COVID-19: Lease agreements in shopping malls vs. epidemic outbreak

The case of lease agreements in shopping malls is covered by the regulations on support for entrepreneurs as a result of the COVID-19 epidemic. This issue is regulated by Article 15 of the Act of 2 March 2020 on special solutions for preventing, countering and combating COVID-19, other infectious diseases and related emergency situations (added by an amendment to the Act of 31 March 2020).

According to this provision, during the ban on conducting business activity in commercial facilities with a commercial area of more than 2000 m2, in accordance with the relevant regulations, the mutual obligations of the parties to the lease, tenancy or other similar agreement by which the commercial area is put into use shall expire. This provision shall apply from the date of the enforcement of the ban.  At the same time, the lessee should submit to the landlord an unconditional and binding offer of willingness to extend the term of the agreement under the existing terms and conditions by the duration of the ban extended by six months. The offer should be submitted at the latest within three months from the date of lifting the ban.

The intention of the legislator can be reconstructed with the justification of the draft amendment to the Act. Taking into account the limited possibility of conducting business activity by lessees in shopping malls, the necessity of temporary expiration of mutual obligations of the parties bounded by lease agreements without their termination was recognized. Compensation for the landlords would constitute an obligation for the lessee to submit an offer regarding extension of the temporarily expired legal relationship on the existing terms and conditions (or, alternatively, imposing a reverse rents obligation).

However, the wording of the provision may raise doubts in terms of its interpretation. The literal wording of the provision indicates that all obligations resulting from the lease agreements shall expire, including potential obligations related to, for example, enabling the lessee to use the facility to store goods. Moreover, this provision does not specify whether expiration of obligations applies automatically to all agreements (whereas some shopping malls still operate). This imprecise nature of the aforesaid regulation may become a source of disputes in the future.

Additionally, the Act indicates that the above provisions do not violate the relevant provisions of the Polish Civil Code governing the obligations of the parties where legal restrictions on freedom of conducting business activity are introduced. Therefore, the general principle of the law should be emphasized that a party shall be obliged to redress the damage arising from non-performance or from improper performance of an obligation, unless the non-performance or the improper performance are an outcome of circumstances which the party shall not be liable for (Article 471 of the Polish Civil Code). An amendment to the content of the obligation may also be made on the basis of the rebus sic stantibus clause expressed in Article 357(1) of the Polish Civil Code.

It is worth to observe that the introduced regulation also indirectly applies to banks, where one of the collaterals established for the purpose of the granted financing is often a transfer of receivables from lease agreements of commercial areas. Accordingly, it seems that the current situation should encourage both parties of lease agreements and entities granting financial support to seek common solutions.

If you have any questions regarding lease of premises in commercial facilities during the epidemic, please contact our attorney-at-law PhD Grzegorz WÄ…siewski (grzegorz.wasiewski@bsjp.pl).