Unfair terms in a Polish condohotel lease – how to challenge them

When can a term in a condohotel agreement be regarded as unfair?

Under Article 385¹ § 1 of the Polish Civil Code, a term in a contract concluded with a consumer may be regarded as an unfair contract term if it was not individually negotiated and shapes the consumer’s rights and obligations contrary to good practice, grossly infringing the consumer’s interests. These conditions must be assessed jointly, taking into account the agreement as a whole, the circumstances in which it was concluded and other related agreements.

First, the term must not have been individually negotiated. This applies where the unit owner had no genuine influence over the wording of the provision. Merely providing a draft agreement, allowing the purchaser to read it, or offering a choice between signing the agreement and abandoning the investment does not amount to negotiation. In condohotel arrangements, it may be particularly relevant that the operator used the same standard form for all owners.

Second, the term must be contrary to good practice. This may involve, in particular, exploiting the operator’s organisational and informational advantage, concealing the agreement’s true economic consequences, granting the business unilateral rights, or transferring to the owner risks over which the owner has no control.

Third, the term must grossly infringe the consumer’s interests. The infringement may be financial, organisational or legal. Examples include depriving an owner of the ability to terminate a long-term agreement despite the operator’s non-performance, imposing an excessive contractual penalty, or allowing the operator unilaterally to alter the rules for determining rent.

As a rule, terms defining the main subject matter of the contract are not reviewed for unfairness if they are expressed in plain and intelligible language. In a condohotel lease, these may principally include the obligation to make the unit available and the obligation to pay rent. This exception must, however, be interpreted narrowly.

If a term relating to the main subject matter is not transparent, it may still be reviewed. Transparency requires more than linguistic clarity. It also requires the consumer to be able to understand the actual legal and economic consequences of the mechanism concerned. The owner should be able to determine, among other things, how remuneration will be calculated, what costs may be deducted and when the operator may change the settlement rules.

Can a condohotel unit owner qualify as a consumer?

If the owner entered into the agreement as a consumer, terms that were not individually negotiated may be reviewed under the rules governing unfair contract terms. Depending on the agreement, the circumstances in which it was concluded and the significance of the challenged terms, a particular term may be found not to bind the owner or, in some cases, the agreement as a whole may be incapable of continuing in force.

The possibility of challenging terms in a condohotel lease under the unfair-terms provisions of the Civil Code depends primarily on whether the purchaser qualifies as a consumer. Unless this condition is met, the protection afforded by Articles 385¹–385³ of the Civil Code will generally not apply, subject to the special protection extended to certain natural persons conducting business activity.

Consumer status and the purchase of a unit as an investment

Under Article 22¹ of the Civil Code, a consumer is a natural person who enters into a legal transaction with a business which is not directly connected with that person’s business or professional activity.

Importantly, purchasing a unit for investment purposes and to generate income does not, in itself, exclude consumer status. A person may still be a consumer where an apartment in a condohotel is purchased as:

• a means of investing savings,
• a source of passive income,
• retirement security,
• part of the purchaser’s private assets,
• an investment not directly connected with the purchaser’s business or professional activity.

The profit-making purpose of a transaction is not the same as conducting a business. A natural person does not lose consumer protection merely because they intend to derive financial benefit from their assets. This may also apply where more than one unit has been acquired. Although the number of units owned may be relevant, it is not, by itself, decisive in determining that the purchaser did not act as a consumer.

Investing private funds does not exclude consumer protection

This position is supported by the case law of the Polish Supreme Court. In one judgment, the Supreme Court held that a natural person independently managing their assets by investing savings may remain a consumer, provided that those activities do not have the characteristics of a business or professional activity directly connected with investment (Supreme Court judgment of 18 July 2019, case no. I CSK 587/17).

A similar conclusion was reached by the Court of Appeal in Białystok in a case concerning a loan used to purchase commercial premises that were subsequently to be leased. The court held that the investment and profit-making purpose of the purchase does not automatically deprive the purchasers of consumer status. It was relevant that they were not professionally engaged in trading or letting real estate and that the transaction was merely a form of managing private assets (Court of Appeal in Białystok, First Civil Division, judgment of 14 June 2024, case no. I ACa 1839/22).

This reasoning may be applied accordingly to a purchaser of a condohotel apartment. If it is shown that the unit was acquired as part of managing private savings and that investing in real estate is not the purchaser’s business or profession, the investment purpose should not, in itself, exclude consumer protection.

These judgments indicate that it may be difficult for an operator to argue that purchasing a unit for profit automatically excludes consumer status. However, the judgments cited concern investment activity in a broad sense rather than condohotel investments specifically and should not be applied mechanically. In any court proceedings, consumer status must also be demonstrated by appropriate evidence.

When might a condohotel owner not qualify as a consumer?

The assessment may be different where a person invests in real estate professionally and in an organised manner. Factors weighing against consumer status may include:

• purchasing a portfolio of units as part of an organised activity,
• regularly purchasing and selling real estate,
• professionally letting or managing real estate,
• a direct link between the agreement and the scope of business disclosed in the CEIDG register,
• treating the purchase as a business asset,
• deducting VAT or recognising expenditure as a business cost,
• presenting oneself to the developer or operator as a business,
• the scale, regularity and professional nature of the activities undertaken.

In one judgment, the Supreme Court stated that managing one’s own assets and investing savings may fall within consumer status, but that protection becomes problematic where the activity takes on the characteristics of an organised, professional business or professional activity (Supreme Court judgment of 18 September 2019, case no. IV CSK 334/18).

Consequently, an IT professional operating as a sole trader may enter into an agreement concerning a private investment in a unit and act as a consumer in that relationship. The position of a real estate agent or a business professionally engaged in acquiring and letting properties may be assessed differently.

How can it be determined whether a condohotel purchaser is a consumer?

There is no single universal indicator that automatically determines whether consumer status exists. Neither the investment purpose itself, nor rental income, nor even ownership of several units is decisive. The investor’s circumstances as a whole should be examined, including in particular:

• the frequency of similar transactions,
• the tax treatment of the unit,
• the scope of any business activity and the entry in the CEIDG register,
• the nature of dealings with the developer and operator,
• the degree to which the investment is organised and professional,
• the number of properties held in condo schemes.

Only such an analysis permits a reliable assessment of whether the owner may rely on the unfair-terms provisions and seek a finding that specific terms are non-binding or, in appropriate circumstances, challenge the continued operation of the agreement as a whole.

Which agreement should be reviewed – the lease, the management agreement or the entire package of documents?

Under Article 385² of the Civil Code, whether a term is consistent with good practice is assessed by reference to the circumstances existing when the contract was concluded, taking into account its content, the circumstances of its conclusion and other contracts connected with it. Article 4(1) of Directive 93/13/EEC establishes a corresponding rule. The assessment of the unfair nature of a term must take account of all circumstances surrounding the conclusion of the contract and of the terms of other contracts on which it depends.

An analysis of unfair terms in a condohotel lease should not be confined to a single document. In such investments, the purchase and fit-out of the unit, its handover to the operator and the arrangements for payment to the owner are elements of one commercial venture. The entire package of documents relating to the condohotel investment should therefore be reviewed, not merely the document entitled “lease agreement”.

Depending on the structure of the investment, the following may require analysis:

• the reservation agreement,
• the preliminary or development agreement,
• the information prospectus,
• the unit sale agreement,
• the lease entered into with the operator,
• schedules and amendments,
• advertising materials and investment presentations,
• correspondence with the developer or operator,
• profitability forecasts and representations concerning a guaranteed rate of return.

In most condohotel developments, the lease is not concluded as an independent agreement freely negotiated after the purchase. The obligation to sign it arises directly from an earlier agreement with the developer. A draft lease may even be attached to the development, preliminary or sale agreement. The purchaser may also be required to contract with a specific operator designated by the developer. That operator often belongs to the same corporate group or is otherwise connected with the entity developing the project.

Although formally separate, the agreements may therefore be closely connected economically and functionally. This does not automatically mean that they constitute one agreement or that an unfair term in one document invalidates all the others. Each agreement and each challenged term must be assessed separately, having regard to the parties to the relevant legal relationship. Nevertheless, the fact that the documents were prepared as elements of a single investment project cannot be ignored.

The package of documents may show, among other things, that:

• entering into the lease was a condition of purchasing the unit,
• the purchaser could not select the operator independently,
• the wording was prepared in advance using the same template for all purchasers,
• refusing to sign the lease would, in practice, mean abandoning the investment,
• the developer and operator, as entities connected by ownership or management, jointly presented a single investment model,
• the investment risks were transferred primarily to the unit owner,
• dividing the relationship among several agreements or companies made it more difficult for the purchaser to assess the transaction’s true consequences.

Does the absence of an opportunity to negotiate matter?

One condition for unfair-terms review is that the challenged term was not individually negotiated with the consumer. Under Article 385¹ § 3 of the Civil Code, a term is not individually negotiated if the consumer had no genuine influence over its content. This applies in particular to provisions taken from a standard contract proposed by the business.

Draft agreements for condo investments are sometimes described by developers as “non-negotiable”. This label has no special legal effect. It normally means only that the business uses a pre-drafted standard agreement and does not intend to negotiate its provisions individually with the purchaser.

A term is individually negotiated only where the purchaser had a genuine influence over that particular term. Merely allowing questions, comments or a choice between several pre-prepared variants will not always suffice. What matters is how negotiations actually proceeded, including whether the business was prepared to amend the disputed term, whether the purchaser’s proposals were substantively discussed and whether any changes resulted from individual arrangements with the developer or operator.

It is therefore insufficient that the owner received the agreement before signing, could read it or could choose whether to accept the package as a whole. An opportunity to read a document is not the same as a genuine ability to influence its provisions.

Evidence that the terms were not individually negotiated may include statements that:

• the documents are “standard”,
• the lease is “non-negotiable”,
• every owner must sign the same template,
• purchasing the unit without an agreement with the selected operator is not possible,
• proposing amendments will cause the developer to withdraw from the sale.

This does not yet establish that a particular term is unfair. It must also be shown that it shapes the consumer’s rights and obligations contrary to good practice and grossly infringes the consumer’s interests. The absence of genuine negotiation does, however, make judicial review possible.

Importantly, under Article 385¹ § 4 of the Civil Code, the burden of proving that a term was individually negotiated rests on the business relying on that fact. The operator cannot therefore merely state that the owner signed the agreement voluntarily. It should demonstrate that the consumer had a genuine opportunity to negotiate the specific term and influence its final wording. In practice, this is often difficult.

What evidence can show that the agreement was not negotiated?

In potential court proceedings, the owner should produce evidence showing how the unit was offered and the agreements were concluded in practice. Relevant evidence may include:

• successive versions of draft agreements,
• emails exchanged with the developer or operator,
• responses to amendments proposed by the purchaser,
• messages stating that the standard agreement cannot be amended,
• evidence from other owners who received identical documents,
• agreements entered into with other purchasers,
• sales presentations and advertising materials,
• recordings of meetings or calls, if lawfully made,
• provisions of the development agreement requiring the lease to be entered into,
• a standard operator agreement attached at an earlier stage,
• evidence of ownership or management links between the developer and operator.

Comparing agreements signed by different owners may be particularly important. If their contents are essentially identical, this supports the conclusion that the operator used a uniform standard contract and that individual terms were not genuinely negotiated.

Only an analysis of the entire relationship between the developer, condohotel operator and unit owner makes it possible to assess properly whether the challenged terms were imposed on the consumer, whether they create a significant contractual imbalance and whether the lease can remain in force after their removal.

Which terms in condohotel leases may be unfair?

Below are several examples from agreements we have recently reviewed which, depending on the circumstances in which they were concluded and the agreement as a whole, may be regarded as unfair.

Unequal termination rights

The owner may terminate the agreement for the operator’s failure to pay rent only once the arrears exceed, for example, six months or several payment periods and only after completing a prescribed demand procedure. At the same time, the operator may terminate the agreement if, among other things, the owner does not entrust it with management of the common property, revokes a power of attorney or begins voting independently on matters concerning the owners’ association.

The key issue is not one isolated ground for termination but the overall asymmetry of the contract, which improves the operator’s position at the purchaser’s expense. The consumer must tolerate for an extended period the operator’s failure to perform its fundamental obligation to pay rent, while the owner’s exercise of rights within the owners’ association may enable the business to end the agreement much sooner.

Such provisions must be examined together. The greater the disparity between the consumer’s real ability to exit and the rights granted to the business, the stronger the argument that the standard contract creates a gross imbalance.

Automatic extension of a ten-year agreement for a further five years

After the first ten years, the agreement is extended for another five years unless either party gives written notice that it does not wish to extend it, with notice required no later than one year before the original term expires.

An automatic renewal mechanism is not inherently unfair. Serious doubts arise, however, from combining a very long renewal period of five years with the need to act as early as one year before the end of the original term. A consumer who simply misses the contractual deadline becomes bound for several additional years.

Contractual penalties for revoking a power of attorney or voting independently

Agreements often provide that an owner who revokes the operator’s authority to represent them at meetings of the owners’ association or begins voting independently will incur a contractual penalty, for example PLN 1,000 for each breach. The agreement may additionally allow rent payments to be withheld until the breach ceases.

As a result, the consumer is effectively discouraged by financial means from exercising fundamental rights as the owner of a unit and a member of the owners’ association.

Authorising the operator to vote “at the attorney’s discretion”

The owner grants the operator authority, among other things, to represent the owner at meetings of the owners’ association and to vote on all resolutions at the attorney’s discretion.

The appointment of an attorney is not, in itself, unfair and is permitted under the Civil Code. The problem lies in the very broad scope of the authority combined with a penalty for revoking it or exercising voting rights personally. In practice, the consumer may be deprived for many years of any meaningful influence over decisions concerning their own property.

Contractual penalty for interfering with voting arrangements

The agreement provides that if the owner revokes the authority or votes personally or through another person in a manner inconsistent with the contractual mechanism, the owner may incur a contractual penalty for each day during which the resulting state of affairs continues.

The mechanism is similar. Crucially, the penalty does not secure an ordinary payment or technical obligation, but rather the manner in which the owner exercises rights directly linked to property ownership. The penalty may accrue daily for weeks or months and may therefore easily become disproportionate to any actual loss suffered by the operator.

Limiting the operator’s liability to wilful misconduct or gross negligence

The agreement provides that the operator is liable for loss resulting from non-performance of its obligations “only in the event of wilful misconduct or gross negligence” and further provides that “such liability is limited to actual loss”.

Under such a term, the operator, although a professional within the meaning of Article 355 § 2 of the Civil Code, excludes liability for ordinary negligence in the performance of a long-term agreement. The consumer could therefore bear the consequences of defective performance even though the business would not be liable for some of its own breaches.

A penalty of PLN 1,000 per day for alterations to the owner’s unit

The agreement prohibits the owner from changing the aesthetics, appearance or furnishings of the unit. If changes are made, the operator may remove them at the owner’s expense and deduct the cost from rent, while the owner must also pay a contractual penalty.

Maintaining a consistent hotel standard may be a legitimate objective. The problem is the means used to secure it: the owner pays the cost of restoration and also incurs an additional penalty of PLN 1,000 for each day. Without a cap, the sanction may be grossly disproportionate to the significance of the breach and any actual loss, which may not materialise at all.

Imposing the jurisdiction of the court where the unit is located

All disputes arising from the agreement are to be determined by the court having jurisdiction over the location of the property.

Condohotel developments are often located in popular tourist destinations, especially in the mountains, by the sea or in resort towns. Purchasers will not normally live where the development is located. They treat the unit as an investment and entrust its operation to a professional operator.

Imposing the jurisdiction of the court where the development is located may therefore require a consumer to litigate hundreds of kilometres from home. This creates additional costs, makes attendance at hearings more difficult and may require representation by a lawyer practising in another region. The arrangement will usually benefit the business, which operates at the development and may conduct many similar cases before the same court.

Is an unfair term invalid, or does it simply not bind the owner?

A finding that a term is unfair does not automatically make it invalid under Article 58 of the Civil Code. Article 385¹ § 1 establishes a separate consequence: the unfair term is not binding on the consumer.

The term’s non-binding effect means that it is ineffective against the claimant and arises ex lege, by operation of law (see E. Łętowska, Umowy odnoszące się do osób trzecich, C.H. Beck, 2005, p. 343).

More precisely, the term does not bind a unit owner who acted as a consumer. The protection arises not from ownership itself but from the capacity in which the agreement was concluded. In condohotel cases, the investment purpose does not automatically exclude consumer status, but an individual assessment is required.

The consequence under Article 385¹ of the Civil Code is usually described in legal scholarship as partial ineffectiveness, operating from the time the agreement was concluded. In principle, the term is treated as if it had never produced legal effects against the consumer. A judgment is declaratory: it confirms, rather than creates, the ineffectiveness.

The statement that this consequence operates entirely automatically requires qualification. The case law of the Court of Justice of the European Union shows that the protection was established in the consumer’s interest. A court must examine of its own motion whether a term may be unfair and inform the consumer of the consequences of disregarding it. The consumer may nevertheless object to that protection and knowingly consent to the term remaining in force.

Under Article 385¹ § 2 of the Civil Code, the parties remain bound by the agreement in all other respects. For example, if a term allowing the operator unilaterally to reduce rent is found unfair, that term will generally be ineffective, not the entire lease.

The court should not revise an unfair term, reduce a charge to a “reasonable” level or create a solution which the parties might hypothetically have agreed. Doing so would weaken the deterrent effect of the rules, because a business could continue using unfair terms in the expectation that a court would merely soften them.

Filling the resulting gap with a supplementary statutory provision is permissible only exceptionally, primarily where the agreement could not continue without the unfair term, its collapse would be particularly detrimental to the consumer, and applying the relevant provision would prevent that outcome.

Can unfair terms cause the entire agreement to fall?

Yes, but this is not an automatic consequence of finding that a term is unfair. The agreement as a whole may fall only where it cannot continue to operate after the unfair term has been removed. Whether it can survive is assessed primarily by objective criteria, not by reconstructing the business’s hypothetical intention and asking whether it would have contracted without the favourable term.

In condohotel agreements, particular significance may attach to the removal of provisions governing the calculation of rent, the allocation of income, the owner’s obligation to bear the operator’s business costs, or the operator’s ability unilaterally to suspend payments. If the parties’ essential obligations can still be determined and performed after those provisions have been removed, the agreement should generally remain in force. If, however, the unfair term concerns a mechanism without which the essential obligations cannot be determined, there may be grounds for concluding that the agreement cannot be maintained.

It is therefore necessary to distinguish the non-binding effect of an individual term from the collapse of the agreement as a whole. The first consequence follows directly from the unfairness of the term. The second requires an additional finding that the agreement cannot objectively operate after the term has been removed and an assessment of the consequences of that outcome for a properly informed consumer.Verdict Partners provides legal assistance to owners of units in condohotels and aparthotels, in particular by:

• reviewing lease agreements, development agreements, sale agreements and other documents relating to the investment,
• assessing whether the unit owner qualifies as a consumer,
• identifying unfair contract terms and assessing the consequences of their non-binding effect,
• determining whether the agreement can remain in force after the unfair terms have been removed,
• assessing the possibility of terminating the agreement or challenging its continued validity,
• preparing a formal notice to the operator and conducting pre-litigation negotiations,
• representing the unit owner in court proceedings against the operator or developer.

Every condohotel agreement requires an individual assessment. Relevant factors include not only the wording of the agreement, but also the circumstances in which it was concluded, the owner’s status, the materials presented before the purchase, and the relationship between the developer and the operator. Please contact our law firm to discuss your case.

Summary

Condohotel leases are usually concluded for many years and form part of a broader package covering the purchase and fit-out of the unit, its handover to the operator and the settlement of income. Assessing whether a condohotel lease contains unfair terms should therefore not be confined to a single document. The development or sale agreement, schedules, powers of attorney, advertising materials, correspondence and the circumstances in which the investment was presented must also be considered.

Terms may be unfair where they were not individually negotiated and, contrary to good practice, grossly infringe the consumer’s interests. In condohotel agreements, particular concerns may arise from grossly unequal termination rights, automatic renewal for another long period, excessive contractual penalties, limitations on the operator’s liability, sanctions for revoking a power of attorney or exercising voting rights independently, and the imposition of a distant court as the forum for disputes.

A finding of unfairness does not automatically invalidate the entire agreement. The principal consequence is that the unfair term does not bind the consumer, while the remainder of the agreement continues in force. Only where the agreement cannot objectively operate after removal of the term may the collapse of the entire contractual relationship be considered. This always requires an analysis of the significance of the challenged term and the consequences for a properly informed consumer.