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| Lease contract A lease contract is one of the contracts regulated by the Law on Obligations, but largely by means of optional rules, which implies that contracting parties are free to regulate their relations as they desire (of course, only within the limits of what is permitted) and that legal provisions serve merely to guide them and to envisage compulsory, i.e. important elements of the contract. Accordingly, through a lease contract the subject of the lease and the amount of rent must be specified. Duration of the lease is not a significant element, but is nevertheless usually contracted. Subject of the lease As for the subject of the lease, i.e. the real estate that is leased out, it is critical one should ascertain whether the lessor has such a right as regards the real estate in matter on the basis of which they are entitled to lease out the real estate in matter in accordance with regulations in force. The right referred to is usually the lessor’s right of ownership of the real estate concerned, but it can be the case, though very rarely, that the lessor is a holder of some other type of right on the basis of which they are entitled to conclude a lease contract (for example, the right of lease which allows the lessor to sublease the real estate, the right of use that government bodies enjoy, etc.). Therefore one should verify proof of ownership of the lessor (an extract from the real estate register, a relevant contract, a court decision, etc.) or proof of some other stated right. In addition, one should also establish the lessor’s identity, and if the lessor is a legal entity or the government, one also needs to ascertain whether a person with whom a lease contract is to be concluded is authorized to conclude this sort of contract. Naturally, the lessor is supposed to act in the same manner when the lessee’s identity is concerned. If a mandatory is to conclude a lease contract on behalf of one of the contracting parties, the proxy must be certified in court and needs to contain authorization for the pursuit of all actions relating to the lease. Rent The amount of rent is another essential element of a lease contract and it must be expressed as a sum of money, in the local or a foreign currency. In accordance with the Law on Foreign Exchange Operations, contracting in a foreign currency is allowed, but the payment must be effected in the dinar equivalent value. One of the exceptions stipulated by the aforementioned Law is a lease contract in the case of which making a payment in a foreign currency is allowed. Thus, payment by foreign means of payment is allowed, but only on condition it is realized via foreign currency accounts with commercial banks. Making a payment in dinars is not restricted, therefore paying in cash directly to the lessor is allowed. If one of the contracting parties or both of them are legal entities, payment is usually or always done via accounts with commercial banks, even in cases when the payment of the lease is made in dinars. Utility costs, electricity and telephone, etc., which are mostly borne by the lessee, are contracted separately – they are very rarely included in the amount of rent. Term of the lease When it comes to the duration of the lease, i.e. the term for which a lease contract is concluded, one should differentiate between a lease for an indefinite term and that for a fixed term. When duration of the lease is not fixed by the contract, each contracting party may give the notice of termination of the lease to the other party, the term of notice being 8 days by the law, which does not interfere with a contracting parties’ right to contract a longer term of notice. When the contract is concluded for a fixed term, it ceases to be valid at the expiration of the term for which it has been concluded. However, if the lessee continues to occupy the real estate in matter and the lessor does not object to this, it will be deemed a new contract has been concluded, and that under the same conditions as the previous one and for an indefinite term. Such a situation is envisaged by the Law on Obligations, one of the reasons for which is that a lease contract belongs to the contracts whose form is not that important. Right of lease The right of lease is tied to the real estate to which it refers, which means that the lessee has the same rights and obligations towards the new owner of the real estate concerned, but they also have the right to cancel the contract within legal periods of notice. Costs of regular maintenance of the real estate, i.e. costs of minor repairs and the very usage of the real estate are borne by the lessee, while the lessor is obliged to bear the costs of investment maintenance as well as costs of keeping the real estate in good condition. The lessee is obliged to treat the real estate with care in the manner of a prudent man, i.e. businessman; they are not liable for the damage to the real estate caused by force majeure, but they are indeed liable for all the damage they inflict deliberately or inadvertently. The lessee has the right to reimbursement of the costs of adaptation or investment maintenance of the real estate they have borne, either because this is contracted or because the lessor has not borne the costs incurred in spite of being obliged to. Nevertheless, the lessee may never request that co-ownership of the real estate should be established after having made investments in the real estate owing to which the value of the real estate in matter increased. The right of the lessee is still an obligation one – they may only request a pecuniary, equivalent value reimbursement, and that the value at the time of making such a request. The lessor has liability towards the lessee for all the physical defects to the real estate, as well as for legal defects which exclude or restrict lessee’s rights. The lessor may terminate the contract without giving the lessee an advance notice if the lessee makes use of the real estate against the contract or its purpose, or they neglect its maintenance to such an extent that there is a danger for the lessor damage will be inflicted, as well as if the rent is not paid within a contracted time limit. Once the contract has expired, the lessee must return the real estate to the lessor in the same condition in which they received it, less damages caused by dilapidation or ordinary wear and tear. One needs to be particularly careful when concluding a lease contract for the real estate co-owned by several persons. In a case like this, since this is an undertaking which goes beyond the legally prescribed limits of regular affairs, all co-owners must consent to the lease contract. Otherwise, the co-owner who has not given their consent may request that the lessee should vest the entire the real estate in them regardless of the fact that they have the right of ownership of only a part of the real estate in matter. Foreign legal entities and natural persons Foreign legal entities and natural persons are allowed to conclude lease contracts for the real estate on the territory of the Republic of Serbia without restrictions and under the same conditions as domestic ones. Lease contracts are usually composed in two languages. The lessor is obliged to notify competent organs of the foreign national’s residence in the real estate in matter. Tax The real estate income tax is the tax that encumbers lease contracts. The tax base is accounted for by the amount of a monthly rent, the tax rate being at 20%. The lessor is the taxpayer, but if the lessee is a legal entity, this obligation will be assumed by the lessee. |
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