Renting residential premises, especially nowadays, is an extremely popular form of housing. An agreement between a landlord (apartment owner) and a tenant (tenant) is, by definition, an agreement whose parties are equal. They agree that the tenant will pay a specific rent, usually monthly, in exchange for providing the premises for individual use for residential purposes. The situation becomes more complicated when the tenant does not meet his payment obligation. The scope of activities of the landlord in this situation is limited. However, criminal law comes to the rescue and the recent judgment of the district court for Warsaw Śródmieście, which sentenced a dishonest tenant for... fraud.
The nature of the lease agreement
To begin, it is worth briefly characterising what a residential lease agreement is. It is a mutual, bilateral contract. This means that both the tenant undertakes to provide a service to the landlord, and the landlord undertakes to provide a service to the tenant. Both these services are interdependent, meaning that one in this legal relationship is a specific equivalent of the other. In short, by entering into such an agreement, the parties agree that the landlord will make the flat available to the tenant, and the tenant will pay them a specified sum. Both these assurances mutually motivate the parties to undertake specific obligations. This means that by entering into this agreement, the tenant causes the landlord to make a specific disposition of their assets, i.e., making the flat available to them in exchange for expected financial benefits.
What can a landlord do if the landlord doesn't pay?
Regardless of what is described above, a situation may arise where the tenant stops paying. The reason why the tenant stops paying can vary. From a civil law perspective, the reason for failing to fulfil the obligation to pay rent is irrelevant. If, in exchange for the use of the flat, the tenant has committed to paying, for example, £2,500 in rent per month, for each month of arrears, until the end of the contract, the debt will accrue. Therefore, if the contract was concluded for a year, and the tenant stopped paying after 2 months, after its termination (assuming it is not terminated by the landlord), they will be obliged to pay £25,000 along with interest. The landlord is therefore compelled to file a lawsuit in court in order to recover their debt, i.e. the overdue rent. As is commonly known, the processing time for such a case is - in an optimistic scenario - several months, and realistically speaking, over a year. During this time, the landlord remains at a loss, as they did not receive payments for the 10 months during which the tenant occupied their property. After the court issues a judgment upholding the claim, the landlord can refer the matter to a bailiff to initiate enforcement proceedings, which is by no means a guarantee of recovering the full amount. As is evident from the above, the landlord does not have many defensive weapons against a tenant who fails to comply with the contract. The described scenario only and exclusively concerns the issue of debt recovery, and in reality, it is often a lesser problem for the landlord because - despite not paying rent - the tenant still occupies the property, and carrying out an eviction is far more difficult. However, this is a topic for another article. Are there therefore any other measures available to the landlord to "motivate" a non-paying tenant to fulfil their commitment?
Criminal liability for non-payment of rent
As recently shown by the ruling of the District Court for Warsaw-Śródmieście, some tenants who fail to pay rent must reckon not only with civil liability in the form of losing a lawsuit and "bailiffs at their accounts", but also with criminal liability. However, this only applies to dishonest tenants, because in their case – as indicated by the ruling described here – the court found that non-payment of rent bears the hallmarks of an offence under Article 286 § 1 of the Criminal Code (hereinafter: "KK"), i.e. simple fraud. Pursuant to the regulation cited: Whoever, in order to obtain a financial advantage, causes another person to unfavorably dispose of his own or another person's property by misleading him or her or by taking advantage of an error or inability to properly understand the action undertaken, shall be subject to the penalty of imprisonment from 6 months to 8 years. Let us therefore analyze the features of a prohibited act that are relevant to the issue at hand, and which must be met in this case for non-payment of rent to be considered fraud.
- Acting in order to obtain financial gain;
- Causing another person to dispose of his or her own property unfavorably;
- By misleading her or taking advantage of a mistake.
Actions aimed at achieving financial gain This means that the tenant's action would have to be aimed at improving his financial situation. In this case, what is important, to fulfill this characteristic, a direct increase in assets is not necessary (e.g. by adding a certain amount of money). This refers to any activity that improves the entity's financial situation. This means that failure to incur expected expenses will also constitute this act. Therefore, if the tenant does not experience the expected loss of property as a result of non-payment of rent, he or she undoubtedly obtains a financial benefit. Causing another person to dispose of his or her own property unfavorably From a linguistic point of view, a birthmark "leads" means behavior that is the cause of something, causing, evoking. By "disposition of property" we will mean, in this case, the lessor making a voluntary decision, although taken under the influence of the tenant's action (because he is the one who "causes" it by his actions), to perform a legal and possibly actual action, the subject of which is the lessor's property. . This regulation is obviously intended to be unfavorable, i.e. bring objectively negative consequences for the lessor/injured party. The unfavorable nature of the disposal of property does not have to mean damage to the injured party's property, but may also be expressed in the loss of future benefits or deterioration of the financial situation, after all, property within the meaning of Art. 286 § 1 of the Penal Code covers both property damage (damnum emergens), as well as lost benefits (lucrum cessans) – yes: Judgment of the Court of Appeal in Warsaw of October 18, 2019, II AKa 215/19. Therefore, by concluding a lease agreement with the landlord and assuming the obligation to pay rent in exchange for the landlord providing him with an apartment, which is undoubtedly part of his property, the tenant has fulfilled this element of a prohibited act. By concluding the contract and making the lessor feel that the tenant was acting in good faith, he led him to conclude the contract, as a result of which he ultimately suffered damage in the form of loss of profits (lucrum cessans). By means of misleading or exploiting an error Misleading in this situation means creating a false impression of reality in the landlord's mind, and exploitation of error means consciously using an already distorted view of reality in the landlord's mind and not correcting it. In the court's opinion, therefore, the tenant's action of entering into an agreement and assuring the landlord that they intended to pay constituted misrepresentation. In this case, however, it must be assumed that the tenant acted with a pre-existing intention, and therefore entirely intentionally. This element is therefore absolutely crucial. It effectively "filters out" dishonest tenants who intended to deceive the landlord when entering into the agreement, from those who stopped paying for other reasons (e.g., loss of income). The tenant in the case heard by the Warsaw court failed to pay several months' rent totalling PLN 14,000, whilst simultaneously boasting on social media, including public broadcasts via YouTube, about a lavish lifestyle, expensive purchases, and large expenditures. This was sufficient clear evidence that they had the means to pay the rent but were using them for other purposes, making it clear that they entered into the rental agreement with the intention of not fulfilling their financial obligations.
Criminal sentence only for fraudsters
As can be seen from the above, not every tenant who fails to pay rent is a fraudster. In order to hold them criminally liable under Article 286(1) of the Criminal Code, they would have to have entered into the tenancy agreement with the intention of not paying, which in practice would usually be very difficult or impossible to prove. Therefore, although the judgement is somewhat controversial, it appears to reflect the principle of justice and does not pose the risk of setting a dangerous precedent of excessive punishment for all tenants who fail to pay. It must be clearly emphasised that not every instance – and indeed very few instances – of failing to settle financial obligations on time will constitute a criminal offence. With regard to the recovery of such debts, the legislator has primarily provided for a civil remedy and, whilst unfortunately taking into account all its shortcomings described in this article, this remains the only possible course of action unless a criminal offence—such as fraud—is involved. The ‘protagonist’ of the criminal case underlying this article was ultimately sentenced to two years’ restriction of liberty in the form of 40 hours of unpaid community service per month. The only thing that spared him a custodial sentence was the fact that he had recently become a father, a circumstance which the court took into account. Furthermore, he was ordered to pay 5,000 zł to the Victim Support and Post-Release Assistance Fund and 4,400 zł to cover court costs. For the sake of accuracy, it should be emphasised that he was sentenced to 1.5 years’ restriction of liberty for the offence under Article 286 § 1 of the Criminal Code, whilst the remaining six months stem from causing damage amounting to 636 zł. However, in this case, the court did not rule on compensation for the damage caused to the landlord, who was the victim. In accordance with Article 46 § 1 of the Criminal Code, in the event of a conviction, the court may rule and, at the request of the aggrieved party or another entitled person, shall order, in accordance with the provisions of civil law, the obligation to compensate, in whole or in part, for the damage caused by the offence. Therefore, such a claim must have been missing on the part of the landlord in the proceedings – perhaps the matter had already been settled in civil proceedings. It should be emphasised, however, that in any other case, if the damage had not been compensated, the court could also have awarded such compensation to the victim within the framework of criminal proceedings.