Anti-crisis shield and the real estate sector
On 1 April 2020, the Act Amending the Act on Special Measures for the Prevention, Control and Management of COVID‑19, Other Infectious Diseases and the Resulting Crisis Situations, and Certain Other Acts – the so-called “Anti-Crisis Shield”, entered into force.
From the perspective of the real estate industry, the most significant solutions offered by the Anti-Crisis Shield are:
- Temporary expiry of mutual obligations of the parties to agreements for the use of retail space (e.g. lease/rental agreements) in retail facilities with a sales area above 2,000 m2;
- Restricted possibility of terminating lease agreements and lease rent until 30 June 2020;
- Blocked start or temporary suspension of time limits under administrative law, and procedural and court deadlines.
RETAIL FACILITIES OF MORE THAN 2,000 m2
The new solutions for retail facilities with a sales area above 2,000 m2 are:
- Temporary expiry of mutual obligations of the parties to lease, rental or other similar agreements for the duration of the trade ban. This regulation has a retroactive effect and is applicable from the effective date of the trade ban;
- The possibility of extending the agreement, on existing terms and conditions, by the duration of the ban plus six additional months, through the submission of an unconditional and binding extension offer by the tenant. The offer must be submitted within three months from the date of lifting the ban.
The temporary expiry of mutual obligations will cease to bind the landlord upon the expiry, to no effect, of the deadline for the submission of the extension offer. These solutions do not prevent the parties from using other solutions based on general regulations of the Civil Code, governing contractual obligations in case of restricted freedom of business activity.
The Anti-Crisis Shield also contains provisions significantly restricting the possibility of terminating lease/rental agreements and rent for premises (implicitly – not only commercial, but also residential). Based on selected provisions:
- rental agreements that would otherwise expire before 30 June 2020, will be renewed until that date on existing terms and conditions (this applies to agreements executed before the effective date of the Anti-Crisis Shield), by way of a unilateral declaration of will of the tenant submitted to the landlord on or before the last day of the term of the agreement;
- the landlord may not terminate the lease/rental agreement or the rent amount until 30 June 2020.
SUSPENSION OF TIME LIMITS
The new regulations provide that, as long as the state of epidemic threat or the state of epidemic is continuing, time limits provided for by administrative law, including:
- limitation periods and other time limits, where the failure to comply would result in expiration of or change to rights in rem, claims and receivables, and would lead to falling into delay;
- time limits to be complied with to ensure legal protection from courts or authorities;
- time limits for a party to perform actions shaping its rights and obligations;
- final statutory time limits, where the failure to comply would result in adverse consequences for a party under the Act;
do not start running and, if already started, are suspended for that period.
PUBLIC LAW FEES
The Anti-Crisis Shield also introduces the following modifications to payments of real estate taxes and other related fees:
- real estate tax exemptions for part of 2020 for land, buildings and structures related to running business activity by specific groups of undertakings whose financial liquidity has deteriorated due to COVID-19;
- extension of the date of payment of real estate tax installments, payable in April-June 2020, for the groups of undertakings above by no more than until September 30, 2020;
- extension of the date of payment of the annual perpetual usufruct fee for 2020 until June 30, 2020.
SIGNIFICANT PRACTICAL ISSUES
In the light of these regulations, it is crucial to consider the following questions:
- Do rental agreements in retail facilities with a sales area above 2,000 m2 actually expire?
- Will the tenant be required to pay outstanding rent or other charges to the landlord for the duration of the ban?
- What about the landlord’s obligations towards the tenant?
- Can the landlord request the tenant to surrender the premises?
- Who is responsible for items left in the leased premises?
- What will be the effect of the tenant’s failure to submit an offer to extend the agreement on existing terms (within three months from the date of lifting the ban)?
- What will be the effect of the landlord’s rejection of a tenant’s offer to extend the agreement on existing terms?
- What happens if the landlord does not respond to or rejects the tenant’s offer?
- Is it possible to renegotiate the so-called service/maintenance agreements concluded by the owner of the shopping centre, which are not subject to the ban?
Kochański and Partners will be happy to answer these and other practical questions from landlords and tenants, to help them secure their interests in this difficult period.
We remain at your disposal, in particular in the scope of:
- Negotiating with either party to the agreement, including in respect of the submission of relevant offers, executing MoU/amending annexes to agreements;
- Reviewing facility agreements to identify potential financial risk in case of rent stoppages;
- Where it is necessary to bring an action to court – developing the optimal trial strategy to secure the interests of the Client;
- Taking other actions as may be necessary to secure your interests.
We also encourage you to consult the services of other Kochański & Partners practices providing legal advice on all areas affected by the state of epidemic emergency, in particular labour law, restructuring law, banking law and state aid issues.
Attorney at Law, Partner, Head of Real Estate Practice
T: +48 883 323 475
Attorney at Law, Counsel
T: +48 795 189 291