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Lease in shopping malls reformed

13 July 2021

On 1 July 2021, a new law was published in the Polish Journal of Laws: the Act of 24 June 2021 (“Amendment”) amending the Act on Special Solutions Related to the Prevention, Counteraction, and Eradication of COVID-19, Other Infectious Diseases, and Resulting Crisis Situations, and Certain Other Acts (“Anti-Crisis Shield”). 

The Amendment provides for, among other things, a repeal of the controversial Article 15ze of the Anti-Crisis Shield and its replacement with new regulations. The new provisions will enter into force on 23 July 2021. What will change?

Situation before the Amendment

In compliance with the current wording of Article 15ze of the Anti-Crisis Shield, during a ban on conducting business activity in commercial facilities with an area exceeding 2000 m2, all mutual obligations of the parties to a lease or a similar agreement under which commercial space is made available for use, shall expire.

However, if a lessee does not submit, within 3 months after the ban to conduct business activity is lifted, an unconditional offer to extend the legal relationship by the period of the ban to conduct business activity extended by 6 months, on the same conditions on which the current agreement was concluded, then the agreement is considered as unexpired. This entails, among other things, the lessee’s obligation to pay the rent and other charges for the shopping mall space for the entire ban period.

Situation after the Amendment

Under the Amendment, Article 15ze of the Anti-Crisis Shield will be repealed and replaced with Article 15ze1, which will lay down different rules concerning shopping mall lease in case of potential future lockdowns.

According to the Amendment, with respect to lease and similar agreements, under which commercial space is used, concluded before 14 March 2020 (i.e. before the date of introduction the first lockdown), during a ban to conduct business activity in commercial shopping malls whose area exceeds 2000 m2, the payments which may be charged by the entity making the space available on account of commercial space use will be reduced to 20% compared to the amounts due to the entity making the space available before 14 March 2020. Within subsequent 3 months after a ban to conduct business activity is lifted, the payments will be reduced to 50% compared to the amounts due to the entity making the space available before 14 March 2020.

When to sue?

Each party will be entitled to bring a legal action to a court and determine the reduction of the amounts due to the providing entity if the statutory reduction is not justified under Article 3571 of the Civil Code. In such cases, having examined the interests of the parties and considered the principles of social co-existence, the court will have the right to determine the reduction of the payments due to the entity making the space available, the manner of their performance, or to modify the period during which the entity making the space available is entitled to charge decreased payments. 

Thus, the parties will retain the right to seek legal protection in court if the statutory reduction turned out inadequate in a specific case, i.e. both excessive and insufficient. However, the legislator has narrowed the court’s competence by excluding the right to terminate the agreement.  

How will the Amendment impact lease relationships shaped based on previous regulations? 

According to the Amendment’s interim provisions, entities authorised to use commercial space who have submitted, under Article 15ze Sec. 2 of the Anti-Crisis Shield, an unconditional offer to prolong the lease or similar agreement concerning commercial space, and the term for filing such offer expired after 31 December 2020, will have the right, within 14 days after the Amendment’s effective date (i.e. 6 August 2021), to evade the legal effects of their statement concerning a prolongation of the agreement. The statement should be made in writing. 

Such evasion of the legal consequences of the statement will not cover the expiry of mutual obligations of parties to a lease or a similar agreement nor the extension of the agreement by the time which has lapsed on the day preceding the declaration of intention to evade the legal effects. This means that, while retaining the exemption from rental and other payments during the period of ban, entities authorised to use commercial space will have the possibility to evade the legal effects of the offers to prolong the term of the agreement, which they have submitted, only if this term has not yet lapsed. 

Clarity or uncertainty?

Please note that the Amendment’s interim provisions differ from the provisions proposed in the government’s draft law. Essentially, in accordance with the initial proposal, the right to withdraw an offer submitted under Article 15ze Sec. 2 of the Anti-Crisis Shield was independent of whether the term to submit the offer lapsed before or after 31 December 2020. Moreover,, an effective submission of a declaration of intent to withdraw the offer was to result in the application, to the given legal relationship, of the principles set forth in the new Article 15ze1 of the Anti-Crisis Shield. 

Pursuant to the adopted Amendment, the lessee’s right to evade the legal effects of submitted offers depends on an individual analysis of a specific agreement. It is worth noting that the Amendment may not substantially decrease the number of disputes between the parties, as each party will be able to refer a case to the court if they deem that the statutory solution is not justified in the given case. 

The Amendment’s intention was to attempt to clarify the relationships between lessors and lessees in shopping malls. Nonetheless, given the interim solutions presented above and first market reactions, it is difficult to consider this attempt successful. This is manifested, for instance, by the recent notification submitted to the European Commission by the Polish Council of Shopping Centres concerning illegal state aid provided to lessees under the Anti-Crisis Shield and the Amendment. Therefore, regardless of the risk of exacerbating legal chaos, it seems that the Amendment will not prevent further antagonisms between lessors and lessees of commercial space.

Please do not hesitate to contact us if you have any questions or concerns. Our experts from the Real Estate Department will be delighted to answer your questions.

Further Reading