The payment of rents for commercial premises during the coronavirus pandemic
The ‘Anti-Crisis Shield’ was published and entered into force on April 1, 2020. The most expected amendment was the one related to Law on COVID-19, which covers a wide range of economic issues, among which the payment of rents for commercial premises during the pandemic.
The scope of application of solutions adopted only concerns agreements of use of premises located at retail buildings with space over 2,000 m² and closed as a result of the orders by the Minister of Health.
Provisions state the following:
- During the period of trade ban in the retail facilities with space over 2,000 m², in accordance with the relevant provisions, mutual obligations of the parties arising from lease agreements, tenancy or other similar agreements under which the retail space is let for use expire.
- Occupant (i.e. lessee, tenant, etc.) of such commercial space, will have to submit to the owner (i.e. lessor, landlord, etc.) an unconditional and binding offer of his/ her will to extend the term of agreement, on the basis of the current conditions, for the period of the trade prohibition extend by 6 months; the offer must have been submitted within three months from the lifting of the prohibition period.
The period of three months seems to offer a temporary suspension of mutual obligations lasting until the occupant submit his/ her offer.
The proposition of the draft law to reduce the rent up to 90% was abandoned and there is no at this stage any support from the State for this particular case.
The ambiguous wording of the law not specify if it also applies to other occupants, whose activities are affected by the prohibition, but it seems not.
Likewise there is no mention about the goods stored on the premises; creating the eventuality for the occupant to pay storage services.
The Civil law governing contractual obligations is still applicable and can be used.
The coronavirus outbreak may be consider as a case of force majeure meaning an:
- external event;
- with impacts, which cannot be prevented.
Usually, force majeure exclude the parties’ liability for failure to perform their contractual obligations. It is then important to verify if the agreement contains a clause of force majeure and whether it is applicable to the given circumstances. If such a clause does not exist, parties can rely on general rules.
As an example the article 357 of the Civil Code is applicable during a judicial procedure if three cumulative conditions are met:
- an extraordinary change;
- involving excessive difficulties or threatening one of the parties to a glaring loss;
- and unforeseeable at the time of the conclusion of the contract.
On the basis of this provisions the judge may decide:
- the manner to execute the contractual obligations
- the amount to be paid
- or even to terminate the contract
Taking into consideration that courts and judicial procedures also will be affected by the coronavirus pandemic, parties should in a first time renegotiate the contract and accept mutual concessions to go through this crisis.
Disclaimer: the above information are based on publicly available information in Poland and for indicative purposes only, they should not replace a formal legal advisory.