Commercial Rent Increases and Indexation in Poland

In accordance with the Polish Civil Code (Kodeks cywilny), which entered into force on 1 January 1965, commercial leasing (B2B) rent increases are not regulated by the restrictive residential "Act on the Protection of Tenants' Rights." Instead, they are governed by the principle of Freedom of Contract (Art. 353¹ KC), allowing parties to negotiate precise mathematical formulas for rent adjustments.

1. Annual Indexation (Waloryzacja)

Unlike residential leases, which often require a formal notice period to increase rent, commercial leases in Poland typically feature Automatic Indexation:

• Mechanism: Rent is adjusted annually based on inflation without the need for an annex or new agreement.
• Effective Date: Indexation usually occurs in the first or second quarter (typically following the publication of the previous year's inflation index).
• Ratchet Clause: It is standard practice to include a "Ratchet" clause, stipulating that if the inflation index is negative (deflation), the rent remains at its current level and does not decrease.

2. Currency Clauses and Indices (EUR vs. PLN)

A unique feature of the Polish Class-A commercial market is the use of foreign currencies:

• EUR-Denominated Leases: Most international funds and office developers (especially in Warsaw) set the base rent in Euro (EUR) to hedge against inflation and currency fluctuations. These leases typically use the HICP (Harmonised Index of Consumer Prices) published by Eurostat for the Eurozone.
• PLN-Denominated Leases: Smaller local retail centers and older office stock often use Polish Złoty (PLN). These leases typically use the GUS (Statistics Poland) annual average consumer price index.
• Payment and Valuation: Even if the rent is denominated in EUR, payments are usually made in PLN, converted at the NBP (National Bank of Poland) average exchange rate on the day before the invoice is issued (Art. 358 § 2 KC).

3. Turnover Rent (Czynsz od Obrotu)

In the retail sector (shopping malls), rent is often divided into two components:

• Base Rent: A fixed monthly amount per square meter.
• Turnover Rent: A percentage of the tenant's monthly net turnover (e.g., 5-10%). The tenant pays whichever amount is higher: the Base Rent or the Turnover Rent.
• Audit Rights: These leases grant the landlord the right to audit the tenant's financial records and require the tenant to use certified point-of-sale (POS) systems integrated with the landlord's reporting software.

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