Property law: Termination notice of your lease agreement

Once you have dealt with all the commercial decisions regarding the rent, its indexation, service charges, securities for payment (regardless of whether you are the landlord or the tenant), you usually reach the point where the decision regarding the termination of the lease must be made. Polish law is quite formalistic in respect of this ultimate remedy for default, and this is one of those occasions where the provisions of the Polish Civil Code cannot be altered by the will of parties.

According to the Civil Code, grounds for termination may result from the provisions of the lease agreement itself. In addition, there are statutory grounds for termination, such as the detrimental or prohibited use of the premises, getting into arrears with rent, breaching the rules and regulations of the building, or causing substantial damage to the leased premises. The parties can gain flexibility by adapting the lease agreement to their specific circumstances.

Defined-period agreements

Certain problems can arise with lease agreements for a defined period. (The maximum term for a lease agreement is 10 years. It cannot be extended during the period, but after the lapse of 10 years the lease would be considered as being for an undefined period). According to the Polish Civil Code, such leases can only be terminated in the circumstances provided for in the lease agreement. Nevertheless, it quite often happens that, as well as defining the circumstances for its termination, a lease agreement also contains a general clause stating that the parties may terminate the contract upon notice.

The Polish Supreme Court has addressed the issue of terminating this type of lease agreement many times. In one of its rulings it gave the opinion that a general termination clause upon notice is invalid and, in some cases, may even invalidate the whole lease agreement, if it is apparent that without this clause the parties would not have signed the lease at all. However, on November 21 this year, the Supreme Court adopted a resolution in which it stated that parties to a lease agreement may provide for termination due to "significant reasons." Although the Court's justification in writing has not yet been made public, one may assume that one meaning of the term "significant reasons" may be "circumstances enumerated in the lease agreement."

Undefined-period agreements

The case of lease agreements for undefined periods is quite different. The reasons for termination provided for in the lease itself, no matter how specific, do not exclude the possibility of terminating the lease upon notice by either of party. It would not be wrong to assume, however, that the parties can extend the statutory three-month termination notice period (in the case of separate premises), but only if this extension is offered to both parties.

Therefore, in the case of a lease agreement for an undefined period, a provision limiting the landlord's or the tenant's right to termination to only strictly defined situations will be deemed invalid.

Knowing how impractical it would be if one did not precisely specify the termination grounds in a lease agreement, one should be very prudent in its drafting. Of course, all this would not have to be mentioned if each tenant and landlord were kind enough to terminate a lease agreement upon mutual consent - in other words, to contractually dissolve the lease.

Jakub Kutzmann is an associate with Linklaters law firm. e-mail: jakub.kutzmann@linklaters.com

Correction: The November 13 Property law was mistakenly attributed to Patryk Figiel. The correct author was Ewelina Laskowska.