On March 11, 2020, the Cabinet of Ministers of Ukraine has issued Decree No. 211 “On Prevention in Ukraine of the Acute Respiratory Disease COVID-19 caused by the SARS-CoV-2 Coronavirus” establishing a quarantine throughout Ukraine, which has currently been extended until April 24, 2020.
Due to the introduced quarantine, all public (cultural, entertaining, sports, social, religious, advertising and other) events, as well as activities of business entities, which provided for the visitors reception, were prohibited, including:
- catering establishments (restaurants, cafes, etc.),
- shopping and entertainment centers and other leisure facilities;
- fitness centers,
- cultural institutions,
- retail and consumer services.
Because of the aforementioned ban and suspension of the business in the area of services, several organizational issues arose, including those related to rent and utility.
Let’s consider this issue from both tenant’s and landlord’s perspective.
If You Are A Tenant
The provisions of the Civil Code of Ukraine (Article 762, paragraphs 4 and 6) entitles the tenant (1) to demand a reduction in payment if, due to circumstances for which it is not responsible, the ability to use the property has significantly decreased; and (2) to be exempt from a rent for the whole time during which the property could not be used by him because of circumstances beyond his control.
Therefore, depending on the tenant’s current work organization and whether the use of the rented premises is difficult or impossible, there are several options for further action.
If the tenant has partially sent its employees for telecommuting, while occupying the premises to the limited extent.
In such a case, the tenant shall be entitled, in the way referred to in Article 762 of the CCU, to reduce the amount of the rent. In order to do this, one should contact the landlord with an offer to enter into such an additional agreement.
If the tenant cannot use the rented premises due to quarantine. This is a more complicated issue.
On April 2, 2020, the Law No. 3275 was published on the “Holos Ukrainy” website, which amended the Final and Transitional Provisions of the Civil Code of Ukraine. Pursuant to these amendments, from the moment of quarantine introduced by CMU Resolution No. 211, and until termination thereof in accordance with the procedure established by law, the tenant may be exempted from payment for the use of property according to the Paragraph 6 of Article 762 of this Code.
Therefore, these innovations only emphasize the tenant’s right to exemption from rent charges during quarantine, but not the landlord’s liability. Thus, in this case, as in the first one, you can contact the landlord either via a letter of inability to use the premises, or a proposal to conclude a relevant additional agreement for the quarantine period.
If the landlord does not consider your request on the issue of a rent charge exemption, the tenant is entitled to notify the landlord of force majeure (according to Law of Ukraine No. 530-IX quarantine is attributed to force majeure circumstances) and to obtain a certificate from the Ukrainian Chamber of Commerce and Industry.
Please note that the main reason for the rent charge exemption is the actual impossibility of using the rented premises, not the fact of quarantine.
Additionally: for the period of quarantine or restrictive measures and within 30 days from the date of its cancellation, it is prohibited to charge and collect penalties (forefault, fines) for late housing and utility payments (Final provisions of Law No. 530 -IX of March 17, 2020). Therefore, any such claims and accruals on the landlord’s part are unreasonable and unlawful.
If You Are A Landlord
As noted above, Law of Ukraine No. 3275 only grants the tenant the right (and does not oblige the landlord) to release the tenant from the rent payment. Therefore, depending on whether the tenant uses the rented premises and to what extent, there may also be two options.
Option 1: reduce the rent amount due to partial use of the premises by the tenant.
The tenant’s right to reduce the rent amount is provided by Article 762 of the CCU. At the same time, it should be appropriate for the latter to provide a landlord with a reasoned proposal for such a reduction, as the use of the whole premises and proceed a profit from them (though not to the amounts received prior to a quarantine period) does not entitle it to demand such a reduction. In any case, such matters as well as the conformity with grounds, are settled by the parties.
Please note that when signing the additional agreement, it is necessary to clearly define which premises remains within the rent, as well as to indicate a separate clause on the utility payment procedure.
Option 2: inability to use the premises, the tenant’s reference to force majeure.
When the tenant applies a notice to a landlord of force majeure or inability to use the premises, it is necessary to carefully investigate the application, including what the counterparty refers to, whether it continues to use the rented premises, as well as whether it is in fact unable to use the rented premises during a quarantine period and so on.
For example, if the tenant does not have the money (let’s say due to the sub-tenants’ failure to pay the corresponding payments), this is not a force majeure.
The assignment of quarantine by Law of Ukraine No. 530-IX to force majeure is also not a proper ground for exempting a tenant from the rent charge, as in this case there must be a cause-and-effect relationship between the quarantine and the inability to use the rented premises.
Therefore, if the tenant is really unable to use the premises due to the prohibition of its activity during quarantine period, the additional agreement may be concluded with the corresponding amendments to rent amount for such a period. Very often, the parties agree on covering only utility and security services by the tenant.
In any case, decision makers should always keep in mind the maintain of relationship with their partners.
If you have any questions about rent reduction/waiver, arranging negotiations with tenants and/or landlords, please contact
– Managing Partner Dmytro Syrota firstname.lastname@example.org or
– Lawyer Kateryna Petrushyna email@example.com.