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Revoking lease contract for a specified period

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The lease of large office premises is in most cases a matter of a contract for a specified period. That contract, as opposed to the lease contract for an unspecified period, cannot be freely revoked by any of the parties and at any time. It provides more permanent tenancy.

A bit of history


Until 9th July 2001 there was not any law concerning revoking contracts for a specified period. At the time, everyone thought that within freedom of contract you could negotiate (and put into contract) a possibility of revoking it at any time. There were breakthroughs in 1996 and 1997, when the Supreme Court has issued two resolutions, which have categorically ended previous pratice of the owners and tenants. According to the resolution made by the Supreme Court on the 3rd of March 1997, sygn. akt: III CZP 3/97, "in the lease contract of business premises  for a specified period, the parties cannot reserve the right to revoke it by termination before its due end". After that resolution there were many rulings which supported the stance presented in it. They noted, that lease contract  for a specified period should be permanent, and this is why the parties cannot reserve the right to evoke it because of any reasons not listed by the law. This legal stance was, however, contradictory to the needs of business.


This stalemate was finally solved by our legislators on the 10th of July 2001, when new regulation was introduced into the civil law code - art. 673 § 3, according to which "if the lease has a specified period, then both the lessor and the tenant have a right to revoke lease based on the cases specified in the contract". It was this law that allowed the parties to put specific conditions, under which the contract could be revoked, in the lease contract for a specified period. The legislator's move was treated as a stance intermediate between total liberty of the contracts and the rule of permanency of the lease contracts for a specified period and the ban on revoking them, as it was interpreted by the Supreme Court .


Premises specified in the lease contract


According to the current law, lease contract for business premises for a specified period can be revoked, but not always and not because of any reason. When the lessor of the tenant want to use this license, they have to put the right to revoke the contract into the contract, specify, which of the parties can use it and formulate a catalogue of premises, which will influence the effectiveness of the revoking. Commercial lease contracts have large lists of cases which make it possible to revoke the contract. However, majority of the cases allow for the revoking by the lessor (catalogues of revoking premises for the tenants are usually smaller and less elastic).


Lawyers of both sides usually double their efforts to make the premises as precise as possible and make them relatable to specific situations, which may happen in the future. The lawyers do that because they know it will be the premises that will allow their clients to revoke the contract when needed.


Valid reasons - a picklock?


Recently the Supreme Court, when analysing the premises for revoking lease contracts being in disputes settled by the Court, has given the parties a picklock. According to the ruling of the Supreme Court from the 17th of June 2011, sygn. akt: II CSK 587/10, "preparing of the lease contract for a specified period which includes a possibility of revoking the contract because of the "valid reasons" is a part of the hypothesis art. 673 § 3 k.c.". In this way the Supreme Court has allowed for the catalogue of premises to be not completely precise and complete. The contract can be revoked if there is valid reason for that. The Supreme Court is permitting "valid reasons" as a premise for revoking a contract, but it is also showing a risk connected to that. Both parties of the contract can estimate the validity of the premide differently. The final settling of the effectiveness of revoking the contract will have to be done by a court, investigating the case.


Conclusions


If any of the exceptional cases, provided by the civil law code will not take place, and the lease contract  for a specified period will not have any decisions, describing conditions under which the contract can be revoked, the parties will not have the right to revoke it, and the contract will be finished after the period of time specified in it will end. This is why the party which wants to have a possibility of revoking the contract earlier and under specific conditions has to take care that revoking right of the contract will be regulated, and the premises for revoking will be specified. I do not advise to put "valid reasons" as a premise. Its underspecification can be an asset and a drawback. "Valid reasons" are voluminous and less antagonising when negotiating a contract, but they do not give a certainty that the reason to which we refer will be recognised as valid. On the other hand, when our contracting party will want to revoke the contract, they can find a reason and we will have a long, expensive and uncertain trial, when we will have to prove, that the reason was not valid. 


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