Analysis

Rent increase during the lease term

Legal alert (5/2015)

Agreement on the rent amount reached by the parties to an agreement on commercial lease of premises does not mean the rent shall stay unchanged for the entire lease term. Usually, it may be revalued under the same lease agreement.

Agreement on the rent amount reached by the parties to a commercial lease of premises does not mean the rent shall stay unchanged for the entire lease term. Usually, rent is revalued under the same lease agreement, most frequently based on the inflation rate applicable to the currency in which the rent is payable (for Euro, relevant indicators published by Eurostat are used).

A unilateral rent increase by the lessor is permitted as well. Pursuant to Article 6851 of the Civil Code, the lessor may increase the rent terminating the existing provision regarding its amount at least a month in advance, at the calendar month end. Should the lessee not accept the increase, the entire lease agreement shall expire.

Lessees are often unaware of the unilateral rent increase option and do not include it in their business assumptions. Nor do they use the existing opportunities to protect themselves against such a unilateral measure.

Rent rise in a lease concluded for a limited period

The above unilateral rent increase may seem not applicable to leases concluded for a limited period of time, since if such leases include provisions determining the contractual rent for the lease term, there is no reason for one party to be allowed to change such an arrangement. As a rule, though, Article 6851 of the Civil Code is deemed to apply to such limited-period leases, as confirmed by judicial decisions, among others by the Appellative Court in Katowice. Consequently, a limited-period lease does not provide the lessee with guarantee that the rent will remain flat for the entire contractual period.

Protection against rent increase

A lessee is not defenseless, though, if a lessor terminates the lease provision regarding the rent amount. It may accept the rise (also implicitly, paying the new higher rate), but it may also:

  • reject the proposed increase, which will result in the expiry of the lease;
  • undermine the effectiveness of the rise in the course of proceedings instigated by the lessor, or in the course of self-instigated proceedings aimed at proving that the increase is invalid.

Lessees may protect themselves against the risk of unilateral rent increase by lessors as early as at the stage of concluding leases.

Including a clause that disallows a unilateral rent increase by the lessor provided for in Article 6851 of the Civil Code or other similar clauses is an effective preventive measure.

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