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Coronavirus and the Retail Real Property sector

In response to the increasing numbers of COVID-19 infections in Poland, the government is undertaking the necessary measures to minimise the risk of further spread of the epidemic.

In line with this, the Minister of Health has issued a regulation, which came into force on 14th March 2020, regarding the epidemic. This regulation covers, among other industries, the retail property sector and enforces a period of limitation of operation of shopping centres, which is a major financial blow for tenants and landlords of commercial spaces.

Due to the unusual situation, a multitude of legal questions are arising from both tenants, who have been prevented from conducting their business activity, and landlords, to whom the enforced restrictions may cause potential problems with debt collection and associated tenant disputes.

The main issue to be resolved by both parties is whether during this downtime period, tenants are obliged to pay the full amount of charges resulting from their lease agreements.

Firstly, to resolve this issue, it is necessary to answer the following questions:

  1. Can the outbreak be considered as an act of God/force majeure (siła wyższa) allowing the avoiding of the obligation to pay all dues under the lease?
  2. Can the impossibility of use of the leased premises be considered as a legal defect of the premises resulting in the impossibility of conducting the agreed activity?
  3. Does the lease agreement contain any provisions enabling the tenant to claim reduction of the rent, or may the tenant pursue such right only by bringing an action to the court?
  4. What kind of claims are tenants entitled to make? Are they entitled to claim faultless inability to perform their obligations or consequential inability to perform their obligations?
  5. Can the temporary prohibition of business activity in retail trade be considered as an occurrence of unforeseeable circumstances (rebus sic stantibus provision), on the basis of which the parties are entitled to claim modification of their legal relationship by the court?
  6. How can rent payment stoppages affect the external financing of shopping centre owners (mainly bank loans)?

As part of our support for entities operating on the real estate market, Kochański and Partners Law Firm will answer these and other practical questions from landlords and tenants, to help them secure their interests in this difficult period.

Kochański and Partners Law Firm remains at your disposal, in particular in the scope of:

  1. Reviewing lease agreements with regard to acts of God, possibilities of claiming reduction of rent, service charges and other fees due under the agreement and also landlord’s liability for legal defects of the premises;
  2. Negotiating with the other party to the agreement to reach an amicable settlement of the matter and conclude appropriate settlements/amending annexes to agreements;
  3. Where it is necessary to bring an action to court – developing the best trial strategy to secure the interests of the Client;
  4. Reviewing loan agreements to identify potential financial risk in case of rent stoppage;
  5. Other actions as may be necessary to secure your interests.

Moreover, due to the issues around protecting the personal assets of company management board members, we expect a large number of restructuring, arrangement and bankruptcy proceedings. We are prepared and ready to break down for you the differing scenarios of how these proceedings may affect your business.

In addition to the above, Kochański and Partners Law Firm remains at your disposal, providing legal assistance in all matters affected by the outbreak, such as labour, restructuring, banking, trade and distribution law.