The end of June saw the expiry of the moratorium on the filing of the insolvency petition resulting from the coronavirus pandemic and the state’s efforts to mitigate the economic impact of the crisis. Lawyer Pavel Strnad from the Polverini Strnad Law Firm, who specialises in insolvency law, warns that we can therefore expect to see a dramatic rise in the number of company insolvencies in the second half of this year. At the same time, this may have an unexpected impact on the owners of the premises in which the insolvent companies operate – even though lessors generally retain a deposit covering up to six lease payments, in certain circumstances during insolvency proceedings they can no longer offset those deposits against outstanding rental debts.
“Lessors count on being able to use the deposit paid by leaseholders not only to repair property damaged by the leaseholder, for instance, but also to offset it against outstanding rent. Although this is generally possible, if the leaseholder becomes insolvent, the lessor’s options are limited. The unlawful offsetting of a deposit to cover rent may be seen as obstructing the satisfaction of other creditors,” says lawyer Pavel Strnad from the Polverini Strnad Law Firm. “In extreme cases it may also constitute a crime,” he adds.
Lessors should therefore exercise great caution if they want to use a deposit paid by a leaseholder to cover debts on rental payments. Offsetting during the course of insolvency proceedings is generally forbidden, if the conditions for offsetting are met after the court has ruled on the method to be used to resolve the bankruptcy, although in certain cases even earlier. Deposits are usually claimed by all property lessors, and most amount to three to six times the monthly rent.
According to Pavel Strnad, the law to mitigate the impact of the coronavirus pandemic, which postponed the obligation to file an insolvency petition until 30 June 2021, rather than providing an actual solution, merely artificially delayed the real consequences of the coronavirus crisis in certain fields and regions. It is possible that some debtors decided to put off filing an insolvency petition in the hope of a certain improvement in the situation. “However, if their business did not start making a profit again during that period, it is likely that they will file an insolvency petition in the near future. During the course of insolvency proceedings the options for lessors to offset deposits are severely limited,” warns Pavel Strnad from the Polverini Strnad Law Firm. “Lessors should therefore consider in advance some form of legal protection – such as using an insolvency test to screen their leaseholders.”
