The following are the usual forms of leases:
- Land leases
Leasing arrangements can be short-term (up to five years) or long-term (up to 50 years). The tenant can lease the land plot for various purposes, the most common of which are construction and further operation of buildings and agricultural production.
- Commercial leases
Most commercial office and retail space, as well as industrial space, is available through a commercial lease. The lease agreement should contain the material terms, including a description of the leased property, space and value, term, rent (including indexation thereof), method of depreciation charges, restoration of the leased property and terms of its return to the landlord, liabilities of the parties and other special terms.
Under Ukrainian law, a lease agreement for real estate concluded for three years or longer (in case of a lease of state or municipal property that is granted at auction — more than five years) is subject to mandatory notarization and the relevant lease rights are subject to state registration.
The lease agreement usually requires a tenant to pay basic rent plus service charges comprising a proportionate share of insurance, utility and common area maintenance charges and a management fee. In a retail lease, a tenant may also be required to pay rent based on a percentage of its annual sales in addition to the fixed amount of rent.
- Residential leases
The Civil Code and Residential Code of Ukraine regulate residential leases. The legal provisions are aimed at protecting the rights and interests of tenants or individuals. If there is a discrepancy between the provisions of a residential lease and legal requirements, the legal requirement will prevail.
Generally, lease provisions are not regulated and are freely negotiable unless municipal or state property or land is leased. However, the law establishes certain rights of the tenant on a statutory basis, such as the following:
- The tenant's preemptive right to extend the lease
- The tenant's preemptive right to buy out the lease object in case of its sale
As to lease of municipal or state property or land, such leases must be in line with the model agreements, as adopted by the government and local authorities. Rent payable under state and municipal property leases is calculated using methodology that is adopted by the government. Rent payable under state and municipal land leases is regulated by local authorities, which adopt regulations on local taxes and duties, and Tax Code of Ukraine, which specifies minimum and maximum annual rent amounts depending on type of land and its normative monetary valuation.
Most ground leases are concluded for five to 25 years.
Commercial leases are often concluded for up to three years in order to avoid the additional expense of their notarization and state registration of lease rights.
Under the law, a tenant duly performing under the lease has a preemptive right to extend the lease subject to all other conditions of the new lease being the same. The procedure for lease extension (including the procedure for notifications and negotiating the lease terms) are subject to regulation under the lease. However, the courts have ruled that the extension right does not apply if the landlord does not intend to lease out the property anymore.
A landlord can generally terminate the lease when the tenant breaches the terms of the lease, which usually includes the following:
- Failure to pay the rent and other payments under the lease
- Insolvency
- Intentional damage to the property
- Subletting the property without the consent of the landlord
- Use of the property in breach of its prescribed use
A tenant can generally terminate the lease when the landlord breaches its obligations under the lease, particularly the following:
- The property does not correspond to the conditions of the lease
- Insolvency
- Failure of the landlord to perform capital repairs
Yes, under a general rule, rent must be paid in Ukrainian hryvnia (UAH), which is a local currency. However, this does not preclude parties from specifying that the exact amount of rent payable is to be calculated based on foreign exchange rates of UAH to a foreign currency chosen by the parties.
If the lease is concluded between a resident and nonresident, then the agreement may provide for payment of rent in foreign currency. However, during martial law, actual performance of this provision may not be feasible if the payment must be transferred to the nonresident's bank account abroad. For the duration of martial law, cross-border payments from Ukraine abroad are restricted by the National Bank of Ukraine and may be carried out only in exceptional cases, which does not include payments under lease agreements.
This will depend on the agreement of the parties. Rent is usually paid in advance on a monthly basis.
Rent under a commercial lease is usually subject to monthly indexation based on the increase/decrease of the exchange rate of USD/EUR to Ukrainian local currency. Moreover, the parties would normally agree that for each subsequent year, the rent will increase based on the CPI index or another index as set out in the lease agreement.
Rent under a ground lease is subject to annual indexation according to the coefficient established and published by the central authority on land resources. If it is provided in the ground lease, the rent amount may be changed if the local authorities amend the normative monetary valuation of the respective land.
The following is usually required of landlords:
- Conduct capital repair of the property and maintenance of the common areas
- Insure the property
- Enter into agreements for utility services (electricity, water supply, etc.)
The following is usually required of tenants:
- Pay rent on time
- Keep the property in good order
- Inform the landlord if capital repairs are needed and give the landlord access to the property to carry out repairs
- Give the landlord access (often by appointment) for inspections and to conduct work
In principle, Ukrainian law does not recognize the concept of an assignment of lease in its usual common law meaning. Assignment of lease under Ukrainian law would require entering into a tripartite agreement between the landlord, the original tenant and the new tenant, i.e., agreement on change of a party to a lease.
Tenants are generally allowed to sublet the premises if they obtain the prior consent of the landlord in writing.
Under a general rule, if the premises are substantially damaged or destroyed due to events that are not attributed to the parties, the tenant may either request a rent decrease (if use of premises is still possible albeit limited) or be released from payment of rent at all for the whole period of time when it was not possible to use the premises. In case of destruction of the premises, the lease would usually be terminated.
If the premises are damaged or destroyed due to causes attributed to the tenant, the tenant may be liable for repairs or replacement. Damage or destruction of premises due to the landlord's fault will likely result in the tenant terminating the lease and claiming damages.