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In a situation where a number of residents of a building owned by the local authority have rent arrears, may the head of the local self government agree that they provide labour in order to clear their debts? 


Put briefly, the answer is affirmative. As matters stand at the moment, overdue rent amounts to a significant item in the breakdown of receivables held by the typical Polish local authority, and the figures in question may reach hundreds of millions of PLN. Claims for overdue rent are difficult to enforce, and many of the local authorities affected find themselves in a precarious situation. In the meantime, as it turns out, such local authorities have at their disposal a solution which enables them to achieve short-term financial benefits as well as offering assistance to residents faced with difficult circumstances. 


Regard should be had to the provisions of the Polish Civil Code (specifically its art 659.2) which envisage definition of rent in reference to non-pecuniary benefits. In particular, lessees may be required to provide certain services to the local authority in consideration for their use of public housing, such as cleaning or construction services. Even if the original contract executed between such a lessee and the local authority provides for rent payments in pecuniary form, there is nothing to prevent the parties from agreeing that, in lieu of paying rent, the lessee provides services to an equivalent value, e.g. by performing specific work.

Such a possibility is available in light of art 453 of the Polish Civil Code. Where the lessee does provide labour of a certain value, her/his rent arrears should be deemed cleared. In return for deeming the lessee’s liabilities repaid, the local authority receives a service of a discrete economic value – an option which is oftentimes preferable to an accounting receivable which may be hard to enforce in practice. In an important point, any agreement in which the local authority and the lessee agree to convert the latter’s financial debt into an obligation to perform specific services or works should be drawn up in writing, and the value of the substitute benefit should be commensurate to the value of the rent arrears (otherwise, the local officials may find themselves answering questions about observing public finance discipline).