GDBD - Kancelaria Radców Prawnych

Are the offers in shopping centers actually helping the lessees?

Tenants interpreted regulations of the Anti-Crisis Shield concerning lease agreements in shopping malls as protecting them from leasehold payments in time of the COVID-19 related ban on carrying on business. 

How does this protection really look like?

To use a construction of the interim expiry of mutual obligations from lease, tenancy and other similar agreements in the time of ban on carrying on business in commercial buildings with the area of more than 2000 m2, introduced by the Anti-Crisis Shield, a lessee (entitled) has to submit to a lessor (provider) an unconditional and binding offer of the extension of the contract under the same conditions for the time of the ban extended by 6 months (art. 15 ze).

Let us summarize what this provision means for a lessee in practice.

Art. 15 ze of the Anti-Crisis Shield refers to the entities whose business activity has been forbidden by the provisions of universally binding law.

Lease agreements are still binding on the parties. They are not entitled to terminate the lease contracts under the provisions of the Anti-Crisis Shield.

Neither party of the lease agreement (i.e. neither lessor nor lessee) is obligated to comply with the obligations towards adverse party resulting from the contract. In the time of the ban, lessee is not entitled to use premises and lessor is not entitled to demand leasehold payments including payment of the rent if the lessee submits to the lessor an unconditional and binding offer of extension of the contract under the same conditions for the time of the ban extended by 6 months.

Lessee should submit this offer (unconditional, binding and under the same conditions of leasehold) within 3 months from the date of the lift of the ban.

If the lessee does not submit an offer of extension of the contract under the same conditions within the time, the provision of the expiry of mutual obligations of the parties shall cease to bind the lessor and the lessee will be obligated to pay 100 % of the rental and other fees for the period of validity of the ban on carrying on business.

The lessee's hope that article 15 ze of the Anti-Crisis Shield creates an entitlement to formulate expectations towards the lessors to unconditionally exempt them from the obligation of paying rent and operating costs for the whole period of validity of the ban on carrying on business in shopping malls is only reasoned if it is related to the willingness of the lessee to extend the current contract generally by over 8 months under the same financial conditions. Meanwhile, amount of fees of the leasehold on the current level is unacceptable for the most of lessees in the situation of ongoing coronavirus pandemic and the decrease in turnover caused by it. 

Therefore, the  Anti-Crisis Shield does not provide lessees a sufficient protection they needed and still need. It is important to pay attention to the correct formulation of legal basis in negotiations with the lessor, in particular to conducting the negotiations on the basis of civil law. In article 15 ze par. 4 legislator indicates directly that regulation ensuing from the Anti-Crisis Shield does not exclude the application of Civil Code to the obligations of the parties, which regulate their relations in situations of the legal limitations upon the freedom of economic activity. Therefore, this is not the Anti-Crisis Shield but the provisions of the Civil Code which represents an opportunity for lessees to be exempted from obligation of paying rent for the time of validity of the ban on carrying on business and to change financial conditions in contracts after resumption of activity in shopping malls.

To conclude, it is worth pointing out that, fortunately for lessees, legislator decided to intervene and finish a dispute between lessees and lessors which has been going on for few months concerning whether 'commercial space' refers only to premises in which the products are being sold as lessors claim or also to service premises and catering establishments as lessees claim.

In the Act of June 19, 2020 (Journal of Laws of 2020, item 1086) amending the Anti-Crisis Shield, it has been added paragraph 5 to article 15 ze as follows: "The commercial space referred to in par. 1 and 2, shall be understood as space located in commercial building with a sales area of more than 2000 m2 regardless of the purpose of putting this area to use, in particular in the purpose of selling goods, providing services and gastronomy."

One should trust that at least this element of negotiations has been clearly defined on statutory level and will be no longer controversial.