This week we are further analyzing issues related to PRS investments and therefore, in today's article we will present you the topic of lease agreements for residential premises in PRS investments.
First, it should be emphasized that the only recommended legal form of lease agreement for PRS-type housing investments is an institutional lease agreement for residential premises, which was introduced into the Polish legal system only in 2017 and is regulated in Articles 19f-19j of the Act of 21 June on the protection of tenants, municipal housing resources and amending the Civil Code (hereinafter referred to as " OchrLok ").
A valid institutional lease agreement must be concluded in writing. The subject of the lease agreement—a residential unit (although it does not have to be a stand-alone unit)—and the rent amount should be specified. This agreement can only be concluded for a fixed term (of any length). Further elements structuring this type of lease agreement are contained in Article 19f, sections 1-3 of the OchrLok Act. According to the regulations, the parties to this agreement must be, as the lessor, a natural person/legal entity/organizational unit not being a legal entity conducting business activities in the field of rental of premises, and the tenant, a natural person.
It should also be emphasized that an institutional lease agreement must be accompanied by a notarial deed containing the tenant's declaration of submission to enforcement and commitment to vacate and surrender the premises. This declaration is a mandatory annex to an institutional lease agreement. The absence of this annex will result in a standard lease agreement. Furthermore, this declaration must meet the requirements of Article 777 § 1 item 4 of the Code of Civil Procedure and include a statement by the tenant acknowledging that they are not entitled to social housing. Failure to comply with these requirements will invalidate the legal act, resulting in the obligation to obtain an eviction order, which can take many months. During this period, the premises will not generate the expected income, which, while it may be possible for the landlord to recover the debt, will require time-consuming court and bailiff proceedings.
The conclusion of an effective institutional premises lease agreement will involve the possibility of increasing the rent in accordance with the conditions specified in the agreement (art. 19h sec. 2 OchrLok), contractual regulation of the collection of rent and other fees (art. 19h sec. 1 OchrLok), and contractual definition of the grounds for termination by the landlord, while retaining the right to terminate the agreement without notice in the cases indicated in art. 11 sec. 2 items 1-3 OchrLok, i.e. primarily in the event of using the premises in a manner inconsistent with the agreement or subletting it without the landlord’s consent.
Other lease agreements, i.e., occasional lease agreements and lease agreements fully governed by OchrLok, do not meet the requirements required by the PRS investment. First and foremost, in the case of occasional lease agreements, the lessor can only be an individual not conducting business activity. However, with respect to a lease agreement fully governed by OchrLok regulations, it should be emphasized that such an agreement would be overly rigid and would not adequately protect the lessor's interests, due to, among other things, the difficult and formalistic procedure for rent increases and termination, as well as the requirement to obtain an eviction order in the event of termination of the lease and failure to vacate the premises by the tenant.
In the next article, we will present the changes in the law that have taken place in the last month.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of September 26, 2022
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