Deed submitting to enforcement in an institutional lease agreement
In recent years, there has been a notable revival in the residential lease market in Poland, and thus an increase in the interest in lease property investments also among foreign investors in the private rented sector (PRS). In response, the Polish parliament has introduced a number of new provisions on lease agreements. One such change was the introduction in 2017 of the institutional lease agreement, which is designed specifically for use by businesses letting residential premises in the private rented sector.
A characteristic feature of the institutional lease agreement, distinguishing it from a standard residential lease, is the obligation to attach to such an agreement a notarial deed in which the tenant submits to enforcement and undertakes to vacate and surrender the premises within the time specified in the landlord’s demand to the tenant upon termination or expiration of the lease agreement, under Art. 19a(2)(1) of the Tenants’ Rights Act (Act on Protection of Tenant’s Rights and Communal Housing Stock and Amending the Civil Code of 21 June 2001).
The notarial deed voluntarily submitting to enforcement is an enforceable title that protects the landlord’s interest in the event that the tenant, upon expiration or termination of the agreement, does not voluntarily return possession of the premises to the landlord. In such a situation (assuming that all formal requirements are met), the landlord can apply for judicial enforcement and regain possession of the premises without having to file suit to obtain a judgment ordering the tenant to vacate the premises (B. Lackoroński in Tenants’ Rights Act: Commentary (ed. K. Osajda), 10th ed. (Warsaw: Legalis, 2022)).
In the case of an institutional lease agreement, the tenant does not need to indicate premises where he could reside in the event of enforcement of his obligation to vacate the premises, or provide a declaration from the owner of such premises consenting to the tenant’s residing there. (Under Art. 19a(2)(3) and (3) of the Tenants’ Rights Act, such an obligation applies to an occasional lease agreement.) This is particularly important in the case of tenants who are foreigners, for whom this condition can be difficult to meet.
Pursuant to Art. 19a(2)(1) of the Tenants’ Rights Act (and also corresponding in this regard to Art. 19f(3)), a notarial deed on voluntary submission to enforcement shall be attached to the lease agreement. The literal wording of this provision would suggest that the tenant should voluntarily submit to enforcement even before conclusion of the lease agreement, so that at the time of the conclusion of the agreement he can present the notarial deed, as a mandatory enclosure. In other words, the tenant would be expected to submit to enforcement before the lease is even concluded, and thus before creation of the legal relationship from which the obligation to vacate the premises could arise.
The legal literature and notarial practice allow for such a solution, provided that at the time of making the declaration, the intention to conclude a lease agreement is already sufficiently clear and the parties are familiar with its key provisions (e.g. B. Lackoroński, supra). But in our view this practice does not seem quite right. As indicated in the case law, a notarial deed submitting to enforcement should relate to an obligation that exists but is not yet due (e.g. Supreme Court of Poland judgment of 25 June 2022, case no. II CSKP 171/22). Also, it appears from Art. 19a(2)(2) of the Tenants’ Rights Act that it is the “tenant” who is to submit to enforcement, not the “prospective tenant.”
Attaching to the lease a notarial deed with a pre-contractual submission to enforcement is particularly risky from the perspective of the landlord, who has an interest in receiving a formally correct submission to enforcement, to ensure that it will allow the landlord to effectively carry out enforcement to vacate the premises.
In our opinion, the tenant should submit a declaration of submission to enforcement only after the lease is concluded, and only then can the tenant’s declaration be attached to the lease agreement. (The legal literature also presents the position that the tenant’s declaration of submission to enforcement as to the obligation to vacate and surrender the premises can be made at any time, including after conclusion of the lease agreement and even after expiration of the agreement, e.g. M. Walasik, Submission to enforcement by notarial deed, Warsaw 2008, p. 101.) In such a situation, it is necessary to properly safeguard the landlord’s interest in the agreement, so that the landlord can withhold delivery of the premises until it receives a proper submission to enforcement, and terminate the agreement if the tenant fails to provide such a deed within a certain time.
Here it should be emphasised that the tenant’s failure to submit a notarial deed submitting to enforcement of his obligation to vacate and surrender the premises does not render the institutional lease invalid or ineffective (commentary to Art. 19a, K. Osajda, Legalis). On the other hand, according to some views, if the tenant does not provide such a notarial deed, then the institutional lease agreement will turn into an ordinary lease agreement subject to the regime of the Tenants’ Rights Act (e.g. E. Bończak-Kucharczyk, Protection of tenants’ rights and lease of residential premises: Commentary, 2019, p. 410; B. Lackoroński, supra). However, in our opinion, if the agreement, in compliance with the law, stipulates the obligation to include a declaration of submission to enforcement, such effect cannot be said to follow if the declaration is actually provided at a later date.
In practice, the parties to an institutional lease often want the unit to be delivered to the tenant as soon as possible after conclusion of the agreement, so that the tenant can start using the premises and the landlord can collect rent. Therefore, the parties to an institutional lease may agree that the tenant will submit a declaration of submission to enforcement simultaneously with conclusion of the institutional lease agreement (then the lease agreement would have to be concluded in the form of a notarial deed, which will also include a deed in which the tenant submits to enforcement) or immediately after concluding the lease agreement. (As the Supreme Court held in its order of 8 February 2018, case no. IV CSK 374/17, if the debtor’s submission to enforcement is included in a notarial deed also containing the act giving rise to the obligation, there is no doubt that the debtor’s submission to enforcement is connected to the substantive legal act and the debtor’s resulting obligations, nor can their interdependence be called into question.)
Dr Jakub Baranowski, attorney-at-law, Aleksandra Szczepińska, Real Estate practice, Wardyński & Partners
