Entering into an office lease agreement is often perceived as a technical stage before starting a business: found the premises, agreed on the price, signed the papers and got to work. But in practice, it is the lease agreement that becomes one of the most frequent sources of conflicts between the landlord and the tenant. And the reason is almost always the same: the document is drawn up formally, without taking into account the requirements of the Civil Code of Ukraine and real business processes.
This article is not a dry legal summary or a rewritten law. This is a practical and professional analysis of what entering into an office lease agreement should look like in accordance with the CCU. We will consider the mandatory terms of the agreement, typical mistakes, key articles of the Civil Code, as well as the rights and obligations of the parties.
What is an Office Lease Agreement from the Perspective of the Civil Code of Ukraine
The Civil Code of Ukraine does not operate with the term "office" as a separate legal category. From a legal perspective, we are talking about the lease of non-residential premises or part of a building. That is why general provisions on property lease apply to office lease agreements, as well as special norms regulating the use of buildings and structures.
The essence of a lease is the transfer of property for temporary use for payment. The ownership right remains with the landlord, while the tenant receives the right to use the premises exclusively within the limits defined by the agreement and the law. This is a fundamental point that is often ignored in real business, especially when parties have been cooperating for a long time and begin to perceive the premises as "their own".
Courts, when considering disputes, always proceed not from the name of the agreement, but from its content. If a document is called an office lease agreement but does not contain essential terms or contradicts the requirements of the CCU, such an agreement may be recognized as not concluded or invalid. Therefore, legal literacy at the stage of drafting the agreement saves not only time but also money that may be lost in litigation or due to unfavorable terms of cooperation.
Form of Agreement: Written and No Alternatives
The first thing that directly follows from the Civil Code of Ukraine: an office lease agreement is concluded in written form. Oral agreements don't work here, even if the parties are well acquainted or "everything was fine for several years". Written form is mandatory regardless of the lease term and the status of the parties. Written form is the minimum. But there are nuances to consider:
• if the lease term exceeds three years, the agreement is subject to notarization;
• if a building or its part is leased for a term exceeding three years, the agreement is also subject to state registration of the right of use;
• the absence of notarization in such cases makes the agreement legally vulnerable.
In practice, many deliberately conclude agreements for 11 months with automatic renewal. This is permissible, but only if the renewal is also clearly spelled out and does not mask an actual long-term lease. If the real purpose of such a construction is to avoid notarization or state registration, in judicial practice this may be regarded as circumvention of the law.
Subject of the Agreement: The Foundation of the Entire Construction
The subject of an office lease agreement is not just an address. It is a detailed description of the premises that leaves no room for double interpretation. It is mistakes in defining the subject of the agreement that most often become the cause of litigation.
The agreement must clearly indicate which specific premises are being leased, on which floor they are located, what area they have and their functional purpose. If the office is located in a business center, it is advisable to indicate its name, as well as the parts of the premises that are or are not included in the lease.
It is also important to record the technical condition of the office at the time of transfer. This can be done either in the agreement itself or in the acceptance and transfer act, which is an integral part of it.
Lease Term: Stability Versus Uncertainty
The term is an essential condition of an office lease agreement. It determines not only the duration of use of the premises, but also the level of stability of the tenant's business. If the term is not specified, the agreement is considered concluded for an indefinite time. In such a case, each party has the right to withdraw from the agreement by notifying the other party in advance.
For real estate lease, this period is three months. For a company that invests in repairs, furniture and infrastructure, such uncertainty can be critical. That is why it is advisable to clearly specify in the agreement the start date of the lease, its end date and renewal conditions. Automatic renewal is allowed, but it must be clearly formulated.
Rent Payment: More Than Just a Number
Rent payment is a mandatory condition of a lease agreement. Without it, the agreement is considered not concluded, since payment is one of the key features of a lease agreement. The agreement should specify:
- amount of rent;
- currency (and exchange rate, if payment is tied to foreign currency);
- payment frequency (monthly, quarterly, in advance or post-factum);
- payment method (bank transfer, cash);
- payment deadlines (specific dates or period);
- conditions for changing rent (indexation, revision, fixed rate).
The CCU allows changing rent only by agreement of the parties, unless otherwise provided by the agreement. That is why the clause on indexation or rate revision should be as clear as possible. For example, you can prescribe annual indexation at the level of official inflation or dependence of rent on the dollar or euro exchange rate.
Utility Payments and Operating Expenses
The Civil Code of Ukraine does not establish automatic distribution of utility payments between the parties. This means that everything depends on the terms of the agreement. And this is where most misunderstandings arise.
Often the agreement contains only a general phrase about payment of utilities by the tenant, without specifying the list, calculation procedure and supporting documents. As a result, the tenant receives bills they were not prepared for, or doubts their validity. The optimal option is to clearly separate the rent and all additional payments, detailing them as much as possible in the agreement or appendices. It is worth prescribing:
- which specific utilities the tenant pays for (electricity, heating, water supply, garbage removal);
- how consumption is accounted for (separate meters, proportional to area);
- who and when provides supporting documents;
- what deadlines payment must be made;
- what happens in case of late payment.
The issue of operating expenses should be regulated separately if the office is located in a business center. This may include elevator maintenance, cleaning of common areas, security, internet, air conditioning. If such services are provided, their cost and payment procedure must be clearly recorded.
Rights and Obligations of the Landlord According to the CCU
Even if an office lease agreement contains minimum conditions, the landlord is still subject to obligations directly provided by the Civil Code of Ukraine. The landlord is obliged to transfer the premises in a condition suitable for use for its intended purpose, and not to create obstacles to its use. They are also responsible for carrying out major repairs, unless otherwise expressly provided by the agreement. Violation of these obligations gives the tenant the right to demand a reduction in rent, elimination of defects or even termination of the agreement.
Rights and Obligations of the Tenant
The tenant is obliged to use the office in accordance with its purpose and the terms of the agreement, pay rent on time and maintain the premises in proper condition. Current repairs are usually the responsibility of the tenant, unless the parties have agreed otherwise. At the same time, the tenant has the right to unimpeded use of the premises, protection from unjustified inspections and interference, as well as compensation for damages in case of violations by the landlord.
Typical Mistakes When Entering into an Office Lease Agreement
Even experienced entrepreneurs regularly repeat the same mistakes when concluding lease agreements. Here are the most common ones:
- absence of an acceptance and transfer act or its formal compilation without recording the actual condition;
- unclear subject of the agreement (vague description of premises, unspecified area);
- oral agreements "outside the agreement" that cannot be proven in court;
- incorrect currency binding without an exchange rate calculation mechanism;
- absence of early termination conditions or their one-sided orientation;
- copying templates without adapting to the specific situation.
All these mistakes are easy to correct at the stage of concluding the agreement, but almost impossible after a dispute arises. Judicial practice shows that courts interpret unclear terms of the agreement in favor of the party that did not draft the agreement. If the landlord provided a ready-made template, ambiguities are interpreted in favor of the tenant, and vice versa.
Acceptance and Transfer Act as a Key Document
The acceptance and transfer act of office premises is often underestimated, although it is precisely this document that records the actual condition of the object at the start of the lease. Without this document, it is difficult to prove when exactly the tenant received the premises and in what condition. A properly drafted act indicates all essential characteristics of the office, meter readings, existing defects and equipment. In the future, this document may become a decisive argument in a dispute.
Early Termination of the Lease Agreement
The Civil Code of Ukraine allows early termination of a lease agreement in case of substantial violations by one of the parties. Substantial violations by the tenant include: non-payment of rent for three consecutive months, use of premises not for their intended purpose, significant deterioration of the property condition. However, in practice it is better when the termination procedure is regulated in detail in the agreement itself. Clearly prescribed notice periods, grounds and financial consequences of termination help avoid conflicts and reduce business risks.
The tenant may be interested in the possibility of early termination if the business is not developing or there is a need to relocate. The landlord, on the contrary, is interested in stability and compensation for losses from premises downtime. A compromise may be a condition on the possibility of termination with two to three months' notice and payment of a certain amount as compensation.
Sublease of Office Premises
As a general rule, transfer of the office or part of it to sublease is possible only with the landlord's consent. If the tenant plans to use the premises for coworking or partial rental, this must be expressly provided for in the agreement.
The absence of such a condition may lead to termination of the agreement and recovery of damages. The landlord has the right to control who uses their property, as this affects the condition of the premises and responsibility for its preservation.
If sublease is allowed, it is advisable to prescribe the conditions: whether the landlord's consent is required for each subtenant separately, whether the tenant has the right to independently conclude sublease agreements, who bears responsibility to the landlord for the actions of subtenants. It is also important to determine whether the landlord has the right to demand part of the income from the sublease or set restrictions on the sublease price.
Entering into an office lease agreement is a strategic decision, not a technical trifle. The stability of the business, financial security and peace of mind of the parties depend on how competently the agreement is drawn up and how much it complies with the Civil Code of Ukraine. A well-drafted office lease agreement does not create problems - it prevents them. Investment in legal support at the stage of concluding the agreement always pays off, as it allows avoiding much higher costs for dispute resolution, business downtime or loss of invested funds.
FAQ
Can an office lease agreement be concluded without specifying a term?
It is possible, but this creates risks. The agreement is considered concluded for an indefinite period, and each party has the right to withdraw from it with three months' notice.
Who should pay for utilities when leasing an office?
This is determined by the agreement. The Civil Code of Ukraine does not establish automatic distribution of utility costs, so they need to be clearly specified in the agreement.
Can rent be changed unilaterally?
No, unless otherwise expressly provided by the agreement. The general rule of the CCU is that rent can only be changed by agreement of the parties.
Is an office acceptance and transfer act required?
Yes. The acceptance and transfer act is a key document that records the condition of the premises and the start of the lease. Its absence complicates the protection of the parties' rights.
Is sublease of office premises allowed?
Sublease is possible only with the landlord's consent, unless otherwise provided by the agreement. Without such consent, transfer of the premises to third parties may be grounds for termination of the agreement.