Law. Human. Environment

Protection of the rights of commercial property lessees amidst economic instability

Yaroslav Kukoba
Download article
Abstract

The purpose of this study was to identify the problematic aspects of protecting the rights of commercial real estate lessees in the context of crisis phenomena that lead to economic instability. The study confirmed that the situation in the field of commercial real estate lease in Ukraine has deteriorated substantially due to the effects of such phenomena as the pandemic and the war, which led to economic instability. The review of the Ukrainian legislative framework revealed that, since the beginning of the pandemic, adequate mechanisms have been introduced to protect lessees’ rights (deferred lease payments, eviction moratoriums, etc.). However, an analysis of Ukrainian judicial practice showed that these mechanisms do not always adequately protect lessees’ rights in practice. The analysis of international practices in protecting lessees’ rights during the pandemic identified a series of effective protection mechanisms that have been used in individual countries. These mechanisms can be adapted to Ukrainian realities to improve the effectiveness of lessee protection. At the same time, the study noted that in virtually any legislation, the lessee must prove that the deterioration of its financial situation was caused by extraordinary circumstances, which will help to maintain a balance in the rights and obligations of lessees and lessors based on the principles of reasonableness and fairness. Accordingly, it is essential to address the development of effective mechanisms for proving this fact on the part of lessees, with adequate regulation in the legislative framework

Keywords

contractual relations; deferred payment; moratorium on eviction; early termination of the contract; force majeure; extraordinary circumstances

Suggested citation
Kukoba, Ya. (2024). Protection of the rights of commercial property lessees amidst economic instability. Law. Human. Environment, 15(4), 31-46. https://doi.org/10.31548/law/4.2024.31
References

[1] Act to Mitigate the Consequences of the COVID-19 Pandemic in Civil, Insolvency and Criminal Procedure Law of Germany. (2020, March). Retrieved from https://dip.bundestag.de/vorgang/gesetz-zur-abmilderung-der-folgen-der-covid-19-pandemie-im-zivil-insolvenz/260576.

[2] Aleynik, N. (2023). Active adaptation: How the commercial property market is transforming. Retrieved from https://banker.ua/uk/projects/yak-transformuyetsya-rinok-komercijnoi-neruxomosti/.

[3] Allan, R., Liusman, E., Lu, T., & Tsang, D. (2021). The COVID-19 pandemic and commercial property rent dynamics. Journal of Risk and Financial Management, 14(8), article number 60. doi: 10.3390/jrfm14080360.

[4] Będowska-Sójka, B., Demir, E., & Zaremba, A. (2022). Hedging geopolitical risks with different asset classes: A focus on the Russian invasion of Ukraine. Finance Research Letters, 50, article number 103192. doi: 10.1016/j.frl.2022.103192.

[5] Ciuriak, D. (2022). The economic consequences of Russia’s war on Ukraine. Verbatim, CD Howe Institute, 11. doi: 10.2139/ssrn.4067766.

[6] Civil Code of Austria. (2017, November). Retrieved from https://natlex.ilo.org/dyn/natlex2/r/natlex/fe/details?p3_isn=42818.

[7] Civil Code of Italy. (1942, March). Retrieved from https://www.brocardi.it/codice-civile/.

[8] Civil Code of Netherlands. (1992, January). Retrieved from https://wetten.overheid.nl/BWBR0005290/2024-07-01.

[9] Civil Code of Ukraine. (2003, January). Retrieved from https://zakon.rada.gov.ua/laws/show/435-15#Text.

[10] Commercial Code of Ukraine. (2003, January). Retrieved from https://zakon.rada.gov.ua/laws/show/436-15#Text.

[11] Commercial property rental market starts to revive. (2022). Retrieved from https://minfin.com. ua/ua/2022/07/07/88390977/.

[12] Decree-Law of Italy No. 18 “Measures to Strengthen the National Health Service and Provide Economic Support for Families, Workers and Businesses Related to the Epidemiological Emergency from COVID-19”. (2020, March). Retrieved from https://www.gazzettaufficiale.it/eli/ id/2020/03/17/20G00034/s.

[13] Decree-Law of Italy No. 34 “On Urgent Measures Regarding Health, Support for Employment, and the Economy, as well as Social Policies, Related to the COVID-19 Epidemiological Emergency”. (2020, May). Retrieved from https://www.wipo.int/wipolex/en/legislation/details/19854.

[14] Expert opinion. Commercial property lease: Pitfalls in contracts. (2024). Retrieved from http:// surl.li/oktwko.

[15] Hanechko, I. (2023). Real estate development: European trends. Foreign Trade: Economics, Finance, Law, 130(5), 97-112. doi: 10.31617/3.2023(130)07.

[16] Hart, D.K. (2021). If past is prologue, then the future is bleak: Contracts, COVID-19, and the changed circumstances doctrines. Texas A&M Law Review, 9, article number 347. doi: 10.2139/ ssrn.3785621.

[17] Izzeldin, M., Muradoğlu, Y.G., Pappas, V., Petropoulou, A., & Sivaprasad, S. (2023). The impact of the Russian-Ukrainian war on global financial markets. International Review of Financial Analysis, 87, article number 102598. doi: 10.1016/j.irfa.2023.102598.

[18] Januarita, R., & Sumiyati, Y. (2021). Legal risk management: Can the COVID-19 pandemic be included as a force majeure clause in a contract? International Journal of Law and Management, 63(2), 219-238. doi: 10.1108/IJLMA-05-2020-0140.

[19] Law of France No. 2020-290 “On Emergency Measures to Deal with the Covid-19 Epidemic”. (2020, March). Retrieved from https://www.legifrance.gouv.fr/loda/id/JORFTEXT000041746313.

[20] Law of Portugal No. 1-A/2020 “Exceptional and Temporary Measures to Respond to the Epidemiological Situation Caused by the SARS-CoV-2 Coronavirus and COVID-19 Disease”. (2020, March). Retrieved from https://dre.pt/application/conteudo/130473088.

[21] Law of Ukraine No. 1071-IX “On Social Support for Insured Persons and Business Entities for the Period of Restrictive Anti-epidemic Measures Introduced to Prevent the Spread of Acute Respiratory Disease COVID-19 Caused by the SARS-CoV-2 Coronavirus in Ukraine”. (2020, December). Retrieved from https://zakon.rada.gov.ua/laws/show/1071-20#Text.

[22] Law of Ukraine No. 530-IX “On Amendments to Certain Legislative Acts of Ukraine Aimed at Preventing the Occurrence and Spread of Coronavirus Disease (COVID-19)”. (2020, March). Retrieved from https://zakon.rada.gov.ua/laws/show/530-20#Text.

[23] Law of Ukraine No. 540-IX “On Amendments to Certain Legislative Acts of Ukraine Aimed at Providing Additional Social and Economic Guarantees in Connection with the Spread of Coronavirus Disease (COVID-19)”. (2020, March). Retrieved from https://zakon.rada.gov.ua/laws/show/540-20#Text.

[24] Mak, V. (2022). Covid-19 and long-term contracts. European Review of Private Law, 30(3), 419-422. doi: 10.54648/erpl2022021.

[25] Manville, M., Monkkonen, P., Lens, M.C., & Green, R. (2023). Renter nonpayment and lessor response: Evidence from COVID-19. Housing Policy Debate, 33(6), 1333-1367. doi: 10.1080/10511482.2022.2085761.

[26] Martin, C., Sisson, A., & Thompson, S. (2023). Reluctant regulators? Rent regulation in Australia during the COVID-19 pandemic. International Journal of Housing Policy, 23(4), 783-803. doi: 10.1080/19491247.2021.1983246.

[27] Order of Court of Pisa. (2020, June). Retrieved from https://iusletter.com/wp-content/uploads/Trib.-di-Pisa-30.06.2020.pdf.

[28] Ordinance of Sweden No. 2020:237 “On State Aid When Certain Lessees of Premises Have Received a Discount on Rent”. (2020, April). Retrieved from http://surl.li/wzstwm.

[29] Ordinance of the Federal Minister of Social Affairs, Health, Care and Consumer Protection of Germany “On the Relaxation of the Measures Taken to Combat the Spread of COVID-19”. (2020, April). Retrieved from http://surl.li/vblgpl.

[30] Ratusznik, P. (2024). The Amount of Rent Under the CoVid-19 Pandemic. Between Poland and Germany. In Polish entrepreneurial law in the era of the COVID-19 pandemic: Problems and challenges (pp. 95-109). Cham: Springer International Publishing. doi: 10.1007/978-3-031-57480-1_7.

[31] Resolution of Grand Chamber of the Supreme Court in Case No. 910/7495/16. (2018, May). Retrieved from http://surl.li/zwtsjx.

[32] Resolution of Supreme Commercial Court of Ukraine in Case No. 922/2531/15. (2016, March). Retrieved from http://surl.li/udvzrx.

[33] Resolution of the Supreme Court Composed of the Panel of Judges of the Commercial Court of Cassation in Case No. 911/3067/20. (2021, October). Retrieved from http://surl.li/hzpfda.

[34] Resolution of the Supreme Court Composed of the Panel of Judges of the Commercial Court of Cassation in Case No. 910/7679/22. (2023, September). Retrieved from http://surl.li/bdtbht.

[35] Resolution of the Supreme Court Composed of the Panel of Judges of the Commercial Court of Cassation in Case No. 914/675/22. (2023, April). Retrieved from http://surl.li/bpekmy.

[36] Richardson, L. (2021). The impact of COVID-19 on service charges in commercial properties.Journal of Building Survey, Appraisal & Valuation, 10(1), 62-71. doi: 10.69554/TAWB2572.

[37] Ricotta, P.J., & Walsh, K.R. (2020). Mothballing motions from retail debtors to avoid lease payments due to COVID-19 pandemic. Retrieved from http://surl.li/jumfjv.

[38] Royal Decree of Spain No. 463/2020 “A state of alarm for the management of the health crisis situation caused by COVID-19”. (2020, March). Retrieved from http://surl.li/jmiwup.

[39] Schindler, S., & Zale, K. (2020). How the law fails lessees (and not just during a pandemic). UCLA Law Review Discourse, 68, 146-158.

[40] Support agreement for lessees and lessors of retail space: Postponement does not lead to cancellation, or does it? (2020). Retrieved from http://surl.li/xmstfx.

[41] Tax Code of Ukraine. (2010, December). Retrieved from https://zakon.rada.gov.ua/laws/show/2755-17#Text.

[42] Temporary Emergency Bridging Measure for Employment (NOW). (2020). Retrieved from http://surl.li/mvucxq.

[43] The impact of COVID-19 on litigation across Europe. (2020). Retrieved from http://surl.li/kwvkww.

[44] The impact of COVID-19 on litigation across Europe. (2021). Retrieved from http://surl.li/qnzdjq.

[45] Ti, E.S. (2022). Of lessors and lessees: Property in the midst of a pandemic. Statute Law Review, 43(3), 284-303. doi: 10.1093/slr/hmab018.

[46] Viljoen, S.M. (2020). The impact of the COVID-19 regulations on rent obligations. De Jure Law Journal, 53(1), 353-368.  doi: 10.17159/2225-7160/2020/v53a22.

[47] Wolf, M.A. (2020). COVID-19 Pandemic and real property law: An early assessment of relief measures for lessees and residential mortgagors. Powell on Real Property. doi: 10.2139/ ssrn.3623281.

[48] Zachariasiewicz, M. (2023). The lease of commercial premises in time of COVID-19: The decision of the german bundesgerichtshof of 12 January 2022 from a Polish perspective. European Review of Private Law, 31(2/3), 627-642. doi: 10.54648/erpl2023015.