Milewska Legal
Leasing

Lease renewal

Author Mateusz Dominiak

What are the consequences if the lessor (leasing company) terminates the leasing contract before the contract expires due to the lessee’s late payment of monthly installments? What happens to the car – does it remain at the lessee’s disposal? How can I defend myself against termination of the contract? Is it possible to renew the leasing contract?

 

Analyses summarizing the year 2023 for Polish entrepreneurs indicate that the economy is currently going through a difficult period. Unfortunately, the difficulties faced by Polish entrepreneurs are not only visible in the analyses and statistics.

 

The weakening value of money and rising costs are leading to difficulties in settling current obligations – including, among others, vehicle leasing debts.

 

Lease arrears

 

According to regulations, late payment of lease instalments is grounds for termination of the lease contract by the leasing company. In accordance with article 70913 § 2 of the Civil Code, if the lessee (lessor) is in arrears with at least one payment, the lessor (leasing company) must set the lessee in writing an appropriate additional period in which to pay the arrears, threatening to terminate the lease contract with immediate effect if the set period is not met, unless the parties have agreed on a termination period.

 

Contractual provisions less favorable to the lessee are invalid. This means that the leasing company may apply less radical solutions. For example, it may provide for the right of termination only in the event of non-payment of 2 or 3 instalments, or apply a notice period of one or two months. In practice, more favorable solutions for lessees that derive directly from the Code are rare.

 

Termination of the lease contract obliges the lessee to pay all due instalments immediately, as well as all future instalments, irrespective of how long the contract has been in force, how much time would have remained until the end of the contract if termination had not taken place, or how many instalments have been correctly paid to date.

 

What happens to the car when the leasing contract is terminated?

 

When the leasing company terminates the leasing contract, the lessee is obliged to return the vehicle to the leasing company. Although the lessee pays the leasing company the full value of the vehicle at the time of purchase, as well as the leasing price, the vehicle remains the property of the leasing company (this is due to the essence of the leasing contract, as we wrote, among other things, in the article “Leasing – basic information on the leasing contract”.

Daria Milewska

Attorney

Do you have any questions related to this topic?


     

    Lease renewal

     

    If the tenant’s financial problems were temporary and he/she has regained the ability to pay the rent, he/she can request renewal of the lease.

     

    Lease renewal is not regulated by the Civil Code or any other law. Consequently, renewal procedures vary from one leasing company to another.

     

    In principle, we may be faced with two situations:

     

    1. the rules for renewing the leasing contract may be laid down in the leasing contract or in the general leasing conditions (GLC);
    2. the rules for renewing the leasing contract are not laid down in the contract or in the GTC.

     

    In the first case, the situation is more comfortable for the lessee. The contract/CGL may grant the lessee the right to renew the lease if certain conditions are met. In this case, the lessee knows how he or she must behave to ensure renewal and continuation of the contract.

     

    Another option is to set out in the contract/license the conditions that the lessee must meet for the contract to be renewed, with the leasing company reserving the final decision in the matter. Even if the lessee makes every contractual effort, the leasing company may still refuse to renew the lease.

     

    In the second case, i.e. where neither the contract nor the general terms and conditions regulate renewal, renewal is also possible. In this case, however, the leasing company is free to decide. It may impose individually defined conditions on the lessee for granting consent to renewal. The scope for modifying these conditions is limited in such a situation, although negotiation is not ruled out. It should be borne in mind, however, that failure to comply with renewal conditions (or hard bargaining) may result in refusal by the leasing company and recovery action.

     

    The leasing company may also refuse to accept a renewal without presenting any conditions. In this case, the lessee cannot demand or force the leasing company to renew the contract.

     

    Defense against lease termination

     

    In the event of a lease renewal refusal (or even still at the negotiation stage before the final renewal decision), the way to defend against lease termination is to contest the leasing company’s declaration of termination.

     

    This will not be possible in all cases. There is no single reason for the ineffectiveness of the declaration of termination. In general, it is due to formal and legal errors on the part of the leasing company. The facts of each individual case may also come into play. It is therefore advisable to seek professional legal advice in this respect.

     

    If we find that the termination of the rental contract was defective, the contract remains in force and the lessee still has the right to use the vehicle. Of course, it should be borne in mind that, in such a situation, the lessee still has obligations under the contract, in particular the obligation to pay rent.

     

    Contesting the declaration of termination of the leasing contract may also require legal action to establish the existence of the legal relationship.

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