Ladies and Gentlemen,
On April 1, 2020, the Act amending the Act on special solutions related to the prevention, counteraction and combating of COVID-19, other infectious diseases and crisis situations caused by them, and certain other acts, the so-called "anti-crisis shield", entered into force.
Below is a summary of the solutions adopted in real estate matters:
1. Expiration of mutual obligations of the parties to the lease agreement in shopping centers
The Act stipulates that during the period of the ban on conducting business in commercial facilities with a sales area exceeding 2,000 m2, the mutual obligations of the parties to the lease, tenancy or other similar agreement by which the commercial space is made available for use expire.
This is a significant change to the provision, which, in the version adopted by the government, referred to the tenant and the rent they pay. The provision now refers to the parties to the contract and, in essence, extinguishes mutual obligations as of March 13, 2020.
In our opinion, the condition for benefiting from this exemption is that the tenant submits an unconditional and binding offer to extend the lease on the current terms for the duration of the ban plus six months. This offer must be submitted within three months of the date the ban is lifted.
If the tenant fails to submit an offer within the required timeframe, then, according to the provision, "the agreement will be deemed not to have expired temporarily." This should be understood to mean that if the tenant fails to submit an offer, the tenant's obligation to pay rent will be renewed, despite the initial "expiration of the mutual obligations of the parties to the agreement." However, if an offer is submitted (and after the ban has been lifted, not now), the agreement will automatically be extended under the existing terms, including the amount of rent paid.
This content of the provision will raise many interpretation doubts in practice, so it can be expected that the legislator will again amend the discussed provision of the so-called anti-crisis shield.
Given that lease agreements are "expiring," and tenants continue to use the premises by storing their equipment and products for sale, it should be assumed that they are using them without a contract. Therefore, the Law Firm suggests concluding agreements between the current tenant and the landlord for the storage of items left in the premises by tenants. Such an agreement should be fee-based and could help landlords cover at least part of the ongoing costs of maintaining shopping malls. In turn, it would protect tenants from potential claims for unpaid use of the premises.
2. Lease agreements for premises (other than in shops with an area of over 2000 m2)2
Lease agreements concluded before the effective date of the Act, whose term expires during the epidemic, may be extended under the same conditions until June 30, 2020. In such a case, the tenant should submit a declaration no later than the last day of the term of the agreement. This entitlement does not apply to tenants who, in the six months prior to the Act's implementation, were in arrears with rent or other fees for at least one billing period, used the premises in a manner inconsistent with the agreement, or leased the premises to another person without the landlord's consent.
Until June 30, 2020, the landlord has no right to terminate the lease or rent. The law provides several exceptions, which should be analyzed in a given factual situation.
The Act also provides additional protection for residential tenants. According to the Act, if a residential lease is terminated before the effective date of the Act, i.e., before April 1, 2020, and the notice period expires after that date, the notice period is automatically extended until June 30, 2020. The condition for extending the notice period of a lease or extending the notice period for the amount of rent for the residential premises is for the tenant to submit a declaration no later than the expiry of that period.
3. Reduction of the property tax rate
The municipal/city council has gained the authority to reduce the property tax rate in 2020: land, buildings and structures related to running a business.
4. Possibility of exemption from property tax by the municipal/city council
In this respect, the municipal/city council will be authorized to adopt a resolution exempting from property tax for part of 2020: land, buildings and structures related to conducting business activities, in relation to the indicated group of entrepreneurs whose financial liquidity has deteriorated.
5. The mayor's right to change the deadline for payment of property tax
The commune head (mayor, city president), by way of an order, will have the right to extend the deadlines for payment of real estate tax installments due in April, May and June 2020 for specified groups of entrepreneurs whose financial liquidity has deteriorated as a result of COVID-19, no longer than until September 30, 2020.
6. Change of the payment deadline for perpetual usufruct fees
The provision assumes that the annual fee for perpetual usufruct, referred to in Article 71 paragraph 1 of the Act of 21 August 1997 on real estate management for 2020, is to be paid by 30 June 2020. This means that the payment deadline will be extended by 3 months ex officio, and no additional applications will need to be submitted in this respect.
7. Change of the deadline for payment of the transformation fee for the transformation of perpetual usufruct into ownership
Pursuant to the amended Act of 20 July 2018 on the transformation of the right of perpetual usufruct of land developed for residential purposes into the right of ownership to this land, the fee due for 2020 is payable by 30 June 2020.
Similarly to the above, this effectively means a three-month deferral of payment deadlines. It's worth noting that these changes will apply to both businesses and individuals, as the bill makes no distinction.
8. Cancellation of monetary liabilities for the lease of municipal or State Treasury properties
The district head or commune head (mayor/city president) will gain the authority to write off, in whole or in part, monetary liabilities arising from the lease, tenancy, or use of real estate, or to pay them off in installments for the period of the state of epidemic threat or epidemic. The district head (without the voivode's consent) / commune head (mayor/city president) will also be able to waive the recovery of these liabilities at the request of an entity whose financial liquidity (ability to repay liabilities on time) has deteriorated due to reasons related to the coronavirus.
9. Activities of local governments
Regardless of the solutions adopted at the central level, municipal and city authorities are taking the initiative at the local government level, introducing incentives for businesses. The first example is the mayor of Krakow, who on March 17, 2020, presented the "Pauza" program, under which he announced the deferral or installment payment of local taxes, including property and transportation taxes, at the request of businesses. These incentives will apply from March to May inclusive. Meanwhile, the mayor of Warsaw has decided to suspend the delivery of property tax decisions for 2020. Only after the decisions are delivered are taxpayers obligated to pay property tax, so those who have not received them are not required to pay them for now.
This material was prepared on the basis of the Act amending the Act on special solutions related to the prevention, counteracting and combating of COVID-19, other infectious diseases and crisis situations caused by them, and certain other acts (version published in Journal of Laws of 2020, item 568)
