Poland

Updated on 01.04.2020.

1. Is a lessee eligible for rent reduction due to a significant decline in footfall and consequently its turnover as a result of COVID-19?

In principle not, however such situation may fulfil prerequisites of applying a hardship clause (rebus sic stantibus) under the Polish Civil Code.

The grounds for applying this provision are:

  1. extraordinary change of relations;
  2. unpredictable and excessive difficulty in performing the contract or threat of gross loss for one of the parties;
  3. causal link between the change of relations and difficulties to perform the contract or threat of gross loss. 

If the above prerequisites are met the lessee may submit a claim to the court demanding either:

  1. change of a manner of the obligation's performance,
  2. change of the amount of the obligation (i.e. rent reduction), or
  3. termination of the lease contract.

Any such change or lease termination becomes effective only based on the final court verdict.

2. Is a lessee eligible to temporarily close its leased space - on its own initiative – and opt for rent reduction as a result of COVID-19?

In principle not.

3. Is a lessee eligible for rent reduction in the event its leased space is closed following an order by the Government as a result of COVID-19?

As a rule the lessee is obliged to pay the rent even if the leased premises are not used/have been abandoned by the lessee and any restrictions in using the premises not caused by the lessor may be considered as the lessee's risk.

On the other hand, by law the lease agreement creates a reciprocal legal relationship which means that the obligation to pay the rent is an equivalent of the right to use the subject of the lease.

Therefore, the lessee may have legal arguments to challenge its obligation to pay the rent during the period when it was prevented from using the premises due to the circumstances for which the lessee does not bear any liability.

Moreover, on the basis of the legislation introduced in relation to COVID-19 stores located in retail centres with area of over 2,000 square meters have to be closed to public until further notice, whereas in the period when the aforementioned stores are to remain closed the mutual obligations of the parties to the lease agreement are “expired”.

The new regulation provides the tenant’s right to submit an offer to the landlord to extend the lease term by six months. If the offer is not submitted within 3 months after reopening the stores, the lease agreement shall be deemed not to be expired.

It should be emphasized that the wording of the adopted act is very unclear and gives rise to various interpretations. The aforementioned regulation also provides that if the lease agreement concerning premises expires before 30 June 2020 as a rule the lease shall be prolonged until 30 June 2020 on the same terms and conditions based on the lessee’s declaration.

Furthermore, as of 1 April 2020 all hotels and accommodation places shall be closed until further notice, except for those used for the purpose of quarantine, isolation or which leased by employees.

4. What kind of security is generally provided by a tenant in connection with a lease, a bank guarantee, a deposit or otherwise?

In most instances bank guarantees and deposits have been provided. In some cases, parent company guarantees are the only form of security.

The lessee may attempt to take advantage of rights provided for in the hardship clause (please see answer to question no 1). Moreover, if occupying the premises by the lessee threatens the health of the lessee or its employees as a rule the lessee may either demand the rent reduction or terminate the lease agreement with immediate effect.

Authors

Wojciech Koczara
Wojciech Koczara
Head of Real Estate and Construction, Poland
Picture of Lidia Dziurzyńska-Leipert
Lidia Dziurzyńska-Leipert
Head of Construction and Head of German Desk, Poland
Picture of Anna Brzoza
Anna Brzoza-Ostrowska