With a potential WeWork restructuring on the horizon, this article explores some issues landlords may face under their WeWork leases, with a focus on how courts in Poland might address them.
According to the WeWork website, WeWork has five co-working locations in Poland (all of them in Warsaw).
Polish law has no specific regulations that apply to the termination of lease agreements in the event of tenant out-of-court workouts. General principles apply to them, and they are well-established and differ depending on whether an agreement has been concluded for a definite or an indefinite term. Our experience shows, however, that lease agreements for commercial buildings in Poland are usually concluded for a definite term. In the case of a definite term agreement, the agreement may be terminated by a landlord or by a tenant prior to the termination date only for reasons expressly indicated in the agreement. Moreover, regardless of how an agreement is worded, Polish law provides landlords with an additional tool for terminating a lease before its end date if the tenant is in arrears with rent payments for at least two full payment periods, despite the landlord having given the tenant, by way of written notice, an additional one month within which to pay the overdue rent. Additionally, of course, both parties may terminate the agreement at any time by mutual agreement.
If the tenant initiates semi-court or court restructuring proceedings in Poland, then some additional, statutory restrictions on a landlord’s right to terminate a lease agreement apply. Generally, to terminate a lease agreement early, consent is required (depending on the circumstances or type of proceedings that are pending) from the creditors’ council, the restructuring judge, or the restructuring court (unless an event of default under the lease agreement arose during the proceedings). On the other hand, in the case of a semi-court or court restructuring, Polish law generally does not provide the tenant with any dedicated right to terminate a lease early. If the tenant plans to terminate a lease agreement as a restructuring measure, the landlord’s approval is necessary. However, in remedial proceedings (postępowanie sanacyjne, a type of court restructuring offering the widest range of restructuring tools), a tenant (precisely speaking, an appointed insolvency office holder acting in its favor and with the approval of the restructuring judge) may decide to effect the unilateral termination of a lease early.
An insolvent tenant can also file for bankruptcy in Poland. However, according to the law, the bankruptcy process usually results in the liquidation of the bankrupt party. The insolvency office holder appointed for the bankrupt is entitled to terminate the lease agreement even if the tenant was not entitled to do so (assuming that the leased space was already made available to the tenant before the date of bankruptcy). On the other hand, the landlord can only terminate the lease for the reasons expressly indicated in the agreement or in the law.
Polish law invalidates a party’s contractual right to modify or terminate an agreement in the event of filing of bankruptcy or restructuring application, commencement of a court restructuring or bankruptcy proceeding, or some other semi-court restructuring-related events.
In each of these situations, a landlord should consider an appropriate strategy regarding the lease agreement and the pending proceedings in Poland, including ways of recovering overdue and current rent, the possibility of using the security to which the landlord is entitled to by law or possesses under the agreement (e.g., a cash deposit), or the feasibility of seeking damages.
If the parties have agreed to non-compete restrictions, our local experience indicates that such restrictions usually do not remain in effect after the lapse of the lease term. However, when they do, the usual period is around two months or so after the lease term. Any longer non-compete arrangements would be quite unique in the Polish market. Moreover, the Polish Competition Authority currently has no clear position regarding non-compete clauses in leases. If a lease contains a non-standard non-compete clause, the landlord might consider whether such clause could be unenforceable as an agreement limiting access to a specific market or an anticompetitive arrangement. The enforceability of such clause or its early termination could also be discussed with the appointed insolvency officeholder.
By Weronika Guerquin-Koryzma, Partner, and Karol Czepukojc, Counsel, Baker McKenzie