The military aggression of Russian Federation against Ukraine has negatively affected the ability of lessees to pay rent.
However, let’s find out whether the imposition of martial law and the occurrence of force majeure release the lessee from the obligation to pay the rent.
On February 24, 2022, under a Presidential Order, martial law was imposed on the entire territory of Ukraine, being for now extended until April 24, 2022, inclusively.
In a letter dated February 28, 2022, the Chamber of Commerce and Industry of Ukraine recognized the military aggression of the Russian Federation against Ukraine, which led to the imposition of martial law, as force majeure. In this regard, the CCI of Ukraine confirmed that these circumstances from February 24, 2022, until their official termination are extraordinary, unavoidable, and objective circumstances for business entities and / or individuals for the purposes of contracts.
Legal force of this letter applies, inter alia, to all lease agreements concluded between legal entities and / or individuals, under which the lessee shall pay rent.
However, it should be noted that the imposition of martial law and the occurrence of force majeure do not qualify as unconditional grounds for releasing the lessee from the obligation to pay rent.
As a general rule, the occurrence of force majeure releases a legal entity / individual from liability for breach of a contract (Article 617 of the Civil Code of Ukraine).
In other words, the lessee will still be obliged to pay the rent in the future, but if he violates the deadline for payment due to force majeure, he cannot be held liable as prescribed by the provisions of the agreement or law. Thus, the following cannot be applied to the lessee:
- any penalties, including fines;
- operational and economic sanctions, in particular, in the form of unilateral withdrawal of the lessor from the contract, or restriction of access to the use of leased property;
- recovery of damages;
- other measures and consequences that may be determined by the lease agreement.
In addition, the lease agreement itself may explicitly states not only, that the occurrence of force majeure releases the parties from liability, but also that the fulfillment of obligations under the agreement (e.g. payment of rent) is postponed for the period of force majeure.
Another situation is when, due to force majeure, the lessee is unable to use the leased property, for example due to restrictions or prohibitions imposed during martial law, or when the use of the leased property was effectively impossible.
Under the law, the lessee is released from rent payment for the entire period during which the property could not be used by him due to circumstances for which he is not responsible (Part 6 of Article 762 of the Civil Code of Ukraine). Similar or additional provisions may also be established by the lease agreement.
However, in this case, the lessee should remember that in the event of a dispute with the lessor regarding the possibility to use the leased property during martial law, the lessee shall prove that he did not have such an opportunity.
In any case, whenever possible, it is important to communicate properly with the lessor about postponing the rent payment, or temporary inability to use the property. After all, although the need to send the relevant notifications can be established by the contract, usually both parties are interested in maintaining a friendly contractual relationship in the future.