- Occasional Letting
- February 28, 2014
- Law Firm: BSJP Brockhuis Jurczak Prusak Sp.k. - Warsaw Office
The institution of occasional letting has emerged in Poland as early as 1994, while the regulations on occasional letting in their updated wording have been reintroduced to the Polish system of law alongside the act of 17th December 2009 amending the Act (Journal of Laws of 2010 No. 3, item 13).
Occasional vs. traditional letting
Occasional letting refers only to the letting of properties serving to meet housing needs. The purpose of introducing the relevant provisions to the Act was the legal protection of owners of residential properties against dishonest tenants. The legislator had realised that it was a common occurrence for owners of residential properties to opt out from letting their properties due to the difficulties in respect of removal of unwanted and non-paying tenants, and therefore there arose the need to protect such owners. Introduction of the occasional letting system was to lead to the removal of an unwanted tenant from the property becoming easier and quicker.
In the event that a tenant fails to comply with the terms of a traditional letting agreement, the owner has the right to terminate the agreement. Despite an effective termination by the landlord, it does happen unfortunately that the tenant fails to vacate the premises within the set time limit. The owner of the property is not, however, able to evict his unwanted tenant. In such a case, the matter is usually brought to court, which is to eventually lead to eviction of the unwanted tenant. The proceedings may take as long as several years, during which, if the tenant does not pay rent, the source of income for the owner of the property is blocked, and he would have to cover the costs relating to the property from his own funds. The alternative here is occasional letting, which enables the landlord to evict a tenant that does not comply with the terms of the letting agreement without having to obtain a court judgment.
Occasional letting in essence
It is not surprising then that landlords prefer the occasional letting system, which protects them against loss of profits.
The key condition for application of the occasional letting system is to conclude a letting agreement in writing under pain of nullity. The agreement is concluded for a definite term not longer than 10 years. In addition to the agreement itself, the attachments thereto, as provided for by law, are of great importance. The first one of those is the tenant’s declaration to be made in the form of a notarial deed on submission to enforcement. Under the declaration, the tenant undertakes to, in a given situation, vacate and return the premises used by him under the agreement. This undertaking becomes updated in the event that, following termination or expiration of the agreement, the tenant fails to vacate the premises of his own accord and the landlord delivers to the tenant a written demand to vacate the premises bearing an officially authenticated signature. Within the demand, the landlord is first and foremost obliged to set the time limit (not shorter than 7 days) for the tenant and any other persons residing in the premises to vacate the property. It is only upon expiration of the abovementioned time limit that the owner of the property has the right to obtain an execution clause at court and then initiate enforcement proceedings based on the declaration attached to the letting agreement.
Furthermore, the tenant identifies another property into which he will be able to move in the event that the obligation to vacate the premises is enforced, and this document is also attached to the letting agreement. In the event that the tenant does not have his own property at his disposal, a declaration of an owner of a property, or a person holding a legal title to a property, stating that such a person gives his consent for the tenant and any other persons residing with him to move into the property identified in the declaration has to be attached to the letting agreement. At the landlord’s request, the above declaration will have to be attached to the letting agreement bearing a notarially authenticated signature. In turn, in the event that the tenant is no longer able to move into the property identified in the declaration, he is obliged to, within 21 days, notify the owner of the premises of another property that he could potentially relocate to. Failure to comply with the above requirement provides a basis for termination of the agreement.
Additionally, an occasional letting agreement may set out the terms in respect of rent increase (in the event that no such provisions are made, the owner of the property does not have the right to increase the rent for the property), as well as stipulate what type of charges the owner can collect from the tenant.
An occasional letting agreement is terminated at the end of the notice period, or alternatively it expires at the end of the term for which it has been concluded. As it is an agreement concluded for a definite term, the parties to the occasional letting agreement are not able to introduce to the agreement any provisions under which they would have the right to terminate the agreement by notice at any time during the effective term of the agreement. Termination of an occasional letting agreement is only possible under the circumstances identified in the Act, pursuant to which the owner has the right to terminate the legal relationship not later than one month in advance effective at the end of the calendar month, in the event that the tenant:
1) despite a written reminder, continues to use the property in a manner non-conforming to the terms of the agreement or contrary to its purpose, neglects his responsibilities, thus allowing damage to occur to the property, or destroys equipment and devices intended for the common use by all residents, or in a gross or persistent manner violates the house regulations, thus causing nuisance to other residents, or
2) is in delay with payment of rent or other charges for use of the property for at least three full payment periods, despite an earlier warning in writing as to the intention of termination of the legal relationship and setting an additional time limit of one month to pay the overdue and current liabilities, or
3) has let, sublet or transferred for gratuitous use the property or its part without the required written consent of the owner, or
4) uses premises that have to be vacated due to the necessity to carry out a demolition or refurbishment of the building, subject to Art. 10 sec. 4 of the Act, when depending on the type and extent of the work, it would be sufficient for the tenant to vacate the premises and move to a substitute property, with the reservation that the tenant will be able to return to the premises under the existing legal relationship.
In the event that the concluded agreement is dissolved or effectively terminated and the tenant fails to move out of the property and/or fails to vacate it, the owner of the property should first, for the purpose of initiating a simplified procedure for enforcement of the obligation to vacate the premises, issue a demand drawn up in writing and bearing his officially authenticated signature, which should contain the following: name of the owner and the tenant in relation of which the demand is issued; identification of the occasional letting agreement for the premises and the reason for termination of the legal relationship arising from the agreement; time limit (not shorter than 7 days from the date of delivery of the demand to the tenant) within which the tenant and the persons residing with him are to vacate the premises. If correctly worded and effectively delivered, the demand to vacate the premises will enable the owner to take further steps aimed at the tenant vacating the occupied premises.
Upon expiration of the time limit set in the demand, in the event that the tenant fails to move out from the occupied premises, the landlord has the right to file a motion with a court for it to append an execution clause to the notarial deed containing the declaration of the tenant on voluntary submission to enforcement, which constitutes the previously mentioned attachment to the letting agreement. The following documents should be attached to the motion: demand to vacate the premises together with the proof of its delivery to the tenant or proof of its postage by registered mail, document confirming the legal title of the owner to the premises in respect of which the owner’s demand is made, and - when the owner is a natural person - confirmation that the head of the relevant tax office has been notified of conclusion of the occasional letting agreement.
Thus, eviction of the tenant takes place without a court judgment, on the basis of only the notarial deed bearing an execution clause, and without having to provide the tenant with alternative premises, which on the whole makes the entire procedure in respect of property recovery and eviction of burdensome tenants much easier.
Occasional letting used to be only applicable to relationships between natural persons. However, on 3rd November 2013, the act of 27th September 2013 on state support in the purchase of a first home by young people (Journal of Laws of 2013, item 1304) has come into effect. Among others, the act introduces changes to provisions enabling application of the occasional letting system by entities conducting business activities.
Housing rental fund
Extending the regulations relating to occasional letting to entities conducting business activities will make it possible to conduct letting activities on a larger scale. This type of a change was required even if just to establish the “Housing rental fund” managed by Bank Gospodarki Krajowej, which is to invest in entire buildings offering residential premises ready to be let, and then let the homes to tenants. The fund is to be the catalyst for changes on the residential market aimed at increasing the role played by the institution of lettings on the Polish property market. The idea behind the “Housing rental fund” is to first and foremost make it possible to be in a stable possession of a home without having to purchase it and subsequently incur a debt to be borne for many years to come. Anyone who can afford to pay rent and is first to express interest in renting a given property can become a tenant. Service charges will have to be paid on top of rent, which due to negotiable rates with utilities suppliers will be lower, which in turn will enable tenants to save money. The total monthly payment will be lower than a monthly mortgage payment and it will be competitive as compared to prices offered by letting agencies and private persons. A potential tenant will be obliged to pay a refundable deposit. The option to purchase the ownership title to the given property is not provided for.
Approximately 20 000 of homes throughout Poland will be covered by the - Housing rental fund”. The venture is to cost PLN 5 billion, while the first homes will be available in the third quarter of 2014.
By means of the institution of occasional letting agreement the legislator provided owners, both natural persons and those conducting business activities, with protection against tenants abusing their rights. It is of the utmost importance that recovering a property under the regulations relating to occasional lettings is now much easier than it used to be in the past
Irrespective of the fact that occasional lettings are still not extremely popular on the Polish market, the emergence of the option itself to use this system by entities conducting business activities brings with it a great chance to propagate this legal solution in Poland. It is the “Housing rental fund”, as well as other individuals, e.g. developers, that are now able to use the new regulations to convert their unsold housing stock into homes for let. It is also highly probable that more entities investing in homes for let will now emerge, e.g. foreign investment funds.