COVID-19 and lease arrangements in Polish law
This article answers the frequently asked question whether and to what extent the COVID-19 pandemic could change the lease arrangements. Can a tenant, directly affected by the effects of the coronavirus and the COVID-19 epidemic, demand a release or even a reduction in the rent of his business premises? What should a landlord do? Will Polish authorities support the entrepreneurs?
Restrictions that apply now to a certain types of business activities (eg. travel agents, restaurants), currently present in Poland, as well as significant difficulties in conducting all types of business activities force entrepreneurs to urgently look for solutions and savings. Here we will try to briefly outline the answer to a specific question: I am not currently operating, do I have to pay the rent?
First of all, every entrepreneur should refer to the lease agreement of the premises they has signed and analyze it in terms of whether and what contractual provisions regulate force majeure (vis maior). The further steps depend on whether the contract contains specific regulations in this respect.
If the contract foresees a force majeure clause, it must be determined whether its content allows to evade the obligation, or how.
If such a clause is not included in the contract or is not useful, please consider the instructions below. In the first place, do not be afraid of talking to your landlord. We are all now in an extreme situation that most of us did not anticipate. Your landlord can face various problems themselves and hope that your rent payments will keep him afloat in a pandemic. This does not mean, however, that you cannot negotiate.
Remember that a force majeure clause in such times can be an useful argument. Regardless of whether it was included in the contract or not, you can refer to it, showing that, for example, lack of payment or incomplete payment of rent is not your fault and it is due to extraordinary external circumstances.
Remember to convince your contractor that temporary suspension or reduction of rent payments does not mean failure to comply with the contract; you can offer specific compensation after a difficult time for everyone or extend the contract ; you can offer temporary satisfaction to the landlord with the deposit paid.
If you cannot offer any reasonable conditions or the landlord is not willing to make concessions, remember that in this situation it may be justified to go to court on the basis of so-called the rebus sic stantibus clause (sort of frustration of law clause), which is an extraordinary change in relations. This clause enables judicial shaping of the content of the contract (e.g. by reducing the amount of rent) or even its termination; however, the court will always take into account the overall relationship between the parties (e.g. tenant's overall income, landlord's loss etc.).
The provision stipulates that: Article 357 (1) of the Polish Civil Code):
If owing to an extraordinary change of circumstances, the performance of an obligation would entail excessive difficulties or would threaten one of the parties with a glaring loss, which the parties did not predict at the moment of the conclusion of the contract, a court of law may, having weighed the parties' interests, according to the principles of community coexistence, determine the manner of the obligation's performance, the amount of the obligation or it may even rule on termination of the contract. When terminating the contract, a court of law may, where necessary, rule on the settlements between the parties, bearing the principles set out in the preceding sentence in mind.
However, court proceedings should always be a last resort. First of all, we recommend negotiations and reaching a compromise. All legal actions should be preceded by a consultation with a lawyer.
It should be pointed out that at this stage the government proposes, as part of the so-called "Anti-crisis shield", reduction of rent in commercial premises with a sales area of over 2000 m2 by 90%. In this respect, entities will also be able to evade the payment of contractual penalties and compensation for non-payment. Therefore, the proposed regulation will apply mainly to entrepreneurs operating within shopping malls; however, this is not a binding provision, but only its draft and at present it is impossible to predict in what shape it will be adopted. We will keep you updated.