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QUARANTINE.
TOPICAL ISSUES IN THE RENT OF RENTAL RELATIONS
- The introduction of a state of emergency in the country and the quarantine regime in many cities has significantly affected the sphere of rental relations, especially in megacities, where such relations form a significant part of urban life and the economy, and a huge number of business entities are involved in them.
- Quarantine implies a number of restrictions. In the context of the problem under consideration, this is, first of all, a temporary suspension of work of all organizations and enterprises, with the exception of those necessary for the livelihoods of the population, and a ban on the movement of people and vehicles without emergency.
- For the vast majority of tenants, this turned out to be forced downtime and the inability to access the premises they rent while maintaining obligations to pay rent, and for lessors – a decrease in profitability, the closure of objects that must be protected, maintained and maintained even during the quarantine period. At the same time, both those and others have obligations (credit, tax, contractual, payroll, etc.) that must be fulfilled.
- As a result, difficulties on both sides, losses and the inevitable occurrence of conflict and controversial situations, in the process of resolving which, in addition to participants in the legal relationship, lawyers, mediators, courts and government bodies may be involved.
- Therefore, the topic of relations between tenants and landlords during the quarantine period is of certain interest and raises many questions.
- In a situation with renting communal and state property, everything is more or less clear. On behalf of the President, given to him by the government, local executive bodies and quasi-public sector entities, the calculation of rental payments for their real estate objects was suspended for micro, small or medium-sized enterprises from March 20 this year for a period of three months.
But what about those who rent space from private owners?
- Of course, try to negotiate with your landlord, having calculated and soberly assessed your financial capabilities. Such negotiations are likely to be difficult, but they are necessary for both parties..
- In quarantine conditions for tenants, the loss of the “accumulated” space, the additional costs of finding, moving and arranging a new rental location, organizing logistics, advertising, etc. are unacceptable. For landlords, a categorical reluctance to meet halfway can lead to the fact that the “old” tenants will not be able to rent premises on the same terms and will be forced to leave, and the “new” ones who are willing to pay in good faith in the situation of the coming economic crisis must still be found. Obviously, both parties should be interested in reaching a mutually acceptable solution..
- Possible options for this solution: the provision of rental vacation (suspension of rental payments, including without transfer of debt); recalculation of the rent according to the actual time of work (if the object is functioning and the tenant has admission there); reduction in the amount or delay of rent; payment by the lessee of only services for the protection and maintenance of the property the abolition of penalties provided for by the lease for late payment; temporary reduction of leased space, etc.
- Certainly, some landlords will agree to concessions. In this case, the achieved result should and must be clothed in writing. That is, you need to conclude an agreement / additional agreement to the lease agreement, clearly formulating in it the procedure and conditions for calculating the rent in the “grace” period agreed by the parties, the procedure and terms for making it, the rights and obligations of the parties (if they have changed), the procedure for the parties to comply with the requirements sanitary-hygienic and fire safety, the distribution of responsibility, the procedure for admission and work at the facility (in case of its functioning) and other conditions essential for the parties for the quarantine period.
- It will be more difficult for those whose landlords take the position of categorical disagreement to revise the terms of previously concluded lease agreements, since they bear the burden of maintaining and servicing the property, did not fall into the category exempted from paying property tax, or for some other reasons and reasons.
- Also, the lessor may not agree to terminate the lease agreement by agreement of the parties or in the event of a unilateral refusal by the tenant to fulfill it.
- In such a situation, you need to prepare for litigation.
- More about what and in what sequence to do in such a situation.
- The events that have taken place are called force majeure. With its offensive, exemption from liability for violation of the obligation due to the occurrence of force majeure circumstances.
- The Civil Code of the Republic of Kazakhstan (Civil Code of the Republic of Kazakhstan) does not contain such a concept. However, when force majeure is mentioned, clause 2 of article 359 of the Civil Code of the Republic of Kazakhstan is traditionally applied, within the meaning of which the person who violated the obligation bears property liability unless he proves that proper performance was impossible due to force majeure, that is, extraordinary and inevitable circumstances under the given conditions (natural disasters, military operations, etc.).
- The specified norm contains a clause that the contract may provide for other grounds for liability or exemption from it.
- Thus, in order to refer to force majeure in negotiations or disputes, you need to carefully analyze the terms of the lease.
- In particular, to establish exactly what circumstances are referred to in it as circumstances of force majeure and the grounds for exemption from liability, the fulfillment of which contractual obligations may not be possible due to their onset, etc..
- You should also carefully read the procedure for notifying the other party about the occurrence of force majeure and the impossibility of execution provided for in the lease. It should be strictly observed, since in order to be exempted from liability, it is necessary to prove that all measures have been taken for the proper fulfillment of obligations. That is, if the contract provides for the notification by e-mail, in a certain form, or in another way, then this should be done. In the absence of clear conditions in the contract in this part, it is necessary to send a written notice by registered mail with a notification. The notice sent to the other party must clearly state the obligations whose fulfillment became impossible due to force majeureа.
- It is very important to comply with the terms of such a notice established by the contract, and if they are not in the contract, do so immediately, since you can count on release from liability only from the moment of such notice.
- The performance of such actions may relieve the sender of the notice from liability for non-performance, but subject to the consent of the other party with the arguments set forth in it. Otherwise, there will be a dispute, the point at which only the court can put, it will give an assessment of the insuperability of the circumstances and their impact on the ability to fulfill violated obligations.
- Speaking of force majeure, it should be understood that the consequence of its occurrence is a violation (complete non-performance or improper performance) of contractual obligations, but not their termination or change. That is, the impossibility of timely and full payment by the tenant of rental payments or the impossibility of the lessor providing the tenant with access to the leased premises during the quarantine period does not mean at all that the parties to the contract are exempted from the obligation to pay the rent or provide access, respectively.
Why?
- Because obligations arise from the contract, and the onset of force majeure does not change or terminate them, unless the contract itself is amended or terminated in the prescribed manner.
- As a result of the introduction of quarantine for the non-proliferation of COVID-19, both tenants and landlords have the right to demand termination of the contract or change of its conditions in order to adapt them to the current situation.
How can i do it?
- The legislator in Art. 401 of the Civil Code of the Republic of Kazakhstan provides for the termination and amendment of the agreement by agreement of the parties; unilaterally or by court order.
- In the first case, everything is clear – both parties express their consent, stipulate the procedure and terms of mutual settlements and draw up this in writing with the relevant agreement. In order to avoid possible subsequent disputes and claims, it is worth checking the credentials of the signatories of such an agreement. In case of termination of the lease, we recommend that you additionally draw up a bilateral act of transfer and acceptance of property, in which to fix its current condition and completeness. This is true both for the lessee – in respect of property rented to him by the lessor, and for the lessor – in relation to the property of the lessee taken out of the leased premises. The act of acceptance can reflect the absence of mutual claims on both positions.
Unilateral refusal to fulfill the contract (cancellation of the contract) is allowed only in cases:
- when the possibility of such a refusal is expressly provided for by the contract, in the manner and on the terms of the contract;
- in the event that in the established manner the other party is declared bankrupt;
- changes or cancellation of the act of the state body on the basis of which the contract is concluded;
- when the contract is concluded without an indication of the term, unless otherwise provided by legislative acts or the contract itself;
- in case of impossibility to fulfill the obligation, if it is caused by a circumstance for which the debtor (violator) is not responsible, including those for which neither one nor the other party is responsible (force majeure).
- We believe that it is possible to demand the termination of the obligation and in accordance with paragraph 1 of Art. 375 of the Civil Code of the Republic of Kazakhstan, i.e. the impossibility of its implementation as a result of the adoption of an act of a state body, since by decision of local authorities the work of almost all enterprises and organizations was suspended. The result – the actual lack of access to rented space, to their property located there, but as a result, loss of income.
- It is important to remember that by canceling the contract unilaterally, you need to warn the other party in writing at least one month in advance, unless otherwise provided by legislative acts or the contract. In this case, the second party may not agree with the unilateral refusal of the first, which means a dispute and a possible appeal to the court.
- Regarding changes or termination of the contract by court decision, that is, by force. It is possible only: 1) in case of a significant violation of the contract by the other party; 2) in other cases provided for by the Civil Code, other legislative acts or an agreement.
- Before applying to the court, you must send the other party a written proposal to amend or terminate the contract, in which to set a deadline for the provision of an answer (in accordance with the terms of the contract or at your own discretion, so as not to wait 30 days). As an advice from practice: such an offer should be sent to the other party in the manner provided for by the contract, as well as by registered letter with notification or in any other way fixing the fact of sending and receiving. If no response is received within the prescribed period, or a refusal is received, you can go to court. Otherwise, the court may refuse to accept the claim..
- If the ground for termination or amendment of the contract was a material breach of contract of one of the parties, the other party shall have the right to demand compensation for losses caused by termination or amendment of the contract.
- To give predictions on the outcome of such a claim is a thankless task. The court, guided by internal convictions, will give a legal assessment of the reasonableness, lawfulness and evidence of the applicant’s claims.
- In addition, legal proceedings are an additional cost of time, money, nerves..
- Whereas under quarantine and emergency conditions these resources turned out to be less for both lessors and tenants. Therefore, it is better to preserve them and, adhering to the principle “A thin world is better than a good quarrel”, try to agree.
- Of course, the efforts of only the entrepreneurs themselves will not be enough. In this situation, they urgently need the support of the state. As additional measures to stabilize the sphere of rental relations, support the population and preserve jobs, we can offer exemption from property tax for all owners of commercial premises, preferential and long-term lending to the subjects of such legal relations, granting a deferment in payments for utility services or short-term reduction of tariffs on them.
- No matter how negative the experience of the country’s first quarantine and state of emergency is, it will have to be accepted and experienced. Landlords and tenants themselves need to draw conclusions and review the approach to concluding a contract. We believe that in the future they should more carefully and thoroughly “work out” the contract: provide for payment terms so that they are more flexible, include the possibility of providing benefits in case of circumstances similar to today, discuss the possibility of insuring their risks, carefully write down the conditions governing the force major.
The help of a qualified lawyer can be invaluable in this.
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