, the vast majority of tenants cannot use and/or enjoy the property they leased for the agreed uses, and/or are being deprived of the source of income that the corresponding rent would naturally generate. To think that such tenants are not released from the payment of rent or that they are not entitled to better conditions than those originally agreed in their leases reveals a note of injustice that compels the exploration of legal alternatives. To identify and execute the various legal alternatives available to tenants, the specific case must be analyzed. The applicable law and case law, and the very drafting of the lease agreement, provide the guidelines for such identification and execution. In general terms, and subject to the specific analysis of the particular case, Mexican law recognizes various mechanisms for the exclusion of liability and for contractual rebalancing in the face of extraordinary circumstances beyond the will of the parties. In lease matters, these mechanisms translate, among others, into potential: (i) payment suspensions, (ii) partial reductions of the rent amount, and (iii) termination of contracts. The applicability of such mechanisms is subject to compliance with various specific legal premises and requirements (including contractual ones). For additional information, please contact our experts: Pablo Saez, Partner: +52 (55) 5258 1085 | psaez@vwys.com.mx Fernando Moreno, Partner: +52 (55) 5258 1008 | fmoreno@vwys.com.mx Alejandro Orellana, Associate: +52 (55) 5258 1085 | aorellana@vwys.com.mx Ariel Garfio, Associate: +52 (55) 5258 1048 | agarfio@vwys.com.mx Javier Betancourt, Associate: +52 (55) 5258 1085 | jbetancourt@vwys.com.mx Raymundo Soberanis, Associate: +52 (55) 5258 1034 | rsoberanis@vwys.com.mx Rocío Vega, Associate: +52 (55) 5258 1016 | rvega@vwys.com.mx Roberto Flores, Associate: +52 (55) 5258 1048 | rflores@vwys.com.mx

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