Commercial property management agreement in Poland – obligations, liability, and termination

Commercial real estate management agreement – legal basis

Under current Polish law, real estate management (including commercial real estate) is defined in Article 184b of the Polish Act of August 21, 1997, on Real Estate Management. According to this provision, real estate management involves making decisions and taking actions aimed at ensuring the rational management of real estate, and in particular:

• proper economic and financial management of the property,
• safety of use and proper operation of the property,
• proper energy management within the meaning of energy law,
• day-to-day administration of the property,
• maintaining the property in a condition not inferior to its intended use,
• reasonable investment in the property.

The phrase “and in particular…” indicates that the above list is not exhaustive, and therefore the parties may further specify these obligations. However, case law indicates that “Management spans areas of an economic, legal, and technical-construction nature. As already mentioned, these areas overlap.” (J. Jaworski, A. Prusaczyk, M. Wolanin, Real Estate Management Act. Commentary, 9th ed., 2025)

There are a number of legal interpretations regarding the legal nature of a commercial real estate management agreement.

It appears, however, that this agreement should be classified as an unnamed contract, that is, a contract not explicitly regulated by the provisions of the Polish Civil Code or other legal acts. Legal doctrine also holds that a real estate management agreement is a service contract governed by Article 750 of the Polish Civil Code.

Commentators, however, agree that under the agreement, the manager performs not only legal acts related to the real estate, i.e., acts undertaken to produce direct legal effects, including the establishment, modification, or termination of a legal relationship, but also factual acts, i.e., acts that are not directly aimed at producing legal effects.

A practical example from Polish case law:

“A contract for the administration of real estate (…) is of a mixed nature, to which – in matters not expressly regulated – the provisions governing contracts of mandate should apply” (judgment of the Polish Court of Appeal in Lublin, 1st Civil Division, dated January 29, 2014, case no. I ACa 652/13).

For the parties to a commercial property management agreement, the practical implication of the above is, first and foremost, that the provisions of the Polish Civil Code concerning contracts of mandate will apply to this type of agreement. Most provisions regarding mandates are of a relatively mandatory (dispositive) nature, which allows the parties to the agreement to freely define their rights and obligations arising from the property management agreement and adapt them to commercial objectives, the specific nature of the property in question, and the cooperation model adopted by the parties.

However, in the absence of specific contractual provisions, the relevant provisions of the Polish Civil Code regarding the provision of services will apply. The parties should, however, always strive to regulate the contractual relationship in as much detail as possible so that they can rely on negotiated and agreed-upon contractual terms rather than on statutory rules.

Of course, the specific obligations of the parties to a property management agreement will depend to a large extent on the type of property, its intended use, nature, and the broadly defined business objectives of the parties. Consequently, the terms of an agreement for managing a large office space will differ from those for spaces located in a shopping center.

A practical example from Polish case law:

“A property manager is an entity that performs ownership-related activities with respect to the property, primarily maintaining the property in proper technical condition, preventing any unjustified deterioration of that condition, and carrying out other necessary activities concerning the property” (judgment of the Polish Provincial Administrative Court in Rzeszów dated February 15, 2011, case no. II SA/Rz 296/10).

Written form of a real estate management agreement

Article 185(2), second sentence, of the Polish Real Estate Management Act provides that for a real estate management agreement to be valid, it must be in written or electronic form, under penalty of nullity. The invalidity of the agreement means that such an agreement has no legal effect. Failure to comply with the written form will therefore result in a situation where no legal relationship is established between the parties.

For this reason, it is recommended in all cases that any agreements concerning the management of commercial real estate be drawn up in writing. In practice, this also makes it easier to document the parties’ intentions and objectives regarding their mutual obligations and the manner of performing the agreement. This may often be necessary in the event of potential disputes or misunderstandings between the parties arising from imprecise wording in the agreement. Of course, for clarification, “written form” does not mean a notarized document, but rather the “classic” written form of a contract.

Scope of responsibilities of a commercial property manager

As noted above, current regulations do not define how the scope of responsibilities and authorities of a commercial property manager should be established, and the parties have considerable discretion in this regard. This will depend largely on the nature of the property and the mutual business arrangements between the parties.

Of course, in practice, it is also important not only to precisely define the scope of the manager’s specific obligations but also to grant appropriate power of attorney to enable their fulfillment and the effective management of the property.

It is crucial for the building owner to determine whether, and to what extent, the manager should be authorized to conduct negotiations and enter into commercial lease agreements for the premises. If such authority is to be granted, it is necessary to grant the manager appropriate power of attorney covering these activities.

This approach is justified by the need to ensure smooth and effective property management. Acting within the scope of their authority, the manager can independently make day-to-day leasing decisions without having to involve the owner or obtain their consent each time. In most cases, this will translate into greater operational flexibility, faster response to market needs, and better optimization of the commercialization process, which in turn may lead to an improvement in the owner’s financial results

Of course, the scope of the power of attorney can be tailored in almost any way, for example by limiting it to certain premises, setting monetary limits, or making the conclusion of a contract negotiated by the property manager contingent upon obtaining the property owner’s consent. In practice, it is also possible to define the scope of activities exceeding ordinary management, for which the property owner’s consent will be required.

Apart from the issue of negotiating and concluding lease agreements, the classic scope of the manager’s activities covered by the power of attorney will generally include:

• concluding, negotiating, and terminating agreements regarding the maintenance and ongoing upkeep of the building,
• maintaining documentation related to lease agreements, such as: bank guarantees, declarations of voluntary submission to enforcement, insurance policies, agreements, lease agreements, and ongoing correspondence with tenants,
• maintaining documentation related to the operation of the property,
• making changes to the property regulations,
• issuing and sending invoices and accounting documents to tenants,
• collecting receivables from tenants at the pre-litigation stage,
• representing the owner’s interests regarding property administration before state and local government authorities,
• taking meter readings,
• receiving correspondence.

However, as indicated above, the scope of obligations may differ from that described above.

The property manager’s obligation to submit reports to the commercial property owner

A commercial property management agreement may also stipulate that the property manager is required to regularly submit reports on the performance of the agreement. Such reports are generally submitted monthly, quarterly, or annually. The scope of the reports primarily covers the manager’s property-related activities, details regarding annual budgeting, projected capital expenditures and investments in the property, actual property expenses, and information regarding the debt collection process. Of course, the scope of individual reports may vary.

Furthermore, to improve communication between the manager and the landlord, the parties may agree to hold regular meetings at specific intervals to discuss current issues related to property management, including, in particular, the status of the lease, planned commercialization activities, and significant events affecting the building’s operations.

Property management agreement – confidentiality

It is also important that, given the scope and nature of the information held, the commercial property manager be bound by a confidentiality obligation. The scope of the NDA agreement in Poland should primarily cover:

• personal and financial data regarding the property owner, tenants, and other parties associated with the property,
• all financial information, such as property maintenance costs, rent amounts, settlements with tenants, etc.
• information regarding transactions, lease agreements, service contracts, and other legal documents related to the property,
• all legal matters related to the property, such as ongoing litigation, complaints, and potential regulatory violations,
• information regarding property security (alarm systems, emergency procedures, security plans).

A breach of confidentiality by the property manager should entitle the building owner to claim a contractual penalty, constituting a lump-sum amount of compensation. The inclusion of such a provision will certainly encourage the property manager to maintain discipline and allow for more effective enforcement of claims in the event of a breach of the confidentiality obligation by the property manager, as the landlord will not be required to prove the damage incurred. It is also important for the landlord to reserve the right to seek damages under general principles if the actual damages exceed the amount of the contractual penalty. Furthermore, in the event of a breach of the NDA provisions, the landlord should be able to terminate the agreement immediately.

Commercial property management agreement – manager’s compensation

For both the owner of the property covered by the property management agreement and the manager, a key element of the agreement will also be the determination of the manager’s compensation. In the commercial real estate industry, the manager’s compensation is often based on a percentage of the contractual rent, but not less than a certain fixed amount.

In practice, this arrangement safeguards the financial interests of both parties. The property owner incurs lower costs during periods of low occupancy, while the manager is guaranteed a minimum fee covering the costs of their work, i.e., the day-to-day management of the property.

Another common solution is the introduction of an additional bonus payment, i.e., a “success fee”, for example, on:

• the building’s occupancy rate,
• the successful collection of fees owed to the landlord by tenants,
• the successful acquisition of tenants,
• the reduction of operating costs, or
• the achievement of a specified level of investment profitability.

Alternatively, the manager’s remuneration may also be determined based on the property owner’s revenue, which can serve as an additional incentive to maximize income from the property.

Of course, given this structure of the billing, it is important to precisely define which elements form the basis for its calculation, for example, whether it includes fees for the rental of parking spaces, storage lockers, storage units, etc., or only the office space itself.

The property manager’s liability and liability insurance

As noted above, the property management agreement should define the contractor’s obligations as precisely as possible. The manager’s obligations will primarily include maintaining the property in accordance with its intended use, specifically, the specifications set forth in the construction plans, preventing unjustified deterioration of the property’s technical condition, and providing ongoing maintenance of the property.

Consequently, a commercial property management agreement should also address the manager’s liability, encompassing both contractual liability (Article 471 of the Polish Civil Code) and liability for torts (Article 415 of the Polish Civil Code). A practical solution to this problem will primarily involve precisely defining the factual circumstances that the parties consider to constitute improper performance of the contract by the property manager, which will consequently allow for the imposition of contractual penalties or enable the immediate termination of the contract.

For example, the parties may consider the following to constitute improper performance of the contract:

• failure to take timely action against tenants who are behind on payments,
• entering into a contract with a service provider without the required consent of the property owner,
• exceeding the established operating budget,
• failure to perform mandatory technical inspections,
• inadequate supervision of service providers, or
• failure to take measures to mitigate damage to the property.

In practice, disputes may also frequently arise from situations involving a failure to report, or improper reporting of, the financial situation to the property owner, or a failure to respond appropriately to tenants’ breaches of lease agreements.

It is also worth noting that a property manager’s failure to fulfill certain obligations, particularly regarding the safety of the building, may result in administrative or even criminal sanctions imposed on the property owner.

A practical example from Polish case law:

“Certain obligations imposed on the owner or manager are also related to the proper appearance of the building in question. The proper aesthetic condition of a building should be understood as maintaining the facade and appearance of the building and its other elements in good condition, as well as ensuring harmony between the building’s appearance and its natural and man-made surroundings” (judgment of the PolishSupreme Administrative Court of June 5, 2002, case no. I SA/Rz 77/02).

The issue of contractual liability is also inextricably linked to the obligation to obtain civil liability insurance. Under current law, pursuant to Article 186(3) of the Polish Real Estate Management Act, a property manager is subject to mandatory civil liability insurance for damages caused in connection with the management of the property. If the property manager performs activities with the assistance of other persons acting under his supervision, he is also subject to civil liability insurance for damages caused by the actions of those persons.

The Polish Regulation of the Polish Minister of Finance of April 26, 2019, on mandatory civil liability insurance for property managers stipulates that the minimum coverage limit for civil liability insurance, with respect to a single incident and to all incidents during an insurance period not exceeding 12 months, the consequences of which are covered by the civil liability insurance policy, is the equivalent in PLN of 50,000 euros.

Of course, it is in the property owner’s interest for the amount of civil liability insurance to be higher than that specified in the aforementioned regulation. A valid insurance policy should also constitute one of the annexes to the property management agreement.

Termination of a commercial property management agreement

As described above, a commercial property management agreement is governed by the provisions regarding contracts of mandate. Article 746 of the Polish Civil Code provides that the parties to the agreement may terminate it at any time, unless otherwise specified. It is therefore of utmost importance for the property owner to draft the property management agreement in such a way as to ensure the continuity of property management and, consequently, the smooth operation of the business and the generation of profit from the property.

The property management agreement should therefore precisely specify:

• the notice period for terminating the agreement,
• the conditions for termination, and any
• penalties for terminating the agreement without cause,
• in addition, it is essential to precisely define the procedure for transferring documents and information related to the property upon termination of the management agreement.

Commercial property management agreement – this is how we can help you

We offer support in many aspects related to commercial leasing services. In the context of this article, we primarily provide the following services:

• drafting and analysis of commercial property management agreements – we can draft a commercial property management agreement, ensuring comprehensive regulation of all relevant legal and operational issues, and analyze existing agreements for risks and potential legal and factual issues,

• ongoing legal advice during the term of the agreement – we can provide the property owner with legal advice throughout the term of the management agreement, assisting with the interpretation of contractual provisions, resolving disputes with the property manager, and making decisions in accordance with applicable law,

• dispute resolution – in the event of conflicts between the property owner and the property manager, we can represent the owner’s interests in negotiations, mediations, or court proceedings, striving to achieve a favorable resolution,
  
  
• monitoring legal compliance – we can monitor the property manager’s activities for compliance with applicable laws and provide the owner with up-to-date information on changes in legal regulations concerning commercial property management.