A lease is a named contract regulated by the provisions of the Law on Obligations. The lessor undertakes, through the lease agreement, to transfer a specific item to the lessee for use, and the lessee undertakes to pay a specified rent for it. Use includes the collection of fruits, unless otherwise agreed or customary.
Тhe object of the lease must be a certain non-consumable item. Items that are consumed upon first use cannot be the subject of a purchase agreement. The subject of a purchase can be both immovable and movable objects such as apartments, premises, commercial spaces, plots, automobiles, machinery, and similar items. A purchase can also encompass existing and future items. It is essential that the object of the lease is a determinate thing.
As a rule, a purchase agreement is not certified by the competent authority, such as a public notary. However, if the parties wish to achieve a higher level of legal certainty, it is recommended that the signatures of the contracting parties be notarized by the competent public notary.
Depending on whether the lessor has an obligation to pay rent, there can be a distinction between a Lease Agreement with compensation and a Lease Agreement without compensation. A Lease Agreement without compensation represents a type of gratuitous legal transaction.
Lessor ‘s obligations
The lessor is obliged to deliver leased item to the to the tenant in proper condition, together with its accessories. The item is considered to be in proper condition if it meets the specifications stated in the contract or, in the absence of a contract, if it is capable of serving the purpose for which the contract was concluded.
The lessor is required to maintain the item in proper condition during the duration of the lease and perform necessary repairs on it. The lessor must compensate the lessee for the expenses incurred in maintaining the item that the lessor would have been responsible for. The costs of minor repairs resulting from regular use of the item, as well as the costs of normal usage, fall on the lessee. If the necessary repairs to the leased item significantly impede its use for an extended period, the lessee has the right to terminate the contract. Additionally, the lessee has the right to a reduction in rent proportionate to the limitations on the use of the item due to these repairs.
The lessor cannot make changes to the leased item during the lease period without the consent of the lessee if it would hinder the use of the item. If the modifications to the item would diminish the lessee’s use of the item to a certain extent, the rent will be reduced accordingly.
The lessor is liable to the lessee for any defects in the leased item that hinder its agreed-upon or regular use, regardless of whether the lessor was aware of them or not, as well as for defects in properties or characteristics explicitly or implicitly specified in the contract. The lessor is not liable for defects in the leased item that were known to the lessee at the time of concluding the contract or could not have remained unknown, but the lessor is liable for a defect in the purchased item that was unknown to the lessee due to gross negligence if the lessor was aware of that defect and intentionally failed to inform the lessee about it.
Limitation or exclusion of liability for material defects in the leased item can be stipulated by contract. Such a provision becomes void if the lessor was aware of the defects and intentionally failed to inform the lessee about them or if the defect renders the use of the leased item impossible, and the lessor imposed this provision using their monopolistic position.
The lessee is obliged to inform the lessor, without undue delay, of any defects in the leased item that become apparent during the lease unless the lessor is already aware of the defect.
If the leased item has a defect that cannot be remedied, the lessee may, at their discretion, terminate the contract or demand a reduction in rent. When the item has a defect that can be remedied without significant inconvenience to the lessee, and the timely delivery of the item was not a fundamental element of the contract, the lessee may demand from the lessor either the remedy of the defect within a reasonable period or a reduction in rent. If the lessor does not remedy the defect within the subsequent reasonable period set by the lessee, the buyer may terminate the contract or demand a reduction in rent. In any case, the lessee has the right to seek compensation for damages.
If a third party claims to have a right over the leased item or any part thereof or if they unlawfully seize the item from the lessee, the lessee is obliged to inform the lessor, unless the lessor is already aware of the situation; otherwise, the lessee will be liable for any resulting damages. If it is determined that a third party has a right that completely excludes the lesse’s right to use the item, the lease agreement is automatically terminated by operation of law, and the lessor is obliged to compensate the lessee for any damages. In cases where the third party’s right only limits the lessee’s rights, the lessee may, at their discretion, terminate the contract or demand a reduction in rent, and in any case, seek compensation for damages.
Obligations of the lessee
The lessee is obliged to use the item with great care. Lessee may only use the item as specified in the contract or according to its intended purpose. The lessee is liable for any damages that occur from using the leased item contrary to the contract or its intended purpose, regardless of whether the item was used by themselves, a person working on their behalf, a sub-lessee, or any other person authorized by the lessee to use the item.
If, despite a warning from the lessor, the lessee continues to use the item contrary to the agreement or its intended purpose, or neglects its maintenance, and there is a risk of significant damage to the lessor, the lessor may terminate the agreement without giving any notice period.
The lessee is obliged to pay the rent within the deadlines specified in the agreement or by law. In the absence of a contract or legal provisions, the rent is paid according to customary practices in the place where the item was delivered to the lessee. If not otherwise agreed or customary in the place of delivery, the rent is paid semi-annually for items leased for one or more years, and if leased for a shorter period, it is paid upon the expiration of that period.
The lessor may terminate the lease agreement if the lessee fails to pay the rent within 15 days after the lessor’s request for payment. However, the contract will remain in force if the lessee pays the amount of rent due before the notice of termination is communicated.
The lessee is obliged to take care of the leased item and return it undamaged upon the termination of the lease. The item is returned in the place where it was delivered. The lessee is not responsible for the wear and tear of the item that occurs during its regular use, nor for damages resulting from its obsolescence. If the lessee has made any alterations to the item during the lease period, they are obliged to return it in the condition it was in when it was delivered. The lessee may remove any additions they made to the item if they can be separated without damaging it, but the lessor may retain them if compensated for their value at the time of return.