The Swedish Government’s proposed rent reductions as a result of Covid-19

Covid-19 continues to affect businesses negatively. We have previously written about a few important considerations for tenants in connection with the extraordinary situation we are in. As mentioned in that article, if the tenant, on its own initiative, is forced to shut the business it conducts on the premises, the tenant is generally still obligated to pay rent as usual. Now Swedish politicians have begun to act on the increasingly difficult situation for tenants in commercial premises.

On Monday, 23 March, the Swedish Moderate Party proposed that the Government reimburse up to half of the rental costs for companies in vulnerable industries such as hotels, restaurants and stores. On Wednesday, 25 March, the Government, together with the Center Party and the Liberal Party, finally presented an opening for a temporary rent reduction for some commercial tenants.

The possibility of rent reduction applies to the second quarter (April, May and June), and is conditional on the landlord having agreed to decrease the rent during that quarter. If so, the landlord can receive compensation from the state corresponding to 50 percent of the rent reduction up to 50 percent of the fixed rent.

Example: If the tenant’s fixed rent amounts to SEK 100,000 per quarter and the landlord agrees to decrease the rent to SEK 50,000, the landlord can receive SEK 25,000 in compensation from the Government.

The Government mentions in its 25 March press release that the support is aimed at sectors such as hotels, restaurants, certain retail stores (Sw: sällanköpshandel), and certain other businesses. Exactly which businesses that will be targeted for support remains for the Government to clarify. Property owners can apply for the compensation retroactively, and a total of SEK 5 billion has been allocated.

It remains to be seen whether the support measures will be sufficient. The tenant is still dependent upon the landlord accepting a rent reduction and the costs this entails.