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EXCLUSIVE INTERVIEW WITH RADIO 100,7: Consumers and extra costs imposed by construction companies – available at https://www.100komma7.lu/program/episode/297327/202004240823-202004240826.
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COVID-19 : IMPORTANT INFORMATION AND EXPLANATIONS
Preliminary information: We have released 2 articles about COVID-19 and co-ownership / lease agreements which can be found at the end of this page.
PART I – ECONOMIC ACTIVITIES
I) Prohibited activities
The Government has prohibited the carrying out of commercial and craft activities which are accessible to the public, under penalty of a fine of a maximum amount of EUR 4,000.
It is interesting to note that the liberal professions are not targeted by the measures, which includes lawyers, physiotherapists, doctors, accountants etc. The regulation only provides that the professions of doctor, dentist and doctor-veterinarian may be exercised in the event of severe and / or urgent health problems. Other liberal professions are not covered by this provision.
However, we are of the opinion that in the same way, these other liberal activities can only be continued if they are not accessible by the public, except in duly justified emergencies. Employers are encouraged to establish other means of communication where possible.
On the other hand, commercial, craft and liberal activities that are not accessible to the public can remain open. These are all services that do not require direct contact with customers.
We are of the opinion that commercial and craft enterprises which are accessible to the public for certain activities but not for others, can continue all activities which do not require this direct contact with customers. Companies are however encouraged to adapt their activities as much as possible.
Any craft activity outside the workshop is prohibited, with the exception of servicing, repair, moving out and depollution activities for safety reasons (see the last point in the list below).
The grand-ducal regulation provides that certain companies which are accessible by the public can maintain their activities. These activities include the following:
1. commercial stores which mainly sell food products
4. businesses that mainly sell animal feed
5. telecommunication service businesses
6. businesses that sell mainly hygiene and washing products and sanitary equipment
7. fuel and gas station sales services
8. distributors and businesses specializing in medical and sanitary equipment
9. medical pedicure limited to medical and not cosmetic care
10. press distribution businesses
11. financial and insurance institutions
12. Postal services
13. laundry and dry cleaning services
14. funeral services
15. the servicing, repair, clearance and maintenance activities necessary for safety reasons.
16. The following companies can now also remain open: DIY and gardening businesses, businesses that mainly sell seasonal products to plant, businesses that mainly sell construction material and those that carry out construction, renovation or transformation activities and businesses that carry out “moving out” activities.
It is important to note that for companies that carry out mixed activities can remain open provided that they primarily carry out one or more of the above-mentioned activities. Some businesses are, however, uncertain as to whether or not they primarily carry out the activities concerned. A broad interpretation seems appropriate to allow the good maintenance of these important services.
The government has taken care to allow businesses to sell non-food products between each other.
This exception for non-food products also applies between individuals as long as they are delivered op picked up (drive-in).
III) The activities which must be maintained.
Several other essential services are imperatively maintained, in particular in the fields of health, waste management, collection and treatment of wastewater and public transport.
Cleaning services are also included, so that currently cleaning agents – employed by a company or an individual – should not (yet?) be affected by the immediate financial aid of 5.000.- EUR (see infra).
For these services, employers can refuse to grant leave during the state of the crisis and cancel any leave already granted.
Note that the judicial administrations will remain open but only for urgent cases. Most of the hearings were postponed to May and June. Legal deadlines have also been suspended (even when filing for bankruptcy except in urgent matters – particularly if outstanding salaries cannot be paid).
PART II – PAYMENT OF SALARIES, LEAVE AND SANITARY MEASURES
1) Partial unemployment
Companies experiencing financial difficulties due to the coronavirus can benefit from the so-called “partial unemployment” if the financial difficulties have reduced the number of employees needed.
80% of the normal salary will be reimbursed, capped at 250% of the minimum social salary for an unqualified employee for at most 1,022 hours per employee and per year.
The aid will take the form of an advance payment and a accurate count will be done afterwards.
The application needs to be done every month.
It is important to note that temporary workers (intérimaires) are excluded, but apprentices and those employed under an employment initiation contract or a job reintegration contract are included for the employer’s portion of the salary.
Employees who are on leave for family reasons are not eligible for partial unemployment.
It should also be noted that if employees can effectively work from home, the conditions for partial unemployment are not met.
It is also possible for an employee to work during certain hours or periods only (at the premises or telework): in that case, partial unemployment may be granted for the remaining hours.
On the other hand, the general conditions must be respected when filing a request for partial unemployment, including in particular the prior exhaustion of the company’s own resources (including in particular the exhaustion of the remaining leave).
Finally, it should be noted that employees who come from abroad can cross the border only if they possess a valid employer certificate.
Household workers employed by individuals should not be affected by this measure.
The request must be made through the MyGuichet.lu website and will be processed in one of two ways depending on the circumstances:
A) The accelerated procedure
This concerns businesses that have had to completely or partially stop their activities following government measures (i.e. prohibition of certain economic activities).
An accelerated procedure has been set up for applications made by these companies.
B) The ordinary procedure
Affected are companies that remain open but nevertheless suffer the negative impact of the crisis.
Their requests will be processed according to the ordinary procedure.
2) Parental leave / Leave for family support
Parental leave may be requested when parents cannot otherwise provide care for their children under the age of 13, following the closure of schools. It is important to ensure that the task cannot be fulfilled by a neighbor or a family member – people at risk are excluded.
The fact that an employee can work from home does not allow the employer to refuse parental leave since working from home remains effective work during which the parent cannot take full care of their children.
On the other hand, the two parents cannot be on parental leave simultaneously.
This specific parental leave cannot be cumulated with partial unemployment and has no influence on ordinary parental leave.
The Government has also introduced a leave for family support that applies to employees or independent workers who need to take care, at home, of a person with a handicap or who severely lost their autonomy. In order to be eligible, the certified service that normally takes care of the person needs to inform the Minister for Family Issues that the service needed to stop all or part of their activities.
3) Supply of labour
JobSwitch.lu facilitates the cooperation and solidarity between companies as it allows them to make their human resources available to each other in exceptional circumstances.
4) Interruption of probation periods
Probation periods are interrupted in companies that had to stop their activities due to the Governmental restrictions or whose employees benefit from partial unemployment.
5) Sanitary obligations
Employers are now formally required to adapt the workplace in such a way that the security and health of the employees is guaranteed: limit the number of employees working at the premises, oblige them to use or wear specific equipment, allow them to use appropriate hygienic products, making sure that the work premises are cleaned and disinfected regularly (…).
External workers have to be informed about these measures.
In no circumstances can these measures have a financial burden on the employees.
Employees are required to inform their employer as soon as they are aware of any risks at the office.
Employees can also leave their office space in case of immediate and severe danger without any consequences.
PART III – FINANCIAL AID
1) Immediate financial assistance of 5,000.- EUR: companies
Immediate and non-repayable financial assistance of 5,000.- EUR is provided for small and medium-sized enterprises (SMEs) and the self-employed.
All companies or self-employed persons whose number of employees or collaborators does not exceed 9 and whose annual turnover is at least 15,000.- EUR are eligible.
The aid is granted on condition that the company or the self-employed have had to close their activities as a result of government measures.
It is not clear whether all activities have had to be closed or only a part of them in order to be granted the financial assistance. We assume that only companies or freelancers who have had to stop a very large part of their activities are concerned (i.e. a store which can no longer accommodate an audience but continues to make certain deliveries should be eligible).
2) Immediate financial assistance of 2,500.- EUR: self-employed
Since April 8, 2020, the self-employed have the right to an immediate, tax-free financial assistance of 2,500.- EUR when they encounter financial difficulties linked to COVID-19.
With a few exceptions, this applies to anyone who, primarily:
– exercises for their own account a professional activity related to the chamber of trades or the chamber of commerce or a professional activity having a mainly intellectual and non-commercial character
– holds more than twenty-five percent of the shares in a general partnership, a limited partnership or a limited liability company having as its object an activity as referred to in the previous point and is the holder of authorization of establishment
– is a director, general partner or representative delegated to the daily management of a public limited company, a partnership limited by shares or a cooperative company having for object an activity as referred to in point 1 and holder of the authorization of establishment issued.
The aid is only granted to the self-employed whose professional income, that served as a basis for calculating social security contributions for the year 2019 plus, where applicable, pensions paid by a pension insurance body, does not exceed the amount of 2.5 times the minimum social wage and who employs less than 10 people.
This assistance cannot be combined with the aid referred to in the first point of this part.
3) Financial assistance in the event of force majeure
A new piece of legislation is currently being drafted in order to support businesses and the self-employed who find themselves in temporary financial difficulty in the event of an external, uncontrollable event (i.e. “force majeure”).
Companies that are experiencing financial difficulties due to the pandemic will be entitled to financial assistance covering 50% of staff costs and rent up to a maximum amount of 500,000.- EUR per company.
However, companies must demonstrate that the financial difficulties were indeed the consequence of the coronavirus crisis.
The aid will take the form of a repayable advance payment.
4) Loans from credit institutions
The Government has taken other measures to facilitate the repayment of loans as well as the guaranteeing of bank loans. More information can be found on the websites of the SNCI and the CHD.
PART IV – ADMINISTRATIVE MEASURES
1) Suspension of time limits
Are suspended in particular:
– calculation of default interest for late payments
– the procedure of forced collection of contributions
– the enforcement of constraints by way of a judicial officer
– fines to be imposed on employers who show delays in reporting to the CCSS
– the liquidation of advances on pecuniary allowances for leave for extraordinary family
On the other hand, the deadline for payment of income tax on request is postponed. The deadline for filing tax declarations is fixed at June 30, 2020. Late payments in matters of VAT declaration are also tolerated.
2) General meetings of companies
Companies are authorized to hold any general meeting – convened for June 30, 2020 at the latest – without a physical meeting, and to require their shareholders or partners and other persons to participate in the meeting and exercise their rights exclusively:
– by remote voting in writing or in electronic form provided that the full text of the resolutions
or decisions to be taken has been published or has been communicated to them;
– through an agent appointed by the company; or
– by videoconference or other means of telecommunication allowing their identification.
The other organs of the company may hold their meetings without a physical meeting:
– by written internal resolutions; or
– by videoconference or other means of telecommunication allowing the identification of the
members participating in the meeting.
Any company is authorized to call its annual general meeting for the later of the following dates: (i) a date which is within a period of six months after the end of its financial year or (ii) a date which is within a period until June 30, 2020.
These provisions apply notwithstanding the articles of association of the company concerned.
A delay of 4 additional months is moreover granted to deposit the annual accounts.
PART V – REAL ESTATE LAW
I) COVID-19 and the lease agreement
What are the implications of the coronavirus on lease agreements?
1. Payment of the rent
The tenant pays rent “in exchange” for occupying the rented premises. It is one of the main obligations of the tenant.
Can the tenant suspend the payment of the rent if he is in a difficult financial situation due to COVID-19 which does not allow him or which causes him problems to pay his rent?
The answer is clear: no.
This principle is the same for residential leases as for commercial leases, administrative leases (e.g. offices) or other leases.
The only possibility for the tenant is to ask his landlord if he agrees to a suspension of the rent or even to a waiver.
If the lessor objects, the tenant has no means to challenge it.
It should be noted in this context that certain municipalities such as the City of Luxembourg, Esch-sur-Alzette or even Dudelange help commercial entities that were impacted by the Coronavirus by taking the initiative not to claim rent during the state of the crisis.
However, nothing can oblige a lessor to do so.
On April 8, 2020, the Minister of Housing clearly stated before the competent committee of the Chamber of Deputies that the Government did not intend to suspend the payments of rent.
One of the reasons is in particular the avoiding of a domino effect, many landlords having taken a loan for the accommodation which they rent out. Indeed, not all the lessors are wealthy, and suspending the rent would risk putting them in a situation where they would no longer be able to repay the monthly payments of their loan and thus risk that the banks seize the buildings and put them up for public sale.
It is true that in a normal period, if a tenant suddenly finds himself unemployed, the law does not give him the right to suspend the payment of his rent either. The same is true for a commercial entity that is experiencing temporary financial difficulties. Why would it be any different with the current situation caused by Coronavirus?
However, the government plans to help tenants in need with financial assistance.
2. Termination of the lease agreement
Just like the situation caused by COVID-19 is no reason to stop paying the rent, the tenant also cannot use the situation to terminate the lease early.
For some tenants, the rented object constitutes only a temporary residence. These include foreign tenants who, for professional reasons or as part of their studies, only spend a few months or a few years in Luxembourg. With the situation caused by COVID-19, they may find themselves inclined to return prematurely to their country of origin, to be with their families.
If such a desire is completely understandable, it does not however justify a unilateral breach of the lease contract.
Early termination of any lease would only be possible with the lessor’s agreement.
It would possibly be different if the lease provided for a diplomatic clause, allowing the tenant to terminate the lease early in the event of a transfer abroad. However, these diplomatic clauses usually state that they apply in the event of a move abroad for professional reasons decided by the employer, therefore in principle independently of the will of the tenant.
It is therefore difficult to see how the diplomatic clause could work if the transfer abroad is undertaken due to the Coronavirus. Everything obviously depends on the wording of the clause.
The usual rules for terminating the lease therefore remain applicable even during the state of crisis.
The question arises however whether the non-payment of rent or their partial payment during the few months of the crisis could be considered as a case of force majeure if not at least as an excuse or fault not sufficiently severe to justify a termination of the lease.
If everything will depend on the circumstances of the case, it seems essential to us in this case that the tenant quickly pays the arrears once the crisis is over.
The amended Grand-Ducal regulation of March 25, 2020 suspending the time limits in jurisdictional matters and temporary adaptation of certain other procedural procedures, provides for two temporary exceptions in matters of evictions.
The first exception is the suspension of all evictions issued by Court order for housing and commercial leases.
Precisely, this means that a landlord with an enforceable eviction decision cannot make a tenant leave the premises during the state of crisis.
The lessor will have to wait until the judicial officers will again be authorized to evict tenants.
The second exception is related to article 253 of the Civil Code which provides that in the event that several or more common children are less than twelve years old on the date of the divorce, the court may, at the request of the spouse exercising parental authority alone or in common and with whom the children reside for the most part, allow that spouse to occupy the family home, whether it is a common property or a property belonging to the other spouse. Evictions pronounced on this basis are also suspended.
It should be stressed that these measures are only applicable during the health crisis.
II) Coronavirus and co-ownership
The big question for many co-owners and their syndics is whether and how to hold their general meetings.
The law on co-ownership obviously does not contain a provision on how to proceed in the event of a pandemic.
1. Convening of general meetings
Article 1 of the grand-ducal regulation of June 13, 1975 implementing the law of May 16, 1975 on co-ownership stipulates that “In every co-ownership syndicate, a general meeting of co-owners is held at least once a year.” (free translation).
There is no obligation to hold the general meeting on a specific date or period, unless the co-ownership regulations specify one.
It is therefore recommended not to convene a general assembly during the crisis but to plan to hold it at a later stage of the year, depending on the situation.
What about assemblies already convened?
2. General meetings already convened
Due to the measures taken by the Government, general meetings of co-owners cannot take place. It is therefore recommended to postpone them, if this has not already be done.
Urgent decisions seem to be rare anyway since the modified Grand-Ducal regulation of 25 March 2020 suspended all the time limits in the procedures before the judicial, administrative, military and constitutional courts so that no prescription period may expire before the end of the crisis.
The question arises as to whether, once the confinement period is over, the syndics must again formally convene these general meetings or whether it is sufficient for them to communicate the new date, and the place of the meeting referring to the previous convocation.
If in the cancellation letter for general meetings, the syndic indicated that they would be postponed with the same agenda, he may limit himself to sending a notice with the new date, time and place of the meeting and refer to documents already sent with the previous convocation.
If, however, he simply canceled the general meeting, it would be wise to once again append all the documentation to the new notice.
3. General meeting by correspondence or videoconference
Can syndics hold a general meeting of co-owners by mail or videoconference instead of requiring the physical presence of the members?
Article 14 paragraph 1 paragraph 1 of the amended law of May 16, 1975 on co-ownership states as a principle that the decisions of the syndicate are taken at the general meeting of co-owners.
This provision precludes the holding of general meetings by correspondence or videoconference as it does not provide for this possibility.
Moreover, few are the co-ownerships in which all the co-owners would be equipped with both the equipment and the know-how required to participate in such a videoconference.
4. Written consultation
There is an exception to the obligation to be physically present at a general meeting.
Indeed, the law provides for the possibility of a written consultation concerning decisions relating to the maintenance and repair of common areas.
In this case, the syndic must submit all the necessary information to the co-owners, in particular the cost of the works. Furthermore, the written consultation must be authorized beforehand by the council (conseil syndical), if there is one.
It is recommended to use this procedure with regards to maintenance and repair of common areas where the law permits it.
5. Works without decision of the general assembly
There is a situation in which the syndic can decide itself about certain works without a vote of the general meeting of co-owners.
Article 21 of the amended May 16, 1975 on co-ownership allows the syndic to carry out urgent safeguarding works without the prior authorization of a general meeting.
Decisions on other works cannot be taken before the end of confinement.
6. General meeting to be held on the basis of a proxy
If for some reason or another, a general meeting absolutely has to be held, eg for urgent works that cannot be decided by the syndic alone because they don’t qualify as safeguarding works, the co-owners could potentially give a proxy to the same person, eg to the syndic, with an exact indication of their vote for each item on the agenda.
Such a solution clearly depends on the agreement of the co-owners to follow such a procedure.
7. Liability of the syndic
What about the syndic’s liability, if it does not convene a general meeting … or if it convenes one?
The liability of the syndic with respect to the syndicate of co-owners is a contractual liability. It is liable for its faults, whether intentional or not, serious or only negligent or even reckless.
Failure to convene or a delay in convening a general meeting of co-owners may constitute a fault. However, for the assessment of the fault, it is necessary to examine the context and to assess whether the delay (postponement or failure to convene) is not justified. This appears to be the case in the current situation due to compulsory confinement.
In any case, the co-owner who sues the syndic would also need to prove prejudice apart from the fault, and a simple postponement rarely causes prejudice, especially since the time limits for legal proceedings have been suspended.
On the other hand, the syndic could be held liable if it convened today a non-essential general meeting and if a co-owner got contaminated during this meeting, not to mention possible fines for the syndic and the co-owners for non-essential groupings of people.
In conclusion, it is therefore recommended to wait until the end of confinement before proceeding to general meetings of co-owners.