Lease agreements of the state property, which accumulate rent arrears for more than 3 months, will be terminated unilaterally without recourse to the court

The State Property Fund of Ukraine has revised its approaches to cooperation with tenants of the state property whose rent arrears reach three or more consecutive months under agreements concluded before the entry into force of the new standard lease agreements (approved by the Cabinet of Ministers on August 12, 2020).

The Fund has made this decision in the background of the fact that during 2020 the number of lease agreements of the state real estate with the recorded debt for 3 or more months has increased by over 500 agreements, while the total debt increased by UAH 538.1 million.

The standard lease agreement of the state property (look at the link http://bit.ly/3lvjRq8), which was in use until September 2020, did not contain a clear rule that would give the landlord the right to terminate such a contract unilaterally in extra judicial way in the case of a significant debt of the tenant. However, the absence of such a rule in the standard contract or in lease agreements concluded on its basis does not mean that the landlord is deprived of this right, if it is expressly provided by law. In accordance with the provisions of Article 782 of the Civil Code of Ukraine, the landlord has the right to withdraw from the lease agreement in the case of rent arrears for 3 consecutive months.

Despite the existence of such a rule in the Civil Code, there is a practice of landlords choosing a long way to go to court with lawsuits against unscrupulous tenants to terminate contracts. The consideration of such cases by courts usually lasts at least a year. During this time, tenants continue to use the property leased from the state, as well as not paying rent, only increasing the debt. Every similar case is also a forced expense of material and human resources of the State Property Fund”, - Leonid Antonenko, First Deputy Chairman of the State Property Fund of Ukraine said.

Therefore, in order to protect the interests of the state and prevent the accumulation of rent arrears for state assets in the case of arrears of rent for 3 months in a row, the State Property Fund will no longer go to court but immediately send debtors notice of unilateral termination of the lease. Information on agreements terminated in this way will be entered into the public Register of decisions and other documents on the basis of which the lease is terminated.

For the purposes of official reporting, these agreements will be considered terminated from the moment of notification to the tenant on withdrawal from the agreement and entering information on it in the register in accordance with the Instruction for measures related to termination of lease contracts and returning of real estate / other separate individual property belonging to the state property from lease, approved by the order of the State Property Fund of Ukraine, dated 22.12.2020 № 2049.

After entering the information in the register, the former tenants will be charged a penalty (instead of rent arrears) if they do not return the property from the lease on time.

Information on the largest debtors for the lease of state property is disclosed by the Fund on its own information resources. You can read their list at the link - https://bit.ly/3vAa3zP.

The State Property Fund also recalls that the new standard agreement of state property lease already contains a provision that gives the landlord the right to automatically unilaterally terminate the lease agreement if the tenant does not pay for the lease for 3 months or more. Therefore, in the case of arrears under agreements that have already been concluded under the new legislation, they will also be terminated by the regional branches of the Fund unilaterally and will be considered terminated from the moment the landlord sends a notice to that effect.