Don’t underestimate the importance of lease agreements
Citizens and businesses often consider the lease agreement as something basic and quite simple, but it can hide a number of risks. Before entering into a lease agreement, it is in your best interest to consult a good law firm and familiarize yourself with the specifics of this type of agreements. The principal legal requirements guiding contractual relationships under lease agreements are found in the Obligations and Contracts Act (“OCA”).
Is a lease agreement in writing required?
Bulgarian legislation does not require that the parties conclude a lease agreement in writing. However, oral agreements are difficult to prove and enforce and when it comes to potential disputes, it is advisable to enter into a written lease agreement.
Also, if you are a tenant renting a real estate for a period of more than one year, entering the agreement in the Property Register of the Registry Agency is recommended. Thus, if the rented property is transferred to a new owner, the tenant will be protected for the duration of the agreement. The new owner will have the same rights and obligations to the tenant and cannot request that the tenant vacates the property before the expiration of the lease agreement (art. 237, para. 1, OCA).
Length of the lease agreement
The lease agreement can be concluded without a specific end date or the agreement can specify a term (duration) of its validity.
The maximum length of a lease agreement cannot exceed 10 years, unless it involves a commercial transaction (art. 229, para 1, OCA). If the lease agreement between natural persons specifies a term longer than 10 years, the agreement is deemed to be concluded for the maximum length permissible under law, i.e., 10 years.
When a lease agreement is concluded by a proxy authorized by the owner of the property to only perform activities related to day-to-day property management, the maximum length of the lease agreement is 3 years (respectively, if the agreement is concluded for a longer period, the contract is deemed to be concluded for a period of up to 3 years under law).
Rights and obligations of the parties to the lease agreement
Obligations of the lessor
Unless agreed otherwise, the lessor is obliged to hand over the property or chattel in a condition that reflects the use for which the property or chattel is rented. If this condition is not met, the tenant has the right to request repairs within the property or chattel, carried out at the expense of the landlord, rent reduction, or to cancel the contract and claim compensation for damages.
During the term of the lease agreement, the lessor has no right to perform the following actions:
- Enter into the rented property without the tenant’s consent;
- Carry our repairs that prevent the tenant from using the property;
- Forcibly evict the tenant;
- Re-rent an already rented property or chattel before the contractual relationships under the lease agreement have ended.
When renting a property part of a condominium, the tenant must comply with the rules governing the management of the commonhold property.
Obligations of the tenant
The tenant’s main obligation is to pay rent for the property or chattel.
Under OCA, the tenant is also obliged to pay all expenses related to the use of the property or chattel. When renting a property, the tenant must cover utility costs such as electricity, water, heating, etc.
The tenant may only use the property or chattel as per its intended purpose or as agreed. For example, when renting a property for residential purposes, the tenant is not allowed to turn it into a café bar or dry-cleaning premises.
As a rule, the tenant must only cover minor repairs related to the maintenance of the property or chattel and its everyday use, like, for example, damages to the shower battery or the internal locks, cleaning stains from the walls, and others. However, in case of major repairs due to damages caused by the tenant, the latter is obliged to pay all related expenses (if the tenant did not cause any damages, repairs are at the expense of the landlord).
In case of damages made or interference by third parties, the tenant must notify the landlord immediately. Otherwise, the tenant may owe compensation or may have to cover the repair costs, resulting from such damages or interference.
When entering into a lease agreement, the parties may also agree on additional rights and obligations such as settling disputes in case of the non-payment of rent, compensation claims for incurred expenses, and others.
To attest the condition the rented property or chattel is in, a handover protocol is usually drawn up, which describes the condition of the property or chattel at the moment of handing it over.
Upon expiration of the lease agreement or after its termination, a second handover protocol is usually drawn up, which describes the condition in which the property or chattel is returned to the lessor.
Termination of lease agreement
Where a lease agreement can be terminated through a unilateral written notice, either party (or the party in favor of which the notice is agreed upon) can thus terminate it. In case the agreement lacks a notice clause, either party can terminate the lease agreement, preferably in writing.
When entering into a lease agreement for a specified period, the contract may be deemed terminated upon expiration. However, if the tenant continues to use the property or chattel and the landlord is aware of that and does not object, the contract is deemed to be extended for an indefinite period.
OCA governs general aspects of lease agreements. It is possible that a specific case has its own peculiarities, making it advisable to include additional language in the lease agreement. To protect the rights of the lessor and lessee, it is recommended that you consult competent legal professionals in the area of property law and real estate.
This article has been prepared for the purposes of general information only and does not constitute legal advice with respect to any particular subject or situation. For specific legal advice you should contact an attorney-at-law. Stoeva, Tchompalov & Znepolski is not responsible for any legal action undertaken on the basis of the information contained herein.