Premises lease agreement. Quarantine lessons.

Very often there are situations when the parties sign template agreements and do not think about how to regulate such an agreement unforeseen situations that may arise in the future.

One such unforeseen situation was quarantine, which affected almost every business, especially the service sector.

At the moment when the Cabinet of Ministers banned the work of most institutions, entrepreneurs began to open their leases and try to find something there that would help them not to pay or reduce rents.

In most cases, such provisions in the contracts were absent. In practice, it turned out that the entrepreneur can not even terminate the contract without the consent of the landlord or defer payment of rent.

Therefore, we will further analyze the typical mistakes that the parties make when preparing lease agreements, and tell you how to secure your business in advance in case of force majeure.

Purpose of the leased object

Usually, when concluding a lease agreement, the parties do not specify the specific purpose of the leased object, ie the purpose for which the premises are leased. It is often possible to find such wordings as "for carrying out commercial activity" or "for commercial purposes", at the same time the concrete purpose of rent is not specified.

In a situation where the Cabinet of Ministers has banned certain activities, such a vague wording of the lease will not allow the tenant to use to his advantage Part 6 of Article 762 of the Civil Code of Ukraine. The article provides that a tenant may be exempted from rent for a time when he could not use the property due to circumstances for which he is not responsible.

That is, if, for example, the restaurant is banned and the restaurant premises are leased precisely for the purpose of carrying out activities in the field of catering, the tenant will have an advantage both in settling the issue with the landlord on rent exemption and in litigation, if such will arise. If the purpose of the leased object is not specified, it can be assumed that the lessee may use the leased premises for activities that are not prohibited.

That is why the contract should clearly prescribe the type of activity for which the premises are leased.

The right to unilaterally terminate the contract

Sometimes the parties either forget or intentionally do not indicate in the contract the right to unilaterally terminate the contract, ie to terminate the contract without the consent of the other party. The tenant suffers the most from this.

Here is an example from practice. In February 2020, the parties entered into a lease agreement for the premises in the mall, which stated that the tenant has no right without the consent of the landlord to terminate the contract during the first three months of the lease. It would seem that such a condition is not burdensome for the tenant, as he plans to rent the premises for a long time. However, in March, the tenant was forced to close his shop due to quarantine. At the same time, in accordance with the agreement, he cannot and must not pay the rent during March and April only because it was specified in the agreement.

There are other situations when it is impossible to terminate the contract without the consent of the other party or there is a significant fine.

Therefore, we recommend that the contract provides for the right to unilaterally terminate the contract with written notice to the other party, for example, 15 calendar days before the date of termination. In our opinion, this wording is optimal for both parties.

Rent and cost of utilities separately

Obviously, when renting a room, the tenant pays for utilities. The cost of utilities can be immediately included in the rent, and can be paid separately on the basis of the relevant bills.

Imagine a situation where the tenant is exempt from rent in accordance with the aforementioned Part 6 of Article 762 of the Civil Code of Ukraine, but the contract states that the cost of utilities is also included in the rent. At this stage, there are disputes between the parties as to whether the tenant is exempt only from rent, or even from utility bills as well, and how to divide them.

Often the tenant believes that because he was exempt from the rent, which includes utility payments under the contract, it means that he is exempt from utility payments. Not really. The cost of utilities must be paid in any case. And there are situations when the tenant has a significant debt for utilities, and then penalties.

Therefore, the best option is to divide the cost of utilities and rent in the contract. This will protect against confusion and future disputes over the amount of mandatory payments.

Postponement of the obligation due to force majeure

In many cases, the contract provides that the parties are released from liability for non-performance in the event of force majeure.

Most treat this item as one that allows you not to pay rent during force majeure. This is a misconception. Let's explain why.

Contracts often provide for penalties for breach of obligation. For example, a penalty in the amount of double the discount rate of the NBU for each day of delay in payment of rent. Force majeure prohibits the application of penalties to the tenant, but does not release from the obligation to pay rent. That is, if the tenant does not pay the rent during force majeure, the landlord can still go to court and collect it forcibly. Instead, the landlord will not be able to collect additional penalties. This is the principle of force majeure.

At the same time, the contract may provide for the postponement of the obligation until the end of force majeure. That is, indicate that the rent will not be paid during the period of force majeure.

In this case, the contract must specify the transfer procedure, namely: determine the period of notification of the commencement of force majeure, the procedure for confirming the force majeure (CCI certificate or regulatory act of the state body), the right to terminate the contract if force majeure lasts longer than specified number of days.

As you can see, the agreement is needed not only to formally consolidate the relationship between the parties, but also can significantly help in the event of an unforeseen situation. It is only necessary to note in it the effective mechanisms for resolving such situations.

So do not hesitate to offer your own changes to the contract if it will help secure your business in any situation!