The outbreak of COVID-19 and the introduced state of emergency have also raised concerns among landlords and tenants in Serbia. How potential outcomes of the situation will affect rights and obligations from commercial lease? Questions keep popping out, like the issues of limitation of working hours, closure of shopping malls, health among the employees of the tenant, payments etc.
Lease contracts in reputable shopping malls and chains of shopping malls nowadays have recognized many aspects of lease, including force majeure, state closures etc. As the first step towards informing on the raised issues, the parties should consult the text of the lease contract, which now tend to be complex and long.
With the spread of the effects of COVID-19 and regulations and rules stemming from imposed state of emergency, tenants are now facing issues such as low fluctuation of shoppers, difficulties on imports of the goods sold, healthcare of its employees, limitations on movement due to curfew and consequently shorter working hours and prospective ban on operation of certain businesses. There are also rumors on closing of all stores, except markets and pharmacies. On the other hand, the Landlords face potential closure of the malls and leased premises. Can these factors be used through legal institutes such as force majeure, termination (under rebus sic stantibus, please see article on that) impossibility of performance?
From the tenants’ perspective, as explained in articles on force majeure and termination due to COVID-19, Serbian courts so far have been reluctant to recognize cases of force majeure and termination under rebus sic stantibus. However, the present situation is very complex and has not recently been seen in legal practice. The combined effect of factors described in the previous paragraph and the state of emergency lasting for 90 days (for now), could represent strong arguments for claiming hardship in performance as a reason for termination by the tenant, without prejudice to the actual court decision. However, the termination in this case requires an action before the courts of law, which are now working with much lower pace. On the other hand, ban on operating a business due to state emergency regulations would be a strong argument to call upon force majeure, but this institute per se applies to relieving against damage claims due to default. Some local communities are already preparing bans on work of restaurants and cafes to be put in force in the upcoming days.
Institute of impossibility to perform an obligation seems to be the best option at this moment for the tenant, especially in the case of bans to operate the business. According to the law, the impossibility to perform an obligation due to reasons for which none of the parties are responsible shall relieve the parties from their obligations. This has been confirmed in the case law.
The landlords’ perspective seems to be less dire at this moment, but with prospective of closing on all stores, which effectively targets the landlords, the position would be the same for both landlords and tenants.
At this moment, it is strongly recommended that landlords and tenants reach an agreement which would temporarily regulate commercial leases until lifting of the state of emergency. Otherwise, BOPA remains at your service as to potential solutions of the case.
