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24 April 2020

New “rent relief” rules

On 13 April 2020, the Parliament of Ukraine adopted the law “On Amending the Law of Ukraine “On the State Budget of Ukraine for 2020” (the “Law”). The Law became effective on 18 April 2020. In addition to changes to the state budget, the Law has also amended provisions of the Civil Code of Ukraine on the lease of property.

The Law revised the recently introduced “rent relief” rule. According to the Law, for the duration of the restrictive quarantine measures introduced by the Cabinet of Ministers to prevent the spread of COVID-19 in Ukraine, the circumstances beyond the tenant’s control that under the Civil Code of Ukraine may be considered the grounds for reduction of/exemption from rent, were clarified.

Such circumstances shall now include the measures introduced by the government that:

  • prohibit certain types of businesses to use the leased property, or
  • prohibit access to such property by third parties.

The changes introduced by the Law may be summarised as follows:

  • the tenants who are restricted in operating their business during the quarantine, are now exempt from the burden of proving the causal relationship between the imposed restrictions and the inability to use the property;
  • there is no regulation for such operating expenses as technical maintenance, security and cleaning costs, etc. The parties to the lease agreement shall resolve the issue by their mutual agreement taking into consideration the relevant provisions of the contract;
  • the “rent relief” for partially used property, which is applicable to most offices due to working remotely, remains insufficiently regulated as well;
  • the law is not retroactive. However, the parties can apply the provisions of the Law to the whole period from the beginning of the quarantine by their mutual agreement.

To sum up, the Law creates a basis for resolving issues concerning lease of property during the quarantine. However, the parties in each case shall analyse the contract in detail, prepare reasonable arguments, as well as necessary documents and facts in support of their position.

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