HOW TO ACT UNDER A PROPERTY RENTAL AGREEMENT DURING QUARANTINE?

Раніше розділ про форс-мажорні обставини у договорі оренди переважно ніхто не читав, але ситуація змінилась за останній тиждень. На що потрібно звернути увагу та як уникнути притягнення до відповідальності за невиконання договору оренди?

Previously, the section on force majeure in the lease contract was mostly not read, but the situation has changed in the last week. What should you pay attention to and how can you avoid prosecution for non-fulfillment of the lease agreement?

WHAT YOU NEED TO PAY ATTENTION TO:

1) Mostly, the lease agreement contains a general provision that the party is released from responsibility for non-fulfillment or improper fulfillment of obligations under the contract, if this non-fulfillment or improper fulfillment was the result of force majeure (force majeure).

Approximately the same provision is contained in the Civil Code of Ukraine (Article 617), which states that a person who has violated an obligation is released from liability if he proves that this violation occurred as a result of an accident or force majeure.

So, first of all, a force majeure circumstance exempts from responsibility, but nowhere is it explicitly stated that it exempts from the performance of direct obligations under the contract, such as paying rent.

Sometimes the contracts also contain provisions that the fulfillment of obligations is postponed during force majeure, that is, you can pay the rent after the end of the quarantine.

2) Usually, the list of such circumstances is quite detailed in the contracts, but even if your contract does not specify the quarantine established by the Cabinet of Ministers of Ukraine, and most likely it is not specified, this circumstance is provided for at the legislative level from March 17, 2020, so on you can refer to it.

3) The obligation to notify your counterparty about force majeure and the deadline for such notification.

It can be, for example, immediate notice, three days, or another term defined by the contract. The notice must specify the content of the circumstances, their nature and impact on the fulfillment of obligations under the contract. If your contract does not specify a time period, it is better to inform about the occurrence of such circumstances as soon as possible.

If the method of notification of force majeure circumstances is not regulated, it is necessary to use the general provisions of the contract on notification, usually this is e-mail, postal letter with notification of delivery. Sometimes contracts also provide for the possibility of communication through other messengers. In our opinion, it is better to notify electronically, and if possible hand over a written document for signature or send it by mail.

4) Certification of the fact of force majeure. Such certification is the certificate of the Chamber of Commerce and Industry of Ukraine. This procedure is regulated in detail in the Regulation on certification of force majeure circumstances (circumstances of force majeure).

But in addition, the  Chamber of Commerce and Industry of Ukraine recommends entrepreneurs who cannot fulfill their obligations due to force majeure circumstances, including quarantine, to issue a documentary suspension of their activities in the relevant field (order, order etc.) and notify in writing the counterparty to whom the obligation is not fulfilled.

Quarantine as a force majeure should have specific negative consequences for your business. If this is not the case and you work in the usual mode, then this cannot be recognized as a force majeure circumstance according to your contract.

The injured party can be exempted from liability only if it provides the corresponding certificate to its counterparty within the period established in the contract.

5) Please note that your contract may include a provision that if the force majeure event lasts for a certain period of time (usually several months), then either party to the contract has the right to terminate its operation.

The Lviv City Council reports on the decision to provide rent relief during the quarantine period for Lviv establishments and shops that rent communal premises.

If we talk about commercial or office premises, the mayor of Lviv called on the owners to also reduce the rent for tenants who are temporarily not working, but there is no mandatory norm for property owners.

IN ORDER TO AVOID PROSECUTION FOR NON-FULFILLMENT OF THE LEASE AGREEMENT, WE RECOMMEND THE FOLLOWING:

1) First of all, you need to agree. The best option is to conclude an additional agreement to the contract, which would regulate the relations of the parties for the quarantine period or a longer period. With this additional agreement, you can determine the amount of rent for the quarantine period, another term for its payment, additionally describe the provisions on force majeure for the future.

This will save time and effort in obtaining a TPP certificate, and will remove the issue of further disputes with the owner of the premises.

2) If the first option does not work, then you need to read your contract and follow the recommendations indicated in the first part of this publication: make the necessary decisions within your company to stop operations, notify your counterparty about the occurrence of force majeure for you and apply to the Chamber of Commerce and Industry to receive a certificate.

Photo: Pixabay

HOW TO ACT UNDER A PROPERTY RENTAL AGREEMENT DURING QUARANTINE?

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