How to terminate the lease during quarantine or other force majeure situations?

In difficult economic conditions, any business requires optimization. As a rule, it all starts with a reduction in unscheduled expenses, and ends with a reduction in expenses for salaries to employees and rental premises.

Today we will talk about how you can save your money as much as possible by using the legal side of relations with your counterparties. We have already talked about how to optimize your business through remote work here.

Now it’s time to elaborate on the question: "What to do with rented offices, premises and any other real estate during the coronavirus disease?”

Read also: Business Tips During Quarantine

How to stop paying rent today?

As you have probably already heard, coronavirus was defined as one of the force majeure circumstances, accompanied by amendments to the relevant Law of Ukraine. 

In addition, the lessees were released for quarantine period from all kinds of sanctions: fines, penalties, etc. Accordingly, under such conditions it is necessary to concentrate your assets on more profitable things, reducing the expenses for things that are not used under current conditions and do not bring profit.

Here are some legal tips to help you in the current situation.

Tip 1. Additional Agreement

You can enter into an additional agreement that temporarily exempts you from rent payments due to non-use of the real estate. Of course, this option is not always possible because the landlords may not agree. However, it is worth a try. 

If you want to add credibility in your own words, we can prepare a written consultation on this issue, with arguments why the landlord should agree, or offer you to take our lawyer to negotiate with the landlord.

Read also: What Is A Legal Opinion Letter?

Tip 2. Certificate of the Chamber of Commerce and Industry Confirming Significant Changes of Circumstances.

As previously written, quarantine is recognized as a force majeure, so landlords usually have no choice but to agree to your proposal to defer payments. 

In addition, lease agreements usually contain force majeure clauses that allow termination of the agreement if the intervening event continues for a long period of time. For the sake of certainty, we can review your agreement for such provisions and, for a stronger position, we can also obtain a Force Majeure Certificate of the Chamber of Commerce and Industry.

Tip 3. Give the Landlord Proper Notice

Article 762 of the Civil Code of Ukraine, namely Parts 4 and 6, entitles the lessee to claim the reduction of payment or become exempt from payment during any period of time when the property could not be in use for the reasons beyond the lessee’s control. This is exactly the case. 

Today, many of our Clients choose this “option”, and with the correct legal consulting, as well as the competent preparation of such notices for the landlord, it works very effectively.

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How to early terminate the Lease Agreement?

Of course, no one is insured against a situation where all possible options do not work, and there is no way out, except to terminate the lease agreement. Then you have to think about how to do it as beneficially as possible for your business. Of course, we’ve prepared a couple of “lifehacks” for you.

In such situations, make sure to thoroughly analyze the provisions of your agreement, because the general provisions of the Civil and Commercial Codes are not so easy to use, especially if the agreement was made up by the lawyers of your opponent. You need to understand several key things:

1. As a general rule, the costs of running repairs are borne by the landlord unless otherwise provided in the agreement.
2. A major overhaul is the duty of the landlord, but if the lessee could not do without a major overhaul, the lessee can easily claim compensation for its expenses.
3. Real estate may be improved only upon the permission of the landlord. And even if it is not stipulated in the agreement, the lessee still has the right to compensation of its expenses, which is confirmed by the relevant court practice (Resolution of the Supreme Economic Court of Ukraine dd. 12.05.2016 in case No. 914/3306/15).

These are the things that, together with an analysis of your agreement, may give us the opportunity to early terminate the lease agreement in your favour. Not everybody understands the legal difference between major repairs, maintenance and improvements. We can help you determine your case.

If you need advice on a rental or termination of a lease agreement, don’t hesitate to call us. We can provide advice online, in any convenient way for you.