Commercial Rent Assistance
On May 8, 2020, Neuchâtel-based associations representing landlords and tenants, along with the state, announced the conclusion of an agreement regarding commercial rents, following the ban on certain activities as part of measures to combat COVID-19. Two months later, the results are very positive. More than 800 applications for assistance have been submitted, demonstrating the effectiveness of the measure. Furthermore, the funds ultimately spent by the state remained well below the 2 million franc ceiling set by the State Council.
As a reminder, the cantonal agreement was based on a shared burden among landlords, tenants, and the canton. It provided for the State of Neuchâtel to cover 25% of the commercial rent during the period of mandatory closure imposed on the tenant, provided that the landlord also agreed to waive at least 50% of the rent. To calculate the cantonal aid, the rent taken into account was capped at 3,000 francs for tenants who were able to resume operations on April 27, and at 5,000 francs for those who had been subject to longer closures. The State Council had then allocated a maximum of 2 million francs to cover the state’s share of this measure.
Quick and efficient work by the partners
The procedure first required the signing of an agreement between the landlord and the tenant, as well as the completion of an online form. Next, this form and the agreement were submitted to one of the four partner organizations involved in implementing the program—Asloca, GastroNeuchâtel, the Swiss Union of Real Estate Professionals (USPI), and the Neuchâtel Real Estate Chamber (CIN)—for verification and preliminary approval of the application. Finally, the Department of Economic Affairs would receive the application, request any additional information, verify the absence of any disputes, and, ultimately, disburse the assistance.
The four partners demonstrated great efficiency, processing each case in just a few days. The State of Neuchâtel would therefore like to extend its sincere thanks to them and highlight the substantial work they have carried out in close collaboration with the cantonal Department of Economic Affairs.
A measure in high demand
Between May 16 and June 15, 2020, tenants submitted 827 applications for assistance. To date, more than 550 applications have been approved and validated, while 95 applications were denied because they were ineligible. The remaining applications are still being processed, either due to missing information or documents in the application or because of ongoing verifications with landlords, partners, or the Department of Economic Affairs.
While the number of applications for support was close to the volume initially anticipated, the average amount of cantonal aid turned out to be significantly lower than initially projected. While the simulations had assumed an amount of 2,000 francs per case, the current situation indicates an amount slightly below 1,000 francs per case. This discrepancy is due to the Federal Council’s decision in early May to accelerate the easing of lockdown restrictions, which helped limit the duration of business closures.
An attractive cost-benefit ratio
As a result of the factors mentioned above, the canton’s final cost will not exceed 700,000 francs, which is below the 2 million franc cap set by the State Council.
Tenants who were subject to business closures, meanwhile, benefited from a reduction in their rent totaling approximately 2 million francs, thanks to the additional concessions voluntarily made by certain landlords who chose to waive more than the 50% required by the agreement. It should also be noted that these significant efforts are in addition to the rent waivers granted to their commercial tenants by Neuchâtel’s public authorities, which were excluded from the scope of the agreement.
Finally, provided it is approved by the Federal Chambers this fall, the federal solution currently under public consultation by the Federal Council should resolve situations that have not yet been settled due to a lack of consensus between tenants and landlords. Thus, the “ticking time bomb” that the issue of commercial rents represented would be completely defused, allowing all economic actors to devote all their time and energy to recovering from the sudden shock they suffered this spring.