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Country - Ukraine
Commercial Leases
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A. SOURCES OF LEASE LAW
Applicable legislation
Leases are generally governed by the Civil Code of Ukraine (CC), the Commercial Code of Ukraine (ComC), the Law of Ukraine on Lease of State and Communal Property, and the Law of Ukraine on Land Lease.
Do any specific rules apply to commercial leases?
No.
Do different regimes apply to leases of commercial premises depending on the use of the premises by the lessee (offices, warehousing, industrial, retail)?
No.
B. DURATION AND TERMINATION OF LEASES
Is there a minimum or maximum obligatory term?
The general rule is that the parties are entitled to agree any term of the lease provided it does not exceed 50 years.
Does the lessee have a right to renew the lease upon expiry of the initial contractual period?
Under the CC and the ComC, lessees enjoy a pre-emptive right to renew part of the lease. This right, however, is only available if the owner of the property is willing to renew the lease and when the lessee is prepared to renew on terms which are no less favourable to those that may have been offered to the owner by any third party.
Do lessees enjoy security of tenure (i.e. the right to remain in occupation after their lease expires)?
See above.
Do leases involve a lengthy procedure for the effective recovery of possession?
In the event of substantial breaches of covenant the lessor can apply to the court for the lease to be terminated.
This procedure can last from several months to a year or even more. The court will sometimes decide that the breach of covenants is not sufficient to warrant termination of the lease and the court will impose an alternative sanction.
Can government/local authorities require the compulsory termination of a lease?
Generally not. However, in particular cases, e.g. when the leased property is a public asset (perhaps a historical building) or its use is against the public interest, the lease may be terminated by the decision of the local authority. In particular cases a government decision and approval of Parliament is required.
Is there a preferential right of acquisition?
Yes, where the lessee has complied with his obligations under the lease and the owner wishes to sell the property, the lessee has the right to acquire it subject to offering terms as favourable as may have been offered by any third party.
C. RENT AND COSTS
Are variable rental agreements common?
Ukrainian legislation provides for different ways of calculating rent: as a fixed sum; as rent in kind; as rent paid by services rendered to the lessor etc or a combination of various forms. The law makes some provision for periodic
review of the rental amount, and the parties may set out other such provisions in their agreement. For example, the rent for a lease of communal or stateowned land should be reviewed once every three years.
Most common indexation
The indexation depends on the form of rental payment. If there is a fixed sum, the indexation can be linked to changes in market price for such type of property.
Another common way of indexation is to link price changes with the fluctuations of a published index, such as the Ukrainian Consumer Price Index.
Who usually pays the common expenses?
Common expenses (i.e. maintenance costs) and utilities are usually paid by the lessor and reimbursed by the lessee pro rata to the size of the area leased.
Are there any other expenses connected with the lease?
No, although where a lease is notarised a relatively small amount of state duty is payable.
Which indirect taxes are applicable?
VAT at the current rate of 20% (with certain exemptions).
D. OBLIGATIONS OF LESSSOR AND LESSEE
Who is responsible for the different works on the premises?
The lessor is obliged to perform capital repairs to the premises, while the lessee must perform what we know as current repairs to the premises.
Can the lessee alter or improve the premises?
Ukrainian law divides improvements into separable and inseparable. If improvements are separable then the lessee is entitled to remove them. If the lessee made the improvements after obtaining the consent of the lessor, they are entitled to receive compensation for their expense, or to offset it against rental payments. However, if the improvements were made without the prior consent of the lessor, and cannot be removed without damaging the property, the lessee is not entitled to receive compensation.
What restrictions are there on the lessee's right to use the premises?
Premises must be used in accordance with statutory safety regulations, their designated use and the lease agreement.
Is there a right to transfer the lease?
Lessees may assign their rights and obligations under the lease agreement to a third party, subject to the prior consent of the lessor.
Is there a right to sub-let the premises?
The lessee may sub-let the premises with the consent of the lessor, save where this is prohibited by the lease or in cases where it is prohibited by Ukrainian legislation. For example, Ukrainian legislation prohibits sub-letting in the case of integral property complexes.
What are the usual guarantees?
The most common types of guarantee are:
- bank guarantees;
- advanced rental payments;
- insurance deposits.
E. PARTICULAR TYPES OF LEASE
Do office leases have any particular characteristics?
Ukrainian law does contain any special requirements for leases of this types.
Do retail leases have any particular characteristics?
Ukrainian law does contain any special requirements for leases of this types.
Do hotel leases have any particular characteristics?
Ukrainian law does contain any special requirements for leases of this types.
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