Termination of a fixed-term lease agreement. Guide.

Introduction. How complicated is early termination of a fixed-term lease?

[Short on time? Link to the abridged version of our guide]

To bardzo klasyczna dla prawników sytuacja – najpierw wynajmujący i najemca umówili się na coś innego. Teraz ze względu na różne (często dosyć istotne, ale jedynie dla jednej ze stron) okoliczności – nadszedł czas by się z umowy wycofać. Możliwość wypowiedzenia umowy najmu zawartej na czas określony zazwyczaj jest jednak bardzo mocno ograniczona.

W najgorszym przypadku najemca zobowiązany będzie przecież płacić czynsz – do końca trwania umowy, a czasami zdarzają się jeszcze wyższe odszkodowania. Z kolei wynajmujący, który chce taką umowę rozwiązać wcześniej może być zobowiązany do konieczności pokrycia wszelkich szkód najemcy – w tym przede wszystkim utraconych zysków. To wszystko jednak nie wydarzy się, jeżeli uda się znaleźć sposób na zgodne z prawem rozwiązanie umowy najmu przed terminem. Zgodne lub jednostronne. However, the former occurs in practice the more often the latter is possible.

In practice, this means that ending a tenancy early needs to be considered on three levels.

• Pierwszy poziom jest czysto prawny: czy istnieje przepis prawa albo postanowienie umowy, które w ogóle pozwala mówić o wypowiedzeniu, rozwiązaniu, odstąpieniu, cesji albo innym mechanizmie zakończenia stosunku najmu.
• The second level is evidential: can the facts the party wishes to invoke be proven by documents, correspondence, photographs, minutes, witnesses, or the history of contract performance.
• The third level is economic: does even a legally feasible action make sense when considering remaining rent, deposit, court costs, risk of losing, duration of the dispute, lost benefits, and the possibility of reaching a settlement.

Only the intersection of these three planes shows whether the matter is genuinely suitable for termination, or rather for negotiation, agreement, preparing an alternative tenant, or a completely different move.

Finding an effective way to terminate a tenancy early

Tenants or Landlords wishing to terminate a fixed-term lease agreement prematurely face a significant obstacle. Among the most common and substantial drawbacks of such a situation are high stress, formalities, damages, and contractual penalties. However, the worst aspect is the uncertainty that persists until the very end of such a dispute – an uncertainty that we guarantee exists for both parties! Both the tenant and the landlord are unsure whether they will be able to terminate the lease agreement at all, how long they will be able to maintain it, and in what condition the property will remain. Consequently, they are unsure how much exiting the conflict (for either party) will ultimately cost.

Z samego charakteru umowy najmu na czas określony wynika przecież, że nie istnieje okres jednostronnego wypowiedzenia inny niż ten pozostały do końca umowy. Co do zasady umowa obowiązuje do końca okresu na który została zawarta. Teoretycznie możliwość wypowiedzenia umowy zawartej na czas określony – po prostu nie istnieje. Nie istnieje coś takiego jak termin wypowiedzenia najmu zawartego na czas określony. However, there are numerous exceptions to these general rules. We describe these exceptions below – in an accessible question-and-answer format.

Gdy jesteśmy stroną, która chciałaby rozwiązać umowę najmu na czas określony wbrew woli drugiej strony, to kluczowe jest zdefiniowanie powodów dla których ta umowa musi zostać rozwiązana. Prawidłowe zdefiniowanie tych przyczyn i wynikających z dokumentów możliwości pozwoli zastanowić się czy koszty związane z rozwiązaniem umowy nie przewyższą korzyści. Pisząc prostszym językiem: dobrze jest najpierw rozważyć, czy na pewno gra jest warta świeczki.

Can a fixed-term lease agreement be terminated? What are the consequences of terminating the contract early? What to do if the contract does not contain a notice period?

It may not be easy to terminate a fixed-term lease if the other party does not show a certain degree of goodwill. Therefore, it would be advisable to at least partially disengage from this goodwill, or to persuade the other party to express this goodwill, first, it is best to examine the provisions of the contract very, very carefully – tak by zweryfikować czy i jakie klauzule umowne umożliwiające wcześniejsze rozwiązanie umowy najmu tam zawarto. Niestety nie zawsze są to klauzule ważne w świetle prawa.

What are the penalties for breaking a fixed-term lease?

Tenants wishing to terminate fixed-term rental agreements are usually (and rightly so) concerned about high compensation and contractual penalties. These can extend far beyond a single month's rent or the security deposit/bond paid to the landlord. We have often seen tenants or landlords ultimately forced to pay compensation amounting to several dozen months' payments that previously arose from the proper execution of the contract.

Similarly, the value of the landlord's damages, following the landlord's unlawful termination of a fixed-term lease, can easily exceed the rent due for the months remaining on the lease. When landlords wish to terminate a fixed-term lease, they are faced with a necessity:

• solutions for contract termination in a manner as legally compliant as possible
• the tenant's belief that the lease agreement has been terminated
• Recovery of the premises
• to recover it in the best possible condition
• to minimise the risk of having to pay the tenant compensation

Therefore, before making a decision, it is worth looking at the matter not only as a legal problem, but as a balance of power: what follows from the contract, what follows from the evidence, what the other party truly wants, and which scenario will be most profitable for each party.

And now strictly to the point:

The worst thing you can do is to procrastinate, or hastily act on your own. Experience teaches that the sooner professionals are involved, the greater the chance that positive results can be achieved. This is because it is easy to expose one's intentions, sometimes even preventing a professional from providing effective assistance later.

Poniżej przedstawiamy szczegółowy przewodnik, który pozwala wstępnie ocenić czy jest szansa na wypowiedzenie umowy najmu zawartej na czas określony. Ten przewodnik mamy nadzieję pomoże czytelnikom zrozumieć wszystkie aspekty tego procesu. Jeżeli jednak w grę wchodzi wysoki czynsz, kaucja, kara umowna albo ryzyko procesu, warto przed pierwszym pismem skonsultować samą strategię działania. W takich sytuacjach od razu zapraszamy do contact.

1. How can you terminate a fixed-term lease agreement?

The first most important step is to examine the contract carefully in order to understand what conditions must be met in order for a contract to be terminated before its term, according to its provisions. Each contract contains a unique catalogue of reasons for termination. There is no uniform template for a fixed-term lease agreement. In many cases, the contract contains specific provisions regarding the possibility of early termination, or hints as to the grounds on which it will be possible to terminate. Here, however, is the first pitfall - not all of these provisions are definitely valid.

Key Steps:

• Find the contract and all addenda, agreements and even sometimes - email correspondence with the landlord. Put it all together in one place.
• Identify your own reasons for termination. Determine whether there are legitimate reasons to terminate the contract early, such as, for example, a material breach of contract by one of the parties. Try to identify whether you are potentially able to find such reasons.
• Consult a lawyer or other highly experienced person in this area. Rent is usually paid monthly, so the sooner the better is usually the case. What shall we do? We'll investigate:
  • A. Does the agreement contain an effective termination clause? If so, we will determine if we can try to consider that the case described in the contract or code has occurred.
  • B. Are there already grounds within this lease to state that the current state of affairs violates the agreement or legal provisions? If so, we check whether the breach gives grounds for termination, rescission of the contract, or a strong negotiating position.
  • C. Is there an economic interest for the other party in the agreement? You don't usually win on formula alone, but on a well-calculated proposal, naturally taking the regulations into account.
  • What happens if the other party refuses? A good strategy must account not only for success, but also for dispute, litigation, continued rent accrual, retention of the deposit, and an attempt to demonstrate damage.

2. How to terminate a rental agreement early? How to convince the landlord or tenant to terminate the agreement early?

Termination of a lease agreement before its expiry may be possible if the agreement provides for such a possibility, or if both parties agree to it. In some cases, courts may also rule that early termination of the agreement was justified due to specific circumstances. However, courts rule this way very rarely, as this is not the purpose of fixed-term agreements.

Najlepiej w przedmiocie wcześniejszego rozwiązania umowy jest się porozumieć. Choć zabrzmi to jak truizm – to w przypadku umów najmu, zgodne załatwienie ich rozwiązania, to przejaw dojrzałości, a nie głupoty. W sprawach, które prowadzimy, najczęściej kluczowe okazuje się nie samo pismo, lecz wcześniejsze ustalenie, jakie argumenty naprawdę mogą skłonić drugą stronę do porozumienia.

Basic termination options:

• Agreement of the parties - The best way to terminate a lease early is to get both parties to agree to the termination. This may involve negotiating the terms of the early termination of the lease, such as the return of the deposit, settlement of outstanding payments, etc. There is a full range of options here.
• Breach of contract terms – You need to consider whether one of the parties is violating the terms of the contract, which sometimes gives the other party the opportunity to terminate such a contract, even if it was concluded for a fixed period.
• Special circumstances – In certain cases, which we call extraordinary, courts may consider early termination of a lease agreement – even one concluded for a fixed period – as justified. However, this is shaky ground and you have to be very confident in your arguments. In addition, the evidence must be prepared perfectly.
• Finding a new, reliable tenant in our place if we are the tenant or, if we are the landlord, another property for our tenant.

3. Can a lease agreement have no notice period? What if there is no notice period in the fixed-term lease agreement?

It's good that there isn't, because such a provision in fixed-term agreements is very often deemed invalid. This is what the Civil Code provisions state. If a fixed-term lease agreement does not contain provisions regarding the notice period dependent on specific circumstances, then in the case of a fixed-term lease agreement, it generally cannot be terminated before the expiry of the term.

The most important exception is - that both parties agree to such a termination, or there are provisions in the contract that allow termination from certain events, or if there are exceptional, absolutely special circumstances.

Possibilities in this case:

• Negotiations with the landlord or tenant – The other party may try to negotiate an early termination of the contract. Such negotiations, if conducted between professionals, usually bring positive results.
• Court termination of the contract – In rare, exceptional circumstances, the court may consider early termination of the contract justified.
• Finding a new tenant. Very often, landlords are more willing to terminate the contract and, despite their initial position that it is impossible to terminate the contract, they agree to a solution that will involve them continuing to pay the rent. That is, concluding an assignment agreement under which other entities (or an entity) on the part of the tenant enter into the lease of the premises. Typically, landlords are primarily interested in renting the property and the benefits associated with it. However, at the same time, they usually make their consent conditional on whether the current tenant will be replaced by someone reliable in their leased property. This also seems completely understandable.

4. Termination of the lease agreement concluded for a specified period of time by the lessor. When and can the landlord terminate the lease?

There is a big difference here to indefinite leases, which can be terminated by the landlord almost always when they concern commercial leases - i.e. when the case concerns the termination of, for example, a commercial lease. Or almost never when the subject of an indefinite lease is a residential unit.

The landlord may terminate a fixed-term lease agreement only in strictly defined cases that are included in the agreement or result from legal provisions. Or court decisions.

Examples of situations in which the landlord can usually terminate the contract:

• Breach of contract terms – If the tenant does not comply with the terms of the contract, such as paying rent on time, improper use of the premises, exposing it to damage, etc. For such a solution to be effective, the landlord must do it in a manner consistent with the law and the provisions of the contract. The former usually have priority.

5. Can a fixed-term lease agreement be terminated early? How can one break a lease agreement faster? Can I resign from a lease agreement?

Both yes and no. Termination of a fixed-term lease agreement, is usually possible in advance, but this almost always requires the fulfilment of certain conditions contained in the agreement. This is because, if the parties introduce such a possibility, they must make it conditional on the occurrence of a future event in order for such a provision to be effective.

If, at the time of entering into the contract, the parties did not foresee such a possibility, then the termination of a fixed-term lease agreement usually requires the consent of both parties. Alternatively, an exception can be found in the civil code, tenancy law, or case law. It may also sometimes be due to an oversight in the agreement. Early termination of a fixed-term lease agreement is a risky action, unless it is strongly based on legal provisions or contractual clauses.

So what can a tenant or landlord do if they want to break the contract? Ways to terminate the lease early:

• Agreement of the parties - The best and simplest solution to a lease is always an agreement between the parties. Although this sometimes seems impossible or far-fetched, an experienced lawyer usually knows how to finalise such an agreement. Read: negotiate. And what arguments to use to convince the other side. After all, he or she has very often sat on the other side of the table and thus better understands the needs and intentions of the 'opponent'. Although it is finding common interests that usually leads to a consensual termination of the lease. So often overlooked by lawyers and their clients, the ability to understand the needs of the other party and to negotiate can sometimes be far more important than all the provisions of the Civil Code.
• Breach of contract terms – If one party violates the terms of the contract, in some cases the other party may demand its termination. However, this is again a risky activity and requires high precision. It's easy to lose such a case later. Many of such provisions have no legal force.
• Special circumstances Courts can order the earlier termination of a lease under special circumstances, as stipulated by the Civil Code – however, courts very rarely agree to this. Therefore, we only go to court if it is necessary, usually opting for an amicable resolution or finding provisions that are somewhat more deeply embedded in the rental agreements.

6. What is the penalty for breaking a fixed-term lease agreement?

The penalty for breaking a fixed-term lease agreement depends on the provisions of the agreement itself. In many cases, lease agreements contain clauses regarding contractual penalties for early termination. Some of them are important, others are not - unfortunately this must be examined by a lawyer. The second most important issue is the liability for damages of the party who prematurely terminates such a fixed-term lease agreement. Terminating a fixed-term lease agreement usually costs some money.

The most common penalties for early termination of the contract are:

• Penalty: An agreed sum that the other party must pay for early termination of the contract. This can be a lump-sum payment that covers the landlord's losses. It is beneficial for the terminating party if the provision introducing such a contractual penalty does not include provisions for claiming additional damages. In such cases, we are dealing with a known cost – a lump-sum compensation. That is, the so-called break-up fee due for terminating a fixed-term lease agreement. Of course, this provision must also be valid, which is also not obvious. It is also worth remembering that even such a break-up fee for early termination of a lease agreement can usually be negotiated.
• Liability for lost rentThe tenant may, first and foremost, be obliged to pay rent for the period during which the premises remain unoccupied after their earlier departure. The landlord is, of course, obliged to make efforts to find a new tenant as quickly as possible. However, this may not be easy, and the premises may, for example, require renovation. It may also turn out that the only tenant found will pay a lower rent. Therefore, cases have been seen where such compensation awarded by the court was equivalent to, for example, two years' rent.
• Responsibility for repair costsIf a tenant vacates the premises, leaving them in a condition other than as stipulated in the agreement or law, they may be obliged to cover the costs of repairs or refurbishment.

7. Can a fixed-term lease agreement be terminated by mutual consent?

An agreement between parties does not always arise because the other side suddenly becomes benevolent. More often, it arises when the other side begins to understand that the dispute will be costly, uncertain, or organisationally burdensome for them.

This is why the ground for a good agreement often needs to be properly prepared. Sometimes the argument is a defect in the property. Sometimes it's a breach of duties by the other party. Sometimes it's finding a new tenant. Sometimes it's the risk of legal proceedings. Sometimes it's a simple economic calculation: it's better to recover some of the money and the property today than to litigate for several months.

This is where a lawyer is most useful – not as the author of a single document, but as someone who can build a rational reason for the other party to agree to end the contract.

An agreement is almost always beneficial to both parties because it avoids conflicts and potential costs associated with court proceedings.

8. What happens after the end of the fixed-term lease agreement?

At the end of a fixed-term lease, the tenant should usually vacate the premises and return it to the landlord in the condition specified in the contract. Key post-contract activities include:

• Delivery and acceptance protocol: Conducting a report that will confirm the condition of the premises at the time of its return.
• Refund of deposit: The landlord should return the deposit to the tenant, provided there are no arrears or damage to the premises.
• Settlement of all receivables: The tenant must settle all rent arrears and other fees owed to the landlord.

If the lease was for a fixed term and was not extended, the tenant has no right to remain in the property after its expiry. The landlord has the right to repossess the property and lease it to a new tenant. Unless they do not pursue this at all and the tenant continues to rent the property. In this case, we may be dealing with a so-called tacit lease extension, provided for in the provisions of the Civil Code.

9. Can I terminate an apartment lease agreement for a fixed period?

In such a case, terminating a fixed-term lease agreement is sometimes possible, but usually requires meeting certain conditions contained in the agreement. You should carefully analyze the content of the contract to check whether it provides for the possibility of early termination of the apartment lease and under what conditions. Sometimes the possibility of terminating an apartment lease agreement concluded for a fixed period also results from legal provisions.

Steps to terminate the contract:

• Analyzing the contract: Check whether the contract contains any early termination clauses.
• Negotiations with the landlord: Obtaining the landlord's consent to terminate the contract early.
• Legal consultation: It is worth consulting a lawyer specializing in real estate lease matters at the very beginning. He will help you analyze the contract and advise you on the best solution, or conduct negotiations with the landlord. Why not treat a lawyer's help as a last resort? It is easy to make his work more difficult or even prevent him from completing the task with his previous movements.

10. Is there a penalty for breaking the apartment lease agreement?

The penalty for breaking a residential lease may arise from contractual provisions. In other situations, compensation is due, which in almost all cases arises from the law. Examples of early termination penalties are:

• Penalty: A fixed amount that the tenant must pay to the landlord for early termination.
• Liability for lost rent: The tenant may be obliged to pay rent for the period during which the premises remain unoccupied after the tenant has moved out early. Sometimes this takes the form of many months of compensation. Moreover, such liability results from legal provisions.
• Repair and renewal costs: If a tenant vacates the premises and leaves it in a poor condition, they may be required to cover the costs of repairs or renovation of the premises.

11. How to terminate a fixed-term occasional lease agreement?

You can terminate an occasional fixed-term rental agreement on similar terms as a standard fixed-term rental agreement. With this slight difference that the provisions of tenancy law apply even more to it.

12. How to calculate the month of notice to terminate a lease agreement?

Regardless of whether we are dealing with an indefinite-term or fixed-term contract, the notice period for a lease agreement is usually counted the same. From the first day of the month following the month in which the notice of termination was submitted. Typically, this deadline is also counted at the end of the calendar month.

Example:

• If notice is given in mid-January, the notice period will begin on 31 January. And for example, with a two-month notice period, it will last until 31 March.

Of course, it is rare - but it happens that the parties agreed otherwise. Just like you shouldn't pay attention to the fact that they arrange to pick up the keys a day or two earlier or later. Of course, if it is done with their mutual consent.

13. Is it possible to withdraw from a signed lease before it comes into force?

Withdrawing from a signed lease agreement, especially one that has not yet come into effect, is an ambiguous topic. There are lawyers who see certain opportunities in such cases, while others take the stance that such an agreement cannot be terminated. A great deal depends on the individual circumstances surrounding the conclusion and nature of the agreement.

Summary:

Jeżeli rozważają Państwo wypowiedzenie umowy najmu na czas określony, najważniejsze jest nie samo przygotowanie pisma, ale wybór właściwej strategii przed jego wysłaniem. Analiza umowy, korespondencji, dowodów i ryzyk finansowych pozwala często uniknąć błędów, które później trudno odwrócić.

W takiej sytuacji warto skonsultować sprawę jeszcze przed pierwszym ruchem — zwłaszcza tam gdzie mamy wielomiesięczny czynsz, kaucję, karę umowną albo istotne ryzyko sporu sądowego.

Jeżeli dojdą Państwo do wniosku, że potrzebują Państwo pomocy w wypowiedzeniu umowy najmu na czas oznaczony, warto to contact z naszą Kancelarią Prawną. Dzięki naszej wiedzy i doświadczeniu zdobytemu w latach praktyki negocjacyjnej i sądowej, pomożemy znaleźć najlepsze rozwiązanie i uniknąć niepotrzebnych problemów. Dla czytelników naszego artykułu to zazwyczaj pierwsza, no może druga, taka sytuacja w życiu. My przerobiliśmy ich sporo, dlatego zazwyczaj nieco łatwiej nam określić intencje stron, potencjalne możliwości, a pośród nich wybrać i zastosować efektywne rozwiązania.

In Poland, the belief that using professional legal services is very expensive and unnecessary still prevails. Paradoxically, it almost always turns out that in the final settlement, using the services of an experienced professional is much cheaper than taking independent steps.