What are the grounds for termination of the land lease agreement? Review of the Ukrainian case law

What are the grounds for termination of the land lease agreement? Review of the Ukrainian case law

What are the grounds for termination of the land lease agreement? Review of the Ukrainian case law

Land lease is one of the legal mechanisms for using someone else's land. The long-term active use of land lease agreements, their extension, renewal, termination or non-fulfillment influences on shaping the judicial practice of dispute settlement relating to land lease.

This article provides you with an overview of the latest decisions of the Supreme Court in this category of cases.

Termination of the agreement on the ground of systematic non-payment of the lease payment

This is the most common reason for the termination of an agreement.

Article 141 of the Land Code of Ukraine enshrines that systematic non-payment of land tax or lease payment is the ground for termination of a lease agreement

In each such case the court must ascertain both 1) a systematic non-payment of lease payment takes place in the case; and 2)  a lessor is largely deprived of what he had counted on when concluding the lease (Decision of the Grand Chamber of the Supreme Court  dated November 27, 2018). The existence of these two circumstances is binding to establish the existence of the grounds for termination of the lease agreement.

In the Decision the Civil Court of Cassation dated March 6, 2019 the same position was reaffirmed in the decision dated April 17, 2019) the Civil Court of Cassation comes to conclusion that partial fulfillment of the terms of the agreement, namely in the part of the lease payment, is also a violation of the terms of the land lease agreement, which gives the lessor the right to demand the termination of such an agreement, regardless of whether the debt was subsequently paid.

“Systematic” non-payment of lease payment means failure to pay two and more times on time violating conditions of the lease agreement (Decision the Civil Court of Cassation dated September 28, 2016). 

However, there is a position of the Supreme Court (Decision the Civil Court of Cassation dated May 13, 2019) that a systematic non-payment of lease payment does not necessarily constitute a ground for termination of the land lease agreement. In this case, the lessee proves that he did not cultivate the land, so as not to use it for its intended purpose. The Court came to the conclusion that the systematic failure to pay the rent cannot be considered grounds for terminating the lease agreement. The non-intentional use was affirmed with the act of inspection of the land and certificates issued by the executive committee of the village council and the State Agricultural Inspectorate.

Termination of the agreement unilaterally based on a decision of the municipal council

In a decision of April 18, 2019, the Economic Court of Cassation, noted that the termination of a land lease unilaterally is allowed only if it is expressly provided for by the relevant law or lease agreement. Moreover, the agreement must indicate the grounds on which the party to the contract acquires the right to terminate it unilaterally.

In the above-mentioned case, the courts found that the basis for the adoption by the municipal council of the decision to terminate the lease unilaterally became lessee failure to follow the requirements of the laws of Ukraine "On the protection of cultural heritage" and "On the regulation of urban development". However, after examining the provisions of the lease agreement concluded between the parties, the courts came to the justified conclusion that a lessee’s violation of the specified requirements of the laws is indeed the basis for termination of the contract, but not unilaterally, but in the general manner, that is, by agreement of the parties or by court decision. The land lease agreement provides for other grounds for its unilateral termination by decision of the lessor, and not one of these grounds has been met.

Finally, it is worth mentioning the situation of acquisition by a third party, not a lessee, of the right to own real estate located on lease land. The Supreme Court in a decision dated May 16,2019 confirmed that in such cases the new owner of real estate acquires all the rights and obligations of the lessor on the land.

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