Occasional rental – what is it and how does it work?

The percentage of people renting dwellings in Poland remains relatively low (it amounted to only a few percent), although the rental market (both private and institutional) is steadily developing. According to Eurostat data as for 2023, 4.2% of Poles lived in apartments rented on market terms. It’s not much, but comparison of Poland’s recent result with statistics for the year 2009 showed almost a twofold increase. The development of rental market, concentrated mainly in the largest agglomerations, was the result of increasing occupational mobility of Poles, who don’t intend to establish lasting ties in particular location. Constantly rising property prices, high mortgage interest rates and high downpayment requirements cause that many people, especially the young, cannot afford to buy their own flat. On the other hand, the offer of flats for rent is currently substantial, as low interest rates and high inflation together with negative interest rates in real terms have encouraged in recent years to look for alternative to bank deposits forms of capital investment and to invest in apartments for rent.

Two types of rental agreements are available in Poland: common (for a fixed or indefinite period) and occasional. Occasional rental is becoming more popular year by year. According to data from the Ministry of Finance, in 2022 there were 66 293 taxpayers (by 43.72% more than a year earlier) that reported income from an occasional rental agreements taxed as a lump sum and 4 819 taxpayers (by 38.40% more compared to 2021) reported such agreements taxed under PIT-36.

NUMBER OF TAXPAYERS REPORTING THE CONCLUSION OF AN OCCASIONAL LEASE AGREEMENT

source: own study based on data from the Ministry of Finance

However, common rental agreement is still the most often chosen, probably due to its simplicity, as it is enough to specify the property, the duration of agreement and the rent amount , while everything else results directly from the law. Occasional rental, although it supports landlords in dealing with unreliable tenants, accounts for only a small percentage of the market. In 2022, the number of taxpayers declaring income from occasional rental accounted for only 7.5% of all taxpayers reporting income from private rental (this applies to agreements taxed as a lump sum). Occasional rental agreements are also not very popular among students. In the latest survey, only 10% of respondents indicated this form of tenancy, while among private rental agreements (excluding decisions on accommodation in student dormitories and institutional rental agreements) – 13%.

Such a low share of occasional rental agreements may be the result of not enough knowledge in this area among both landlords and tenants. This is confirmed by this student survey, which showed that as many as half of the respondents do not know what the term of ‘occasional rental’ means. Moreover, awareness of the existence of such type of rental agreement has not increased over the past year. Another 22% of respondents are familiar with the concept but have a negative attitude towards it, and only 28% (only by 1 percentage point more than a year ago) would have no objections to concluding an occasional rental agreement.

STUDENT ATTITUDE TOWARDS OCCASIONAL RENTAL

source: Report ‘Students on residential market’ edition 2024

What is the occasional rental?

The occasional rental was introduced into the Polish legal system on December 17, 2009 by an amendment to the Act of June 21, 2001 on the protection of tenants’ rights, municipal housing stock and amending the Civil Code, which came into force on January 28, 2010. This is a special form of residential property rent created to increase (in comparison to common agreements) the protection of property owners against dishonest tenants, who are obliged by the law to move out in case when they do not pay the rent or when they refuse to leave the apartment after the lease agreement has ended.

Characteristic features of occasional rental

1. It may only be concluded in a form of a written civil law agreement, falling which it will be invalid (contrary to common agreement, which can be concluded orally).
2. The owner cannot be a professional market participant in the area of renting dwellings (most often it is simply a natural person).
3. The tenant is a natural person (exceptionally, the tenancy agreement may be concluded by a sole proprietorship, but for his or hers own housing needs).
4. The contract is only for a specified period, no longer than 10 years (unlike a common rental agreement, the occasional rental agreement will not automatically extend after the expiration of the agreed rent period).
5. The owner is required to report the rental to the tax office, which allows to benefit from preferential tax rates.
6. The conclusion of the agreement may depend on the tenant paying a deposit, but it cannot be higher than six times the monthly rent.
7. The owner may change the rent (e.g. indexation based on the inflation rate) only under the conditions specified in the agreement.

Occasional rental agreement – what should it include?

The Act on the protection of tenants’ rights defines the procedure of signing the agreement and specifies the necessary attachments.

To conclude an occasional rental agreement, the tenant should provide:

• the tenant’s statement in the form of a notarial deed on voluntary submission to enforcement and the obligation to empty the premises within the time limit indicated in the request, as well as to cover any fees arising from the agreement;
• a written tenant’s statement indicating an address, where he or she can reside in the event of starting the enforcement proceedings;
• a written statement of an owner of the property indicated by the tenant in the abovementioned statement or of the person holding legal title to that property on consent to the tenant’s residence in case of starting the enforcement proceedings.

A condition for concluding the occasional rental agreement is also its notification by the landlord to the tax office within 14 days from the start of the rental period. At the request of the tenant, the owner is obliged to provide confirmation of the notification to the tax office.

If any of the aforementioned requirements is not met, the occasional rental agreement will be treated as a common rental agreement without the expedited enforcement process.

When can an occasional rental agreement be terminated?

The lack of enthusiasm to occasional rental agreements and thus their low popularity may result from insufficient knowledge regarding the possibilities for terminating such rental. Tenants often believe that eviction is more likely in this type of rental than in a common rental. The phrase ‘easier eviction’ generates fear, and because only few potential tenants make the effort to understand the entire procedure, most people are afraid of being unexpectedly evicted for trivial reasons. Meanwhile, the terms of termination are clearly defined in the law.

A rental agreement, whether traditional or occasionally, can be terminated in the following situations:

• when a tenant, despite a warning, continues to violate the rules of using the apartment (using the premises in contrary to the agreement conditions or causes damage) or disrupts the peace of the other residents of the building;
• when a tenant is overdue on rent or other payments for at least three full payment periods (typically months), despite a written warning and adding one more month to regulate the outstanding payments;
• when a tenant conducts a sublease or gives free access to the apartment or part of it to the third parties without the landlord’s permission;
• on terms specified in the agreement (parties of the agreement may define the specific cases, in which early termination of the rental agreement is possible, such as tenant’s loss of employment or employment in another city);
• due to unforeseen circumstances – in case of circumstances that make it impossible to use the premises, such as its destruction.

In addition, an occasionally rental agreement provides for one more reason for eviction: when the tenant has lost the possibility of moving into premises indicated as ‘emergency’ in the appendix to the agreement and has not proposed an alternative address.

Advantages and disadvantages of occasional rental

For property owners, one of the key challenges is to carefully draft the agreement. Although occasional rental is intended for non-professionals, the procedure is quite complicated and requires knowledge, among others, what should be included in such an agreement.

For tenants, the requirement to provide a declaration in the form of a notarial deed and to indicate the address for possible eviction may be a significant problem. Not every tenant is able to meet this requirement.

Concluding an occasional rental agreement requires participation of a notary, so additional cost should be taken into account. However, the fee for preparing the deed of submission to enforcement has been limited by law at 10% of the minimum wage, i.e. PLN 430 in 2024. This amount should be supplemented by the fees for copies of the deed and possible certification of the signature on the statement indicating the address for relocation. These fees can be paid by either the landlord or the tenant.

And what about benefits? First of all, it is much easier to enforce rights to the flat when it is necessary to evict a problematic tenant. Occasional rental also allows for the eviction of pregnant women and parents with children, which is beneficial not only for owners of flats, but also for people with this status. Before the introduction of regulations on occasional rental, landlords often avoided renting apartments to parents with children and other people who were granted additional legal protection. This form of rental does not provide complete protection, but investing time and resources to complete the entire procedure makes this form of rental more stable and durable in comparison to common rental agreements, which is also a benefit for tenants. An occasional rental may also mean a greater offer of apartments and more favourable rental conditions. Landlords are often more open to negotiations, considering their better legal protection.

As we can see, despite some disadvantages, occasional renting also offers benefits for both parties and a fair tenant, who pays all dues on time, has no reasons to worry — the law protects him against the termination of the agreement without justified cause.

Agnieszka Pilcicka
Real Estate Market Senior Analyst