Ukraine: COVID-19 - Lease Agreements - Actions for tenants to consider

In brief

The COVID-19 outbreak is affecting the lease relationship and forcing landlords to find ways to protect their interests. 

The Verkhovna Rada of Ukraine continues to adopt legislation aimed at liberalizing the current quarantine rules. Thus, on April 13, 2020, the Verkhovna Rada of Ukraine adopted the Law on Amendments to the Law of Ukraine "On the State Budget of Ukraine for 2020", which, if signed by the President of Ukraine, will provide an opportunity to reduce the rent at the request of a tenant who has no opportunity use the premises in their business activities due to the quarantine restrictions imposed, and will set rent limits for such situations.

To reduce the negative impact of the pandemic and its associated constraints and to ensure that your lease arrangements are tailored to the changing circumstances, consider the following steps, depending on your business needs. We are ready to assist you in this. 


Contents

Lease negotiation stage

  • Start dates: Consider tying the start date of individual events or activities to the end of quarantine.
  • Messaging and billing: To speed up the exchange of information and the payment of bills, make sure that the draft pre-lease / lease agreement allows you to bill and send messages electronically
  • Formulation of force majeure provisions: Pay particular attention to force majeure provisions: carefully check for force majeure epidemics, pandemics and / or related restrictions

Preliminary lease agreement

  • Performing finishing work: Analyze the timing of finishing work with particular care: changes may be necessary to take into account the effects of quarantine and avoid penalties and termination of the contract. Remember to discuss the schedule with contractors.
  • Termination of Preliminary Lease Agreement: Review the termination of the lease agreement and see if the circumstances of the COVID-19 situation can affect the termination of the lease and evaluate the expiration of the termination of the lease. In doing so, it is also important to analyze whether it would be in the interests of both parties to maintain the relationship and agree the changes to the provisions of the previous lease.

Lease agreement

  • Changing Terms of Payment: If the tenant requires a reduction in rent, consider applying options that will suit the interests of both parties. For example, it is possible to change the payment schedule for rent; provide for the payment of the rent after the end of the relevant period and not in advance; or arrange for a reduction in the rent, providing that it is paid several months in advance. When considering rent reduction consider the level of negative impact of the COVID-19 situation on the tenant's business.
  • Keeping Public Shops: Keep up-to-date with updates on public space cleaning guidelines and other workplace safety and health requirements.
  • Reimbursement of additional maintenance and maintenance costs: Review the relevant provisions of the lease agreement to determine whether the reimbursement of additional services, such as additional cleaning and garbage collection services, is at the expense of tenants.
  • Penalties: Analyze whether the circumstances surrounding the COVID-19 situation may be the basis for penalties, and consider the mechanisms available to mitigate or eliminate this risk.
  • Failure to fulfill obligations due to force majeure: Analyze force majeure provisions to determine due process and deadlines for sending communications.
  • Termination of the lease: Failure to perform the contract due to circumstances beyond the control of the party does not automatically terminate the lease. However, the party may initiate the procedure of termination of the lease due to a significant change in circumstances.
  • Security payment: Analyze the possibility of covering rent unpaid by a security payment.
  • Insurance: Check insurance contracts / policies and see if the "insurance risks" of the pandemic and its associated limitations include.
  • Statements and warranties: Check the list of warranties and warranties and identify those that become or may be false or inaccurate, creating a risk of adverse effects.

Additional information

The above comments are not legal or otherwise advised and should not be considered as a substitute for advice in a particular case.


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