On May 20, 2021, the Lower House of Parliament adopted the Act (the “Amending Act”) amending the Law of March 2, 2020 on special arrangements for preventing and combating COVID-19, other infectious diseases and the crisis situations caused thereby (the “COVID-19 Act”).

The Amending Act will be debated in the Senate.

The Amending Act proposes two major changes to current legislation, related to mutual obligations of the parties of lease agreements, or other similar agreements on use of commercial space (the “Agreements”). Firstly, it revokes Article 15ze of the COVID-19 Act (“Current Provision”) and replaces it with a new Article 15ze¹ (“New Provision”). The Current Provision provides for temporary expiration of rent and service charge payment obligations arising from the Agreements during the period of any trading ban applicable to shopping malls, if the Tenant submits an unconditional and binding offer to the landlord to extend the lease term by the period of the ban on trading in commercial facilities exceeding 2,000 sq. m. plus an addition nal 6 months (the “Offer”). The Offer should be submitted within 3 months after the ban is lifted.

The New Provision will apply only to Agreements made before March 14, 2020 for retail premises in commercial facilities exceeding 2,000 sq. m. of sales area, regardless of the activity conducted in the particular commercial premises (in particular, sale of goods, services and catering).

Under the New Provision, all payments made by the entities entitled to use the commercial space (the “Tenants”) under the Agreements will be reduced to:

1. 20% of the initial payments amount due before March 14, 2020 – within the period of prohibition on conducting business activity in commercial facilities exceeding 2,000 sq. m.,
2. 50% of the initial payments amount due before March 14, 2020 – within three months of the lifting of each prohibition.

Under the Amending Act, the said reductions apply to all receivables under Agreements, meaning rent, service charges, marketing fees and other fees due to the landlord.

If the reduction is not justified under Article 357¹ of the Civil Code, either party may ask the court to determine the amount of the reduction. After considering the interests of the parties, under the principles of social co-existence (good practice), the court may determine the amount and period of the reduction in payments, as well as the manner in which the payments should be made.

In Article 7 of the Amending Act, if the Tenant who has submitted an Offer submits, within 14 days after the date of entry into force of the Amending Act, a declaration of will to withdraw the Offer, the New Provision will apply to this Agreement. The said declaration on withdrawal of the Offer is effective from its date of submission. In the event of failure to submit such declaration, the Offer shall be binding for the period referred to in the Current Provision (par. 2).

From the literal content of Article 7, it is unclear whether it will apply to all offers submitted by Tenants on the basis of the Current Provision, or only to offers submitted after the last prohibition is lifted. It is also imprecise on whether it can be applied to offers already accepted by landlords. In relation to lifting the last prohibition, the period to submit offers to extend started on May 4, 2021 and will end on August 4, 2021.

Therefore, if the Senate adopts the Amending Act as is, Tenants will likely try to extend the application of Article 7 to all offers submitted in relation to all prohibitions, starting from March 2020. However, there are strong arguments against such a broad interpretation, based on the general prohibition of retroactive effect of law, unless such effect is justified by important reasons. No such reasons were presented during the legislative process.

If the Amending Act is adopted, the New Provision and Article 7 will enter into force 21 days after the Amending Act is published in the statute books.

Should you have any further questions regarding the regulations, please do not hesitate to contact us.