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Country - Bosnia-Herzegovina
Commercial Leases
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A. SOURCES OF LEASE LAW
Applicable legislation
Leases are in general governed by the Law on Obligations.
In particular, leases of business premises and business buildings are governed by the RBiH Law on Lease of Business Buildings and Premises which is in force in both entities (Republic of Srpska and the Federation of Bosnia and Herzegovina).
In the Federation of Bosnia and Herzegovina some cantons have adopted a separate Law on the Lease of Business Buildings and Premises which further regulate conditions for the lease of business buildings and premises.
In the case of business leases there are also additional rules established by municipal bodies, including certain obligations of the contracting parties which must be inserted into lease agreements.
Do any specific rules apply to commercial leases?
Generally the parties are free to contract as they wish.
Where statutory provisions are in force, there are sometimes restrictions on contracting out of those provisions. In the Federation some of the cantons have adopted the Law on the Lease of Business Buildings and Premises which further regulate conditions for leases of business buildings and premises.
All commercial leases should be in writing and must include the following details:
- names of the contracting parties;
- premises that are the subject of the lease;
- term of the lease (when it begins and under what conditions it can be renewed);
- amount of rent and service charges (if any);
- the purpose of the lease;
- the business activity that will be performed at the premises;
- provisions on use of joint premises in building (if they exist);
- the place and date of the contract's conclusion; and
- signatures of the contracting parties;
and should further include:
- whether the rent includes utilities, such as phone, electricity and water;
- whether the lessee has the right to sub-let or assign the lease and, if so, under what conditions;
- how the lease can be terminated and any associated conditions.
Do different regimes apply to leases of commercial premises depending on the use of the premises by the lessee (offices, warehousing, industrial, retail)?
In general the Law on Obligations and the Law on the Lease of Business Buildings and Premises apply.
Separate laws also regulate the lease of agricultural land, business premises and apartments, and where these laws do not regulate some issues then the Law on Obligations applies.
The general conditions for concluding a lease agreement are the same but specific conditions will depend on the business activities which will be carried out by the lessee.
B. DURATION AND TERMINATION OF LEASES
Is there a minimum or maximum obligatory term?
No, and leases can be granted for a limited or an unlimited period.
Does the lessee have a right to renew the lease upon expiry of the initial contractual period?
It is common practice in Bosnia and Herzegovina ("BiH") for a renewal provision to be included in a lease.
Do lessees enjoy security of tenure (i.e. the right to remain in occupation after their lease expires)?
There are no laws in BiH which give a lessee of commercial provision security of terms, but:
(a) pursuant to the Law on the Lease of Business Buildings and Premises, if the lease is for a fixed term then upon its expiration if the lessor does not oppose the continuation of the lease the lessee has a right to continue the occupancy. The lessor will be treated as not opposing the continuation of the lease if the lessor does not send a termination notice to the court within 15 days after the expiration of the fixed term (Article 33);
(b) pursuant to the Law on Transfer of Property, an owner who intends to sell a property is obliged to offer the property to the lessee where the lessee has been carrying on business there for at least five years (Article 32).
Do leases involve a lengthy procedure for the effective recovery of possession?
Leases invariably contain a provision allowing the lessor to terminate for non-payment of rent or breach of the covenant (for market rent leases, the insolvency of the lessee is usually also a ground for termination). In such case the lessee is obliged to give the lessor vacant possession.
If a lessee refuses to leave the premises, the lessor will need to obtain a court order to enable it to recover possession. The procedure can take several months.
Courts almost always allow a lessee to rectify a breach of covenant and retain the premises. For example, if there are arrears and the lessee pays them up, then the court will allow a lessee to stay unless there is a long history of rent arrears.
Can government/local authorities require the compulsory termination of a lease?
Yes, if the relevant municipality expropriates the premises, the lease will be terminated.
Is there a preferential right of acquisition?
The parties are free to contract as they wish and pre-emption rights for lessees to purchase the property if the owner wishes to sell are common in leases of business premises.
C. RENT AND COSTS
Are variable rental agreements common?
Yes, but an increase in the Consumer Price Index will not directly affect rental rates. Changes to the rent can be agreed between the contracting parties.
Specific provisions stipulating minimum or maximum amounts for rent can also be imposed by municipal bodies. These provisions will affect leases of properties in certain locations in particular municipalities (e.g. leases for state-owned business premises for specific activities).
Most common indexation
In Bosnia and Herzegovina there is no official indexation and it is not common for rent increases to be linked to any index.
Who usually pays the common expenses?
The lessor is obliged to pay for general maintenance and also the cost of insuring the building.
Each lessee pays a proportion of the service charge based on the size of the unit in relation to the total size of the leased building.
Certain expenses will be excluded from the service charge, such as the cost of initial development of the building.
Are there any other expenses connected with the lease?
No.
Which indirect taxes apply?
The standard rate of VAT is 17%.
However, the following services are VAT exempted: leases and sub-leases of residential premises, apartments and housing projects which were leased for a period of more than 60 days, as well as services of leasing agricultural and forest land registered in land books.
D. OBLIGATIONS OF LESSOR AND LESSEE
Who is responsible for the different works on the premises?
The lessor is responsible for the repair and maintenance of common areas and the structure of the building. Lessees are responsible for maintaining the interiors of their individual units.
Can the lessee alter or improve the premises?
Most leases limit the lessee's rights to alter or improve the premises. Structural alterations are frequently prohibited. Non-structural alterations normally require the lessor's prior consent.
On the termination of the lease the lessee is obliged to return the premises either in the condition agreed with the lessor, or in the same condition as the premises were originally.
On termination, the lessor may require any alterations to be removed. If the property was damaged or changed in status as a result of the alterations then the lessee will be required to pay compensation to the lessor.
What restrictions are there on the lessee's right to use the premises?
Leases normally stipulate the permitted use of the premises.
Activities which have not been agreed in the lease or which may cause damage to the property are prohibited.
Is there a right to transfer the lease?
The lessee can transfer the premises to a third party unless this is prohibited by the contract. The lease normally provides that any transfer will be subject to the consent of the lessor, although if a transfer is allowed under the terms of the lease then the lessor can only withhold consent on reasonable grounds.
Is there a right to sub-let the premises?
Under the Law on Obligations a lessee can sublet the premises to a third person unless this is prohibited by the contract.
The lease will normally state that any transfer requires the prior consent of the lessor. If a sublease is allowed under the terms of the contract then the lessor can only withhold consent on reasonable grounds.
What are the usual guarantees?
The parties are free to contract as they wish. In practice the lessee will normally provide guarantees in the form of an advance payment of rent.
E. PARTICULAR TYPES OF LEASE
Do office leases have any particular characteristics?
There are no specific provisions relating to office leases since these are considered to be business leases.
In general, business leases are regulated by the Law on Obligations and by the Law on the Lease of Business Buildings and Premises.
Municipalities also have additional regulations setting out the conditions for the lease of business premises.
A lease of business premises for an indefinite period of time cannot be terminated until at least one year after the contract was concluded.
A lease of business premises must be cancelled via the appropriate court.
Do retail leases have any particular characteristics?
The provisions of the Law on Obligations and the Law on the Lease of Business Buildings and Premises normally apply.
Retail leases are also subject to additional municipal regulations.
Retail lessees may also be subject to obligations which exist for the benefit of the shopping centre as a whole, such as an obligation to open during specified hours and to contribute towards the marketing of the centre.
Do hotel leases have any particular characteristics?
The regulations relating to business leases also apply to hotels. These are additional municipal regulations relating to the location, size and other features of hotels.
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