Edis Felić: It Didn’t Take Long to Wait for the Abuse of the Elimination of Default Interest

A few months ago, I wrote in this column about how a company in bankruptcy cannot be evicted from its business premises, nor can it be forced to pay rent if it cannot (or does not want to). I was called again by a property owner whose uncle is having problems with a bakery in bankruptcy, but I did not know that the uncle has two more business premises rented to two companies.

Now they are also causing him problems because they do not pay due to the current crisis, even though they only suspended operations for a very short time. And they do not pay, claims my interlocutor, because they are abusing the Law on the Amendment of the Law on the Enforcement of Monetary Claims (ZDZPONS), which came into force on April 18, 2020. However, this law primarily prescribes the suspension of enforcement over monetary assets concerning individual debtors (Article 25.a) for a period of three months, and Article 25.b states that during the duration of special circumstances (related to Article 25.a), default interest does not accrue. Although I was aware of the suspension of enforcement and (more importantly for this story) the suspension of the collection of default interest, when I read that law, I did not understand why only individuals were mentioned and not legal entities.

New and Even Newer Law

I called my interlocutor and asked him if he was sure that his uncle could not collect default interest due to late payment of rent, explaining to him that the law states that the suspension applies only to individuals. He replied that he had no idea either, but that his uncle was allegedly told that the suspension also applies to debtor companies, but he did not know who told him that.

This intrigued me considering that I was, I repeat, convinced that the suspension of the collection of default interest applies to legal entities as well. I spoke with some bankers who told me that Article 25.b also applies to legal entities regardless of the fact that it does not state so and that they were interpreted that way by the relevant institutions that interpret legal provisions. I must admit that I still did not understand, because although I am not a legal expert, the law explicitly mentions only individuals.

I decided to bother lawyer Stjepan Lović again, who kindly explained to me how this is resolved. Namely, in addition to the aforementioned Law of April 18, a little later, the Law on Emergency Measures in Enforcement and Bankruptcy Proceedings during Special Circumstances (ZIMOSP) was adopted, which came into force on May 1. Article 3 of ZIMOSP prescribes that during the duration of special circumstances, all enforcement proceedings are suspended. This law also resolved that the collection of default interest from companies that do not pay their obligations during the crisis (i.e., the pandemic) is suspended.

– Article 7 of ZIMOSP, as well as Article 25.b of ZDZPONS, prescribes the suspension of the accrual of default interest during the duration of special circumstances, so the landlord will certainly not be able to calculate and collect default interest on due and unpaid rent amounts during the duration of special circumstances – explains Lović.

In May, it Became Clearer

Although bankers claim, and we all believed, that ZDZPONS resolved that from April 18, default interest is not calculated for either individuals or legal entities, most likely that imprecision (that only individuals are mentioned in that law) forced the authorities to supplement with another law (ZIMOSP) that the suspension also applies to legal entities.

In any case, my interlocutor was right, his uncle cannot collect default interest even though, he claims, the companies that rented those premises are abusing this fact, so they do not pay rent, or they will pay it when the special circumstances expire. He believes that this is not fair, and of course, this is now a question of the morality of certain individuals because if, for example, stores mostly operated, or some other activities, and generated income, it would be fair for them to fulfill their obligations to landlords.

POST SCRIPTUM
However, the situation is not hopeless for landlords because the Law (ZIMOSP) defines exceptions to the suspension of enforcement proceedings. Enforcement can be carried out to satisfy claims for statutory child support, based on due and unpaid wages, salary compensation, or severance pay, if it concerns measures of security from criminal proceedings and the satisfaction of future installments upon maturity. Due to the latter, explains lawyer Lović, for claims for rent that are due monthly (to be settled in the future, upon maturity), the enforcement procedure should not be stopped. However, the collection based on this and the application of the aforementioned provision of ZIMOSP will still depend on the interpretation of the court (or public notary) for action in the specific enforcement procedure.

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