1. Outline of the problem
The current epidemiological situation around the world, including in our country, raises many questions about the possibility of modifying or even terminating ongoing legal relations between entities from many sectors of our economy. One of the topics that has been particularly emphasized recently is the possibility of terminating the lease agreement - regardless of its purpose. We have written about the solutions our law firm offers regarding lease agreements for commercial premises in shopping malls here, and in the scope of other commercial premises, e.g. catering here. Therefore, it remains to consider the issue of termination of the lease of residential premises.
Many people currently renting apartments in large cities left them empty some time ago, because due to the suspension of stationary operations of many workplaces, schools and universities, they returned to their family homes. However, some of them are still bound by lease agreements, which are usually designed to last throughout the entire school or academic year. Even while writing this article, the author of this article received a text message informing him that one of his friends was looking for someone who could move into the premises in his place. The situation is very common, and legal assistance in this area is almost essential - using it is usually cheaper than the costs and risks associated with not obtaining it.
- Rent reduction
For the Landlord, reducing the rent is a less painful effect, so he may be more willing to consider this type of proposal. Therefore, it is worth, first of all, trying to negotiate a reduction in the rent, e.g. to the amount of the maintenance costs of the apartment, with the reservation that the contract may be terminated by mutual consent of the parties if a person is willing to replace the current tenant.
However, if it becomes necessary to enter into a dispute, Art. 664 § 1 of the Act of 23 April 1964 - Civil Code (hereinafter: "K.C")
| "If the leased item has defects that limit its suitability for the agreed use, the tenant may demand an appropriate reduction in rent for the duration of the defects." |
The concept of a defect itself is not regulated in the lease regulations, therefore it is necessary to refer to the warranty regulations in this respect. The institution of warranty for defects in sold goods distinguishes two forms of defects - physical defects and legal defects. In the case of the coronavirus pandemic, restrictions on the use of premises are a consequence of restrictions on the activities of workplaces or universities - so these are restrictions of a legal nature.
| "Legal defects should include such encumbrances on real estate that, due to legal restrictions, make it difficult to use the thing, contrary to the contract, i.e. contrary to the justified expectations of the buyer." |
However, there is a controversy as to whether the restrictions contained in the Regulation may qualify as a legal defect - for a broader scope, please refer to the above-mentioned articles. However, if we assume that such an interpretation is possible, we should consider whether we are dealing with a defect in the premises. Unfortunately, we have a clear answer here - the restrictions introduced by the government do not in any way prevent or limit the possibility of using the premises for residential purposes. However, rental agreements are often concluded, for example, because of the need to quickly get to work or university. In such a situation, the current restrictions make the premises at least less useful for tenants, and therefore do not correspond to the purpose for which the contract was concluded. In this situation, it will often be important how the lease agreement was constructed and whether the Landlord is a private person or an entrepreneur.
If we decide to terminate the lease agreement, the basic issue to be considered concerns the expected period for which the agreement itself was concluded. If the contract was concluded for an indefinite period, it may be terminated.
| 673 § 1 of the Civil Code "If the duration of the lease is not specified, both the landlord and the tenant may terminate the lease subject to the contractual deadlines and, failing that, the statutory deadlines. |
In accordance with the regulation contained in Art. 688 of the Civil Code, if the rent is payable monthly - which is a standard solution - the notice period is three months in advance at the end of the calendar month. The length of the notice period is left to the discretion of the parties. In this field, both in doctrine and case law, there is a dispute as to the nature of this provision - namely, whether the parties' freedom is not limited and the deadline can be set freely, or whether, due to the need to protect the tenant's interest, this provision should be considered semi-imperative, and therefore it will only be possible to extend the notice period, but it will not be possible to shorten it. The Supreme Court has supported the possibility of freely shaping this term in some judgments, and in the author's opinion, in practice this position should be considered correct, as there are no sufficient grounds to exclude in this respect one of the basic principles of private law - the principle of freedom of contract. However, it should be borne in mind that very often there are opinions in this respect that modifications to the detriment of the tenant or "downwards" are inadmissible. Each such contract should be read autonomously and may be interpreted differently depending on the specific factual situation, and among lawyers (including judges) there are many opponents of the application of the principle of freedom of contract in this case.
In turn, in the case of a contract concluded for a fixed period, its very essence implies that it should last until its completion in accordance with the deadline agreed between the parties. This is an obligation in which the lessor undertakes to make the premises available to the tenant for a specified period of time, at the same time excluding his/her control over the property, and the tenant undertakes to pay the agreed rent and take care of the premises entrusted to him for a specified period of time. Therefore, any deviations from the rule of durability of this relationship should be treated as exceptions.
One of such exceptions is the possibility of regulating the termination notice in the contract, because it depends on the mutual will of the parties how they will shape their future legal relationship. Therefore, if the parties provided for the possibility of terminating the contract subject to important reasons, there is no violation of the principle pacta sunt servanda, because de facto termination of the contract in accordance with its provisions is tantamount to its compliance. In such a situation, however, both the provision on the possibility of terminating the contract and the manner in which the notice period was determined should be carefully examined. It is common practice to construct this clause based on specific conditions that must exist for termination of the contract to be possible. Due to the very wide scope of possible interpretation of such provisions and the different jurisprudence of courts in such an analysis, we encourage you to use our services or other experienced professionals in the field of real estate law to be sure of the adopted interpretation of the lease agreement and its provisions.
- Important reasons
Lease agreements often include a very general provision that a residential lease agreement concluded for a fixed period may be terminated only for important reasons. The use of terms that are not specified in contracts, on the one hand, makes them more flexible, but on the other hand, it leads to many conflicts about the exact meaning of such a phrase. The concept of important reasons in fixed-term lease agreements is a good example of this, because each situation of terminating a fixed-term relationship before the expiry of that period must be treated in a restrictive manner. The essence of this problem is reflected, for example, in the jurisprudence of the Supreme Court:
| “Making the possibility of terminating the Agreement dependent on important reasons makes it more important to assess whether the reason is of a qualified nature - whether it is a serious cause. This narrows the range of situations in which it is possible to terminate an Agreement concluded for a fixed period, and the final assessment of the "validity" of the reason rests with the Court. The court makes such an assessment objectively, and not solely through the prism of the subjective interest of the party terminating the contract; therefore, there is no way to speak of a free right to terminate the Agreement. |
In order to clearly determine whether the current epidemiological situation in the country can be classified as an important cause, it is necessary to examine the content of the contract each time and balance the interests of both parties, referring to the individual facts. However, a general thesis can be put forward that in the current factual situation, the requirement of important reasons is being updated, e.g. if a residential premises has lost its real importance for a given person because there is no need to live there. Therefore, you cannot use the current situation to break the lease and rent another premises at a lower price (because prices have actually dropped significantly). If the court were to analyze such a situation, it would come to the conclusion, for example, that the tenant did not cease his professional activity due to the epidemic and, as a result, the valid reasons requirement was not updated. However, this is a very strong basis for exiting an ongoing legal relationship and as long as the contractual provisions elsewhere do not introduce additional restrictions, the chance of effectively terminating the contract is high - you just need to skillfully analyze the circumstances.
What to do if there are no provisions regarding termination of the lease agreement?
A defect that threatens health and life
In the case of a contract concluded for an indefinite period, it is not possible to exclude the right to terminate the contract, which results from the general rule that you cannot assume eternal obligations.
Due to the coronavirus pandemic, it is worth referring to Art. when renting a residential premises. 682 CC:
| "If the defects of the rented premises are such that they pose a threat to the health of the tenant or his household members or persons employed by him, the tenant may terminate the lease without notice, even if he was aware of the defects at the time of concluding the contract." |
The question arises whether it is possible to apply this provision in a situation where one of the roommates is infected with coronavirus or is subject to quarantine. The application of this regulation allows for termination of the lease agreement with immediate effect, which results from the legislator's weighing of two values - the principle that contracts should be kept and the principle of protection of human health and life - where he gave primacy to the latter. However, the question arises whether in such a situation we are actually dealing with a defect, and if so, what kind. The answer to this question is not obvious. Assuming that we are dealing with a defect, I would advocate considering it a physical defect, which was the purpose of introducing this provision. If there is a potentially infected person and a sick person in the premises at the same time, it becomes impossible to use the common areas of the premises, e.g. the kitchen, without being exposed to infection. At the same time, it is impossible to require a healthy person to leave the premises for 14 days while paying the rent. However, if there is an obligation to quarantine other household members, such a person will remain locked up for 14 days, possibly without the opportunity to work, which will lead to the loss of part of the salary. Therefore, it seems that such a justification for immediate termination of the lease agreement is not excluded, although perhaps a more appropriate claim would be to reduce the rent, with the proviso that when reducing the rent, the requirement is to limit the suitability of the item for use, while the above case concerns the complete impossibility of using it. from the premises.
- The defect does not pose a threat to health or life
| art. 644 § 2 of the Civil Code "If, at the time of handing over to the tenant, the item had defects that prevent the use of the item as provided for in the contract, or if such defects arose later and the lessor, despite receiving notice, did not remove them in due time, or if the defects cannot be removed, the tenant may terminate the lease without notice. notice periods." |
While in the case of a threat to health and life, it can be said that the premises are defective, in the current situation, using this regulation seems to be difficult to implement. The premises themselves do not have any defects that can be classified as legal or physical defects, because the premises can still be lived in. It may not correspond to the purpose for which the contract was concluded, i.e. I live here because I go to work or to university, but in no case can this circumstance be considered a defect justifying the possibility of terminating the contract with immediate effect, unless the contract clearly specifies specific purpose of concluding the contract. However, this requires a thorough examination of the provisions relating to the subject matter of the contract.
- An extraordinary change in relations
Another possible solution is provided for in Art. 3571 CC in the form of the so-called clause rebus sic stantibus:
| “If for a reason extraordinary change in relations performance would be associated with excessive difficulties or would threaten one of the parties with a significant loss, which the parties did not anticipate when concluding the contract, the court may, after considering the interests of the parties, in accordance with the principles of social coexistence, specify the manner of fulfilling the obligation, the amount of the benefit or even order the termination of the contract. When terminating the contract, the court may, if necessary, decide on the parties' settlements, guided by the principles set out in the preceding sentence. |
The basic inconvenience resulting from this institution is that it is the court that decides on the manner of fulfilling the obligation and must also take into account the interests of both parties. The question also arises whether the current situation can be considered a situation of extraordinary change in relations. You can read more about this in the articles mentioned at the beginning. However, the doctrine indicates that:
| "the introduction of new, unpredictable and not applicable in properly functioning societies legal prohibitions related to a specific situation (e.g. natural disaster, epidemic, armed conflict, serious economic crisis) should be considered, in my opinion, an extraordinary change in relations." |
Although the restrictions introduced do not apply to the rental of premises for residential purposes, they indirectly affect the purpose of concluding a lease agreement. This extraordinary situation, in turn, results from the occurrence of an unprecedented state of natural disaster - it does not matter here that the government decided to ignore this fact, because this circumstance is assessed objectively, not subjectively. Therefore, it is a natural disaster whose consequences were and are difficult to predict.
Our experience shows that this is one of the most promising methods of liberating yourself from an unwanted legal relationship, but it requires professional support at every stage of the implementation of this institution. However, since court proceedings usually take a relatively long time, we always first examine the contractual provisions to see if other solutions can be used.
- Consequential impossibility of performance
While in the case of commercial premises one may be tempted to argue that in the current situation there is indeed a subsequent impossibility of providing services, in the case of residential premises such an argument would be very difficult to maintain. The landlord still provides the living space to the tenant. The service is therefore possible to provide – both objectively and subjectively. However, as indicated above, it may be fulfilled incompletely, i.e. the current situation will lead to the premises being considered defective. You can read more about the subsequent impossibility of providing services in the cited articles.
- Summary
As the above analysis shows, the legal situation of tenants, both in the case of contracts concluded for a fixed period and those concluded for an indefinite period, is relatively good, although the possibility of early termination is much more favorable in the case of the latter type of contracts. However, in the case of a fixed-term contract, the content of the contract itself may contain loopholes that, after careful analysis, will allow termination of the contract. Even in their absence, skillful use of statutory solutions also allows us to hope that it will be possible to end the lease agreement earlier or at least reduce the rent.
If necessary, we encourage you to contact our law firm to assess the provisions contained in your lease agreement; a short analysis will allow us to offer legal solutions adequate to the situation.