If it is worth submitting declarations extending lease contracts based on Art. 15z?
Many clients come to us with perhaps the most difficult dilemma facing retail and service tenants in shopping centres across our country in recent days. The choice is as follows – if you wish to extend your agreements with the shopping centres for more than a year because your retail and service outlets are generating such profits and you are convinced that the shopping centres will maintain, and perhaps even grow, their customer base, then submitting a declaration pursuant to Article 15ze may be a good choice – although there are controversies surrounding this issue as well.
If, in your opinion, the business operations will generate increasing income in the future, then the decision to extend the lease in exchange for a rent reduction seems almost obvious. However, this matter is by no means obvious, as a significant group of tenants are fighting to obtain larger rent reductions during 'non-lockdown' periods in exchange for such an extension. If you do not have such a conviction, it is worth considering choosing another path. Nevertheless, it is a good idea to carefully weigh all the pros and cons, as well as the advantages and disadvantages of each solution, which we present below: Premises lease agreement.
Advantages of lease extensions in a shopping centre based on Article 15ze:
-Resolving the argument/dispute (until the next lockdown), avoiding legal proceedings -100%: it is certain that there is no obligation to pay rent for the period of the lockdowns (part of November, December and January)
Disadvantages of extending the lease agreement for premises in a shopping mall based on Art. 15ze:
-Necessity of extension commercial premises lease agreements by over 26 months, that's not the best idea in the context of falling footfall in shopping centres. It will be difficult to maintain store profitability with the likely falling footfall in shopping centres over the coming weeks and years. This stems not only from epidemic issues, but also from the fact that people have simply learned to buy online and will not be returning to retail any time soon. - Lack of a comprehensive solution for subsequent lockdowns – the necessity to extend the agreement for each subsequent period of total restrictions - If you only decide to go to court for a rent reduction or contract termination after the next lockdown (should one occur), the chance of protecting your rights drops radically. And although what is happening puts Tenants with their backs to the wall, it will not be all that easy for us or your other legal representatives to defend against the argument "then why have you extended the contract several times so far?". Although, of course, there are counter-arguments to that as well.
However, if you decide not to submit a declaration pursuant to Article 15ze, then:
-The likelihood of reaching an agreement on potentially more favourable terms increases at every subsequent stage of the case -The possibility of securing full or significantly more extensive protection of your interests in court (recent rulings, which have been reasonable and have taken into account the tenants’ extremely difficult situation, give cause for optimism – it is not uncommon for interim orders to set the fairest rents based on market rates or to grant reductions of the order of 50% and 75%)
-The possibility of obtaining long-term legal protection against the landlord’s claims in court. Disadvantages: -Costs of legal proceedings (approx. 5% of the annual rent, although it is also possible to start by applying for an interim order) -Uncertainty as to the outcome (and, if successful, the need to pay additional costs and interest) -The duration of the dispute with the landlord It appears that new legislation may be enacted when shopping centres are next closed. If this happens, I do not believe it would seriously undermine the obligations already undertaken under Article 15 of the Act. However, there is a chance that this legislation will provide a more favourable outcome for those who have not signed the aforementioned declarations and addenda. The above is, however, merely an estimate, as the content of the future legislation is not known at this stage. Above, we have outlined the pros and cons of extending tenancy agreements in exchange for rent relief for the periods of lockdown. We have tried to make this decision as easy as possible for tenants, but ultimately, no one can make this decision on their behalf.
We invite you to ask additional questions and contact us directly biuro@klodzinskikancelaria.pl and by phone number +4850925943
Piotr Kłodziński Legal Advisor Warsaw