Land lease agreement: conclusion, amendment, termination

If you have any questions please call us by phone 050 052 44 04 or email advokat@novakovska.com.

Content:

1. The concept of a land lease agreement

2. Termination of the land lease agreement

3. Typical land lease agreement

4. Lawyer for land issues

1. The concept of a land lease agreement

A land lease agreement is a type of a property lease agreement. A property lease is a type of obligation. According to part 1 of Article 509 of the Civil Code of Ukraine dated January 16, 2003 No. 365-IV (hereinafter - the Civil Code) “an obligation is a legal relationship in which one party (the debtor) is obliged to perform a certain action in favor of the other party (the creditor) (transfer property, perform work , provide a service, pay money, etc.) or refrain from performing a certain action (negative obligation), and the creditor has the right to demand that the debtor fulfill his obligation ”. Unlike rights in rem, rights of obligation give the authorized person only the right to the actions of the other party, and not the right to a thing (land plot).

The above is extremely important to remember, because often a lease is confused with an agreement on the establishment of property rights (emphyteusis, superficies, personal easements). The difference between a lease agreement for a land plot and an agreement on the establishment of a speech right to a land plot is that in the case of a lease agreement for a land plot, the lessor must create conditions for the proper use of the land plot. In the event of a transaction on the establishment of a speech right, the owner is not obliged to create such conditions, but only must transfer the thing (land plot) for use.

This circumstance should be taken into account when forming the terms of the land lease agreement so that this agreement was not recognized in the future as a sham transaction, which hides the agreement on the establishment of speech rights. The main legal consequence of such recognition is that, by virtue of part 2 of Article 235 of the Civil Code, if it is established that the transaction was made by the parties to conceal another transaction that they actually made, the relations of the parties are governed by the rules of the transaction that the parties actually made. In other words, if it is established that the parties have made a transaction on the establishment of speech law, then the court will have every reason to apply to legal relations the norms governing speech legal relations.

Thus, the consequences of concluding a lease agreement and an agreement on the establishment of speech law may differ significantly. For example, if it became impossible to use the land plot due to force majeure, then in this case the tenant is automatically released from the obligation to pay rent “... for all the time during which the property could not be used by him due to circumstances for which he does not answer ”(part 6 of article 762 of the Civil Code). However, the emfiteuta is not exempt from the payment for the use of the land plot in the above situation.

2. Termination of the land lease agreement

By virtue of the general rule "Pacta sunt servanda" (lat.: Contracts must be fulfilled) (article 629 of the Civil Code), the concluded land lease agreement must be fulfilled and the parties cannot simply stop fulfilling it, because the other party, planning its activities, counts on the fact that its counterparty will fulfill the land lease agreement. Despite the above, sometimes there is a need to terminate the land lease agreement. The legislation provides for the grounds for such termination and a broken land lease agreement can only be in the case when there are such grounds.

The grounds for terminating the contract are:

• by mutual agreement of the parties;
• if unilateral termination is provided for by the land lease agreement itself or by law;
• in the event of a significant violation of the terms of the land lease agreement;
• systematic failure to pay rent;
• due to a significant change in circumstances;
• in case of failure by the parties to fulfill the obligations provided for in Articles 24 and 25 of the Law of Ukraine "On Land Lease" and the terms of the contract, in the event
• accidental destruction or damage to the leased object, which significantly interferes with the use of the land plot provided for by the contract, as well as on the grounds determined by the Land Code of Ukraine and other laws of Ukraine.
• other grounds.

Let's dwell on some of these reasons.

The legislation of Ukraine, allowing the parties to provide for the right to unilateral termination of the contract, contains provisions limiting this right of the parties. An example of such restrictions can be the provision of part 3 of article 19 of the Law of Ukraine "On land lease" dated 06.10.1998 No. 161-XIV, according to which, when leasing agricultural land plots for commercial agricultural production, farming, personal peasant farming, the validity period a land lease agreement is determined by agreement of the parties, but cannot be less than 7 years. In judicial practice, the question arises as to whether a party has the right to demand unilateral termination of the lease agreement before the expiration of 7 years. Such a case was the subject of consideration of the Supreme Court, in the decision of 04/14/2021 in case No. 659/569/19, expressed the opinion that if the parties provided for the possibility of terminating the contract unilaterally, then they can do this regardless of whether the time limit has expired, provided for in part 3 of article 19 of the Law of Ukraine "On land lease". Unfortunately, the Supreme Court did not properly argue its position on this issue. The marriage of proper argumentation in the decision of the Supreme Court gives grounds for other courts to be guided by this provision when considering cases, because part 6 of Article 13 of the Law of Ukraine "On Judicial System" dated 02.06.2016 No. 1402-VIII obliges the courts to take into account the conclusions regarding the application of the rule of law set forth in the decisions of the Supreme Court. Ships.

Since the courts must only take into account the conclusions of the Supreme Court, it is important to understand the goal that the legislator could set for himself, establishing the rule of Part 3 of Article 19 of the Law of Ukraine "On Land Lease". In our opinion, the above norm was intended to prevent abuse on the part of rural and settlement councils, which provided land plots for rent for too short periods. The short lease term significantly complicated the long-term investments of farmers, without which it is difficult to farm. However, the introduction of the rule that the term of a land lease agreement concluded between two private individuals cannot be less than 7 years seems to be in no way justified by the state's interference in private relations.

The foregoing gives grounds to agree with the conclusion of the Supreme Court. The provisions of Part 3 of Article 19 of the Law of Ukraine "On Land Lease" do not apply to lease agreements for land plots concluded between individuals. At the same time, local governments and executive authorities must lease agricultural land plots for commercial agricultural production, farming, personal peasant farming for a period not less than 7 years.

A common ground for early termination of a land lease agreement is a systematic failure to pay rent.

Systematic non-payment in judicial practice means not paying rent 2 or more times (see, for example, the decision of the Supreme Court of April 28, 2021, case No. 341/245/19).

In judicial practice, there are cases when the tenant has paid the systematically unpaid rent. In this situation, the question arises whether the payment of the rent excludes the possibility of terminating the lease agreement for the land plot on the basis of systematic non-payment of the rent? In this situation, the Supreme Court is of the opinion that the termination of the land lease agreement is a kind of sanction designed to induce the tenant to pay the rent on time, therefore, further fulfillment of the obligation to pay the rent is not grounds for refusing to terminate the land lease agreement. This position was expressed by the Supreme Court in its ruling of 19.04.2021 in case No. 531/562/20; in the decision of 06.03.2019 in case No. 183/262/17.

In our opinion, this position of the Supreme Court is justified, because termination of the contract is a means that allows a bona fide counterparty to free themselves from contractual relations with a counterparty who systematically violates their obligations under the contract. The systematic failure to fulfill its obligations by one of the counterparties gives reason to consider it unreliable, in this regard, it seems quite logical to provide an opportunity to get rid of contractual relations with this counterparty. Further payment of the rent does not deny the unreliability of the counterparty, which, moreover, has not systematically fulfilled its contractual obligations, in this regard, there is no reason not to provide a bona fide counterparty with the opportunity to get rid of the unfair one.

In practice, they often equate the termination of the contract and the recognition of the contract as invalid. The reason for such conclusions is given by a similar legal result of termination of the contract and the recognition of the contract as invalid - the termination of the contract. However, these two phenomena are significantly different. Among the many signs that distinguish the termination of the contract and the recognition of the contract as invalid, there are different legal consequences for the rights and freedoms of the parties. As a result of the termination of the contract, the latter ceases to generate the rights and obligations of the parties. In this case, the performance under the contract, which was completed before the termination of the contract, is a proper performance. If the transaction is declared invalid, the transaction did not give rise to rights and obligations from the moment of its conclusion and execution, to provide by the parties under this agreement would mean the implementation of the improper one. The consequence of the invalidation of the transaction is the obligation of the parties to return to each other what was received under this contract or to reimburse its value, if it is impossible to return what was performed under the contract (bilateral restitution).

The distinction between recognition of a land lease agreement as invalid and its termination is often of great practical importance. For example, in case No. 688/3065/19, which was the subject of consideration by the Supreme Court, the plaintiff applied to the court with a demand to declare the land lease agreements invalid. The reason for the claim was the provision by the village council of the lease of land plots, which are on the right of lease from the plaintiff, to another business entity. After the plaintiff filed a claim with the court, the defendant entered into additional agreements to lease agreements for land plots on the termination of these agreements. In this regard, the plaintiff dropped the claim. The court ruled to close the proceedings.

The distinction between recognition of a land lease agreement as invalid and its termination is often of great practical importance. For example, in case No. 688/3065/19, which was the subject of consideration by the Supreme Court, the plaintiff applied to the court with a demand to declare the land lease agreements invalid. The reason for the claim was the provision by the village council of the lease of land plots, which are on the right of lease from the plaintiff, to another business entity. After the plaintiff filed a claim with the court, the defendant entered into additional agreements to lease agreements for land plots on the termination of these agreements. In this regard, the plaintiff dropped the claim. The court ruled to close the proceedings.

3. Typical land lease agreement

Typically, typical contracts are approved in order to strengthen control over the conclusion of contracts in a particular area and oblige the parties to enshrine certain conditions in the contract. Such an instrument as a typical contract does not correspond to the principles of a market economy, and therefore the approval of a typical contract should take place only in cases where it is impossible to solve a social problem with the help of market mechanisms. Unfortunately, there are no such grounds in the case of a land lease agreement, however, a typical land lease agreement was approved by the Resolution of the Cabinet of Ministers of Ukraine No. 220 dated 03.03.2004.

The legal significance of typical contracts is that the parties cannot deviate from the content of a typical contract, but have the right to specify its terms. A typical agreement, approved by the above-mentioned resolution of the Cabinet of Ministers of Ukraine, contains some of the actual terms of the lease agreement. In the overwhelming majority, it establishes only the details of the land lease agreement.

The practical significance of a typical land lease agreement approved by a resolution of the Cabinet of Ministers of Ukraine is that the conditions provided for in this agreement must necessarily be in the land lease agreement and be formulated as provided for in a typical land lease agreement. Violation of these requirements may lead to the fact that the court may invalidate such an agreement on the basis that the parties did not comply with the requirements of part 1 of Article 203 of the Civil Code (the content of the transaction cannot contradict this Code, other acts of civil law, as well as the interests of the state and society, his moral principles).

4. Lawyer for land issues

If you need legal assistance from a specialist lawyer in the field of land law, our association is ready to provide you with qualified legal assistance. Lawyers of JSC Novakovskaya & Partners are experts in land issues.

You can contact us to provide these types of legal assistance:

• analysis of the land lease agreement;
• termination of the land lease agreement;
• protection of your interests in the event that your counterparty under the land lease agreement systematically fails to fulfill its obligations;
• the conditions in which you entered into a lease agreement for a land plot have changed significantly, and the lease agreement for a land plot becomes excessively burdensome for you.

We will ensure proper representation of your interests in the courts of Ukraine.

Therefore, if you have any questions please call us by phone 050 052 44 04 or email advokat@novakovska.com.