According to the lease agreement, the lessor (lessor) transfers or undertakes to transfer the property to the lessee (lessee) for possession and use for a certain period of time. Lease agreements are prevalent both in economic legal relations among legal entities and in civil ones, where the subjects are also natural persons. This is due to the fact that the object of lease agreements can be any property that is not excluded from civil turnover: from small household items to complete property complexes. At the same time, it is not uncommon for the counterparty under the lease agreement to stop fulfilling its obligations properly: for example, the tenant pays the usage fee late, or the lessor does not provide the premises with utilities, the mandatory availability of which is provided for in the lease agreement. The impossibility of reaching a resolution of the dispute through negotiations leads to the fact that the managed party is looking for a way to resolve the situation through termination of the contract, including one-sided. However, as it turns out, it is not always possible to implement it outside the court order or in a short time. We will talk about this below.
Why is it impossible to terminate the contract unilaterally out of court in a short period of time?
The current legislation (Articles 651 of the Civil Code of Ukraine and 188 of the Economic Code of Ukraine) stipulates the rule: “Termination of contracts is carried out by agreement of the parties, unilateral termination of contracts is not allowed unless otherwise provided by law or contract.”Thus, according to the general rule, in order to terminate the contract, it is necessary to reach a mutual agreement between the parties and properly formalize such agreement (conclude an additional agreement) or, if it is not possible to reach an agreement, apply to the court with a claim for termination of the contract. Exceptions to this rule are established by contract or law.
Regarding the termination of the employment (lease) contract, the norms of the Civil Code of Ukraine and the Economic Code of Ukraine come into conflict. Thus, Article 782 of the Civil Code of Ukraine provides that the lessor has the right to refuse the rental agreement and demand the return of the thing if the lessee does not pay for the use of the thing for three consecutive months. Instead, Article 291 of the Economic Code of Ukraine categorically states: that unilateral refusal of the lease agreement is not allowed. Taking into account the fact that in relation to business contracts, the specified norm of business legislation is special, a lease agreement by the parties in which there are business entities cannot be terminated unilaterally – only by mutual consent of the parties or by a court decision.
Given the inconsistency of economic and civil legislation regarding the possibility of unilateral termination of the lease agreement, the resolution of such disputes is also ambiguous. After all, in practice, the lion’s share of lease agreements contain provisions on the possibility of their unilateral termination by one or both parties in the presence of violations of the terms of the agreement and without such. At the same time, the courts take a different position: some clearly uphold the prescriptions of Art.291 of the Commercial Code of Ukraine, while others (including the Supreme Court in case 922/3293/18) prioritized the dispositive nature of civil legislation and the right of the parties to change the contract and supplement it at their own discretion with convenient and effective regulations.
Additional grounds for terminating the lease agreement by both the lessee and the lessor
At the same time, the Civil Code of Ukraine defines additional grounds for terminating the lease agreement by both the lessee and the lessor. The lessor has the right to demand termination of the contract in the following cases:
- the tenant owns and/or uses the thing contrary to the contract or purpose of the thing;
- the lessee, without the lessor’s permission, transferred the thing into possession and/or use to another person;
- the hirer creates a threat of damage to the thing by his negligent behavior;
- the lessee has not started to carry out capital repairs of the thing if the obligation to carry out capital repairs was assigned to the lessee.
- In turn, the lessee has the right to demand the termination of the lease agreement if:
- the lessor handed over the thing, the quality of which does not correspond to the terms of the contract and the purpose of the thing;
- the lessor does not fulfill his obligation to carry out capital repairs of the thing.
It should also be remembered that for certain types of lease agreements (depending on the lease object), special grounds for termination are established by law. For example, the tenant of housing has the right, with the consent of other persons who live with him permanently, at any time to withdraw from the lease agreement by notifying the landlord of this in writing three months in advance, or if the housing has become unfit for permanent residence in it. There are also additional grounds for terminating the lease agreement by a court decision at the initiative of the lessor:
- non-payment by the lessee of housing rent for six months, if the contract does not establish a longer term, and in the case of short-term rent – more than twice;
- destruction or damage to housing by the tenant or other persons for whose actions he is responsible;
- if it is necessary to use housing for the lessor and his family members.
In economic legal relations, the party that initiates the termination of the contract must do so in accordance with the provisions of Article 188 of the Economic Code of Ukraine: send proposals about this to the other party under the contract. The party to the contract, which received a proposal to terminate the agreement, within twenty days of receiving the proposal, notifies the other party about the results of its consideration. In the absence of a consensus of the parties, the interested party has the right to refer the dispute to the court for resolution. The parties can also clarify or change this procedure in the contract.
Summarizing: the right to unilaterally terminate the lease depends on several conditions at the same time:
- provisions of legislation regarding the possibility of terminating or rejecting a contract of a certain type;
- the existence of facts of violations by one of the parties of the essential conditions of the lease agreement;
- additional provisions of a specific contract regarding the possibility of early termination at the request of one of the parties.