Lease Contract - Final Copy PDF

Definition and Characteristics of Lease Contract 1  Definition of Lease Contract: Article 558 of the Egyptian Civil Law defines Lease Contract by the following “Lease is a contract by which the lessee can benefit from a specific object for a specific period in considerat...

Definition and Characteristics of Lease Contract 1  Definition of Lease Contract: Article 558 of the Egyptian Civil Law defines Lease Contract by the following “Lease is a contract by which the lessee can benefit from a specific object for a specific period in consideration of a specific price”. From this definition we can say that Lease Contract is characterized by the following characters. Characteristics of Lease Contract: 1) Lease Contract is an Onerous Contract and a Bilateral Contract. Onerous contract is one which obliges each of the parties together to give or to do something. A contract is characterized Bilateral when the contracting parties bind themselves reciprocally the one to the other. In such contract each party is at the same time debtor and 2 creditor, he owes certain performance and in return he can claim certain performance from the other party. The obligations contracted by one are conditional on those contracted by the other. In Lease contract both parties of the contract bind themselves reciprocally the one to the other, the lessee is obligated to pay the rent and the lessor is obligated to make the lessee use the object, consequently each party will give the other something. 2) Lease Contract is a Consensual Contract: Lease contract is a consensual contract, it becomes effective to the consent of the parties without the need to put any special form, and thus it is formed by conducting offer and acceptance without any other forms or regulations required by law. Although it should be written but that is not considered a formal regulation required by law for formation of Lease contract, it is only necessary for the proof of the contract but not the 3 formation of the contract. Moreover, the parties can agree to make writing an element in forming the contract because the consensual feature is not a matter of Public Order, at this moment the contract becomes a formal contract. 3) Lease Contract is a Continuous Contract: Lease contract is a continuous contract since each party has to perform several obligations for a continuous time. One of the most important consequences of this is the hardness of application of resolution's provisions on this type of contracts, thus in case of resolution or impossibility of execution of one of the parties’ obligations this will not lead to lapse of the obligations of the other party. For example, if the contract terminates depending on nonpayment of rent this will not affect what had been executed of the contract, therefore the 4 lessee will not be able to get back the paid rents as long as he was using the object before resolution. However, Lease contract is characterized to be a continuous contract but it stills a contract with a fixed term, time always plays an essential element in its formation and execution therefore time of creation, time of execution and time of termination of the contract should be detected. Lease contract can be renewed if the parties decide to continue in their contracting relation, it is better for both parties to include the contract an explicit clause emphasizes intention to renew the contract better than declaring such intention by notice before the end of the contract. 3) Lease Contract Deals with the Usufruct of Premises: The aim of Lease is to grant the lessee the opportunity to usufruct – use- a specific object for a 5 definite period and return it back to the lessor, it doesn’t grant the lessee the authority to transfer any right related to the object. This is the main difference between Lease and Sale Contract where the aim of sale is to transfer the ownership for the purchaser to use the sold object or transfer it another time. 6  Differentiation Between Lease and Similar Contracts 1) Lease Contract and Usufruct of National Objects: Usufruct – use - of national objects represented in the following examples like; showers on beaches, advertisements in airports and real stations. Most of the recent legal writers and courts reject the opinion that says that the relation between the state and individuals in the previous examples depends on lease contract. They say that this relation depends on common law regulations, what binds the beneficiaries and administrative departments are the licenses or administrative contracts. Moreover, the lease regulations don’t give both parties the authority to terminate the lease contract before the end of the its period, while the public interest 7 may give the administrative department the authority to withdraw the license according to the public interest requirements. On the other side the state has the power to lease its private properties under the supervision of lease contract located in Civil Code. 2) Differentiation Between Lease and Commodate: Article 635 of the Civil Code decides “Commodate is a contract by virtue of which the lender is obligated to deliver an inconsumable object to the borrower to use it without consideration”. Both contracts are similar in their aims, both require to authorize a party to use an object owned by another party for specified period. The main difference between them that lease contract shall be for a specific consideration paid by the lessee while the usage of borrower is without consideration. 8  3) Differentiation Between Lease and Trust Contracts: Trust is a contract by which a person is obligated to receive an object from another person to maintain it and return it1. The trustee must receive the trust, he shall not use the trust without implicit or explicit permission of the trustor2. In sometimes lease and trust contracts could be similar, for instance parking a private truck in a parking lot, is it considered a lease for the parking place or trust agreement for the car? Most of the writers see that this contract is a special form of agreement, it is a trust with consideration. 1 Article 718 – Civil Code 2 Article 719 – Civil Code 9 Formation of Lease Contract 10  Lease Contract is a consensual agreement, the main element in this agreement is the consent. If consent exists the contract is formed without any other regulation. Consent exists by meeting of offer and acceptance in order to grant one of them the authority to benefit from a specific object for a specified rent. Consent in Lease Contract: Lease contract is formed by meeting of mutual intentions of its parties. One of them shall intent to grant the other party the authority to benefit from the object for a specific price. If one of them intents to rent and the other intents to borrow, therefore the contract will not exist due to the absence of consent. 1) Consent on Leased Premises: Lease does not exist and produce its effects unless the two parties agree on the leased premises, for 11 instance, if one party offers to lease an object and the other accepts to lease a different object, the contract will not exist due to the lack of consent. The Object of Lease Contract Shall be Determinate or Capable to be Determinate: The object in lease contract shall be determinate or capable to be determinate, thus it shall exist at the time of contract, accordingly if the object was partially or fully destroyed before the formation of contract such contract will not exist. Lease contract may exist even if the parties do not know that the object is partially destroyed, in their view; this assumption gives the lessee the opportunity to claim for decreasing the price of lease or rescind the contract. This view depends on article 569/2 that decides “In the event the destruction is partial, or the premise becomes in an unusable condition according to the purpose it was 12 leased for, or such use gravely decreased without fault on the lessee, he may then, if the lessor does not restore the premise to its original condition in appropriate time, request – according to circumstances – either the decrease of rent or rescind the contract”. The object of contract may exist in the future, like a house that will be built or a car will be manufactured. Article 131/1 decides “Subject of the obligation may be in the future”. However, leasing an estate of a living person is null, even by the consent of this person. The Object Shall be Possible: If the object of the obligation itself is impossible, the contract is then void3. This condition is related to the possibility of the contract which means if the party could perform the obligation that would be included in the contract or not. The first condition was related to the 3 Article 132 – Civil Code 13 existence of premises, but this condition is related to the obligation to do or to abstain. The Object Shall be Determined: If the object of the obligation is not specifically determined, it must then be determined by its type and quantity or otherwise the contract is null. It is sufficient that the object be determined by type only if the contract includes what can determine it. If the parties do not agree to the degree of the object as to its quality and it is not possible to conclude the same from custom or any other way, the debtor must then deliver an average quality of the object4. These provisions refer to that object must be determinate or at least capable of being to determinate according to circumstances. 4 Article 133- Civil Code 14  Consent Over Lease Price (Rent): Lessor in lease contract shall intent to get a pecuniary or any submission. The rent shall not be fictitious, it shall be a true price in order to form a lease contract. If the price mentioned in the contract was fictitious the contract is considered a lease contract but will be Commodate. The Rent may be pecuniary or any other kind of submission5.The rent may be part of the harvest seeds; it can be any other obligation performed by lessee in favor of lessor such as designing a house or defending the lessor in a lawsuit. The price is always as a pecuniary submission, the parties can pay the price in a foreign currency. 5 Article 561- Civil Code 15  Estimating the Price (Rent): Article 562 decides “In the event the parties do not agree to the amount of lease or its estimation method, or if it becomes difficult to evidence the amount of lease, equal lease value shall be into force.” According to this article we can say that the rent may not be clearly determined through the contract. Such contract, will not be null even if it did not mention the price. Accordingly, the rent may be determined by parties or by law. Rent Determined by Parties: The Parties may freely agree on the rent of lease. The rent is decided depending on its nature, if the parties agree to pay the rent in the form of money therefore it shall be determined by currency and amount. If they agree to pay it in the form of seeds it shall be determined by weight. The rent of lease always takes the form of periodic installments paid within the contract’s term, it 16 may be paid before or after the execution of the contract. The parties can clearly mention the rent while forming the contract, for instance, if they decide the rent is 1000 L.E. In sometimes the contract may not clearly mention the rent but it may contain a way for determining the it later, like in case they agree on a percentage of the products of the premises leased or determined through a third party. The Rent Determined by Law: If the contract did not mention the rent due to the disagreement of parties thus the contract is not legally formed as a result of the unconsent over rent. The court has the authority to conclude from the surrounding circumstances the fact of agreement is a final contract or just a proposal under negotiations. 17  If the contract did not mention the rent of lease or a way of determination, thus the rent of similar objects could be accepted6. 6 Article 563- Civil Code 18  Consent on the Term of Contract: The term of lease contract is always temporary, the aim of lease is to authorize the lessee to benefit from an object for a temporary specific period. If the term of lease is infinite, such contract is not considered a lease contract even if the parties named it a lease contract. The contract will also be null if it mentions that its term continues as long as its object still exists undestroyed. The contract can mention its term for the lifetime of any of its parties, moreover the parties can agree to make the term as long as the lessee is paying the rent. Moreover, most of the legal authors agree that the term of lease shall not be extremely long. The court at all times has the authority to decide from the surrounding circumstances whether the term is long or not, such as the nature of the object and aim of lease. 19  Accordingly, some of the writers agree that the term of lease shall not exceed sixty years as the Monopoly Right. Article 999 of the Civil Code decides “Monopolizing is not permissible for a period exceeding sixty years. In the event a longer period is determined or determining a term was omitted, the monopoly is deemed to be for the period of sixty years.” If the contract mentions more than sixty years, therefore it will be valid only for sixty years depending on article 143 of the Civil Code which decides “If the contract is null or voidable in one of its elements, only such element shall be nullified, unless it appears that the contract would not be completed without the null or voidable element, then the whole contract is null.” If the parties failed to agree on the term of contract, the contract will not exist. The term of lease contract is 20 an essential element for its creation; therefore, it is necessary to be determined by law or parties. Determining the Term of Lease by Parties: As we mentioned before the parties can freely agree on the term of lease contract, but this liberty is not absolute, it is restricted by the sixty years mentioned in article 999 of Civil Code. This restriction does not prevent them to renew the contract after this period. The parties can directly and clearly determine the term of contract, for instance the contract may decides “The lease starts by the first of January 2010 and ends by 31 of December 2011”. Moreover, the term can be determined by a unit of time such as an hour, day, month or a year. If the parties didn’t decide the starting date of lease therefore it starts by the date of delivery of the leased premises to the lessee. 21  The parties may explicitly or implicitly agree on the term of lease contract, the implicit term is concluded from the surrounding circumstances of the contract, for instance if a party leased an apartment during summer at a coastal town without mentioning the term of contract, therefore it may conclude that lease starts by June and ends by the end of September. If the contract explicitly or implicitly fails to determine its term, the parties may be subject for two main submissions. The first they may negotiate on the term of contract, and if they fail to agree on such term the contract will not exist due to the unconsent over one of its essential elements. The second, they may apply the regulations decided by article 563 of Civil Code “In the event a lease is concluded without agreement to a period or for an indefinite term or it became difficult to evidence the claimed term, the lease is then concluded 22 for the term determined to pay the rent and ends by the lapse of such period upon the request of one of the parties if he warns the other party to vacate in the following dates: a) In agricultural and fallow lands, if the term determined for payment of rent is six months or more, the warning shall be three months prior to its expiry. If the term is less than that, warning must be prior to its last half, without prejudice to the lessee’s right to the harvest according to custom. b) In houses, shops, offices, stores, factories, warehouses and the like, if the term determined for rent payment is four months or more, warning must be two months prior to its expiry. If the term is less than that, warning must be prior to its last half. c) In lodgings, furnished rooms and all other places other than the previous, if the term determined for rent 23 payment is two months or more, warning must be one month prior to its expiry. If the term is less than that, warning must be prior to its last half”. 24  Conditions Required by Law for Validity of Lease Contract: Validity of Lease Contract requires the intention of each party to be free of vices of consent, moreover each party shall be capable to form lease contract. If any of the parties was exposed to Mistake, Fraud, Duress or Exploitation from the other contracting party, lease contract will be voidable in favor of the one affected by vice of consent. If one of the parties was legally uncapable, the contract will be voidable. Capacity of Lessor: Leasing is an action that rounds between harms and benefits, it is a management act. Managements acts doesn’t affect the value of the leased premises as it shall return directly back to the owner by the end of the contract, therefore the legal capacity required is the 25 management capacity, this capacity occurs by reaching 18 years old. Capacity of Lessee: Most of the legal doctrine agree that the capacity of lessee is the same as lessor, both requires management capacity. On the other side some of the legal writers see that capacity of lessee shall be the full legal capacity, therefore if the lessee did not reach 7 years the contract will be absolutely null. If the lessee’s age was over 7 years the contract will be voidable in his favor. There are three exemptions on this view: 1) If the lessee child exceeds 7 years and entitled to pay the rent from his own custody7. 2) If the lessee was 16 years and entitled to pay the rent from his own salary8. 7 Article 61 the Law of financial Guardianship No. 119 of 1952. 26  3) If the lessee was a minor obtained the court’s permission for marriage expenses as he can pay the rent from such expenses9. 8 Article 63 the Law of financial Guardianship No. 119 of 1952. 9 Article 61 the Law of financial Guardianship No. 119 of 1952. 27  Proof of Lease Contract: The Egyptian Civil Law did not mention special regulations for proofing lease contract; therefore, it shall be proofed through the general rules especially article 60 of the Law of Evidence that decides “In other than commercial articles, if the legal act worth more than 1000 L.E or is of undefined value, witnesses' testimony may not prove its existence or lapse unless there is an agreement or provision to the contrary”. The value of lease contract is determined by calculating the rent of lease during the whole term even if the rent takes the form of installments. The majority of legal writers agree that if the contract did not mention its term, the main way for deciding the value of the contract will be the time stipulated for paying the rent. Accordingly, we can say that if the sum of rent exceeds 1000 L.E the contract shall be proved through written 28 evidence, in contrary if the rent is less than 1000 L.E the contract may be proved through witnesses moreover the contract can be proved without the written evidence if moral obstacle exists. 29 Effects of Lease of Contract 30  Lease Contract reciprocally creates certain obligations on both parties. Lease contract and its regulations are not a matter of public order, they are complementary rules. Accordingly, if the parties agree on conditions that might conflicts with lease rules in Civil Law the agreement of parties will apply and govern the relation between parties. The contract will produce its legal effects once it is formed properly, these effects represent the obligations of both parties, this chapter will illustrate the obligation of each party of the contract. 31  Obligations of Lessor 1) Obligation to Deliver the Leased Premises: The lessor must deliver the leased premises and its annexes to the lessee in a condition sufficient to benefit according to the agreement or the nature of the premises10. In the event the leased premises is delivered in a condition where it cannot serve the benefit it was leased for or if such benefit is gravely decreased, the lessee has the right to request rescinding of the contract or decrease the rent proportionally with the decrease of benefit, with compensation in both cases if needed. If the leased premises is in a condition subjecting the health of the lessee or those living with him or employees or labor to a 10 Article 564 – Civil Code 32 grave risk, the lessee may then request rescinding the contract even if he previously waived such right. Obligation to deliver the leased premises is subject to the same provisions applicable on the obligation to deliver the sold premises, particularly those provisions related to the time and place of delivery, determination of the value of the leased premises and specification of its annexes11. Delivery is made by placing the leased item at the lessee’s disposal whereby he can possess it or benefit thereof without obstacles even if he does not materially seize it as long as he is informed by the lessor. Such delivery is made according to the nature of the leased item12. 11 Article 565 – Civil Code 12 Article 566 – Civil Code 33  Way of Delivery: Delivery is made by placing the leased premises under the usage of the lessee to benefit from it without barriers. Accordingly, we can say that delivery has two main elements, the first is placing the leased premises under the usage of lessee to benefit from it without barriers. The second, is to inform the lessee if any of the barriers occur, therefore the usage of premises doesn’t occur. For example, if the leased house was occupied by the lessor’s property or leased object was subject to another running lease agreement. In these situations, the lessor shall work to remove these barriers. Only the lessor has the authority to claim for removing the barriers from the premises, the lessee will not be capable to claim for this remove. Delivery may be made once the 34 parties agree if the leased item is in the possession of the lessee before the lease13. What Shall the Lessor Deliver: The lessor shall deliver the leased premises and its annexes to the lessee in a condition sufficient to benefit according to the agreement or the nature of the premises14. For example, if the premises was a house the surrounding garden is considered an annex for it. Time of Delivery: Payment shall be immediately made once the obligation is finally on the debtor, as long as there is no agreement or provision stating otherwise. However, the judge may, in exceptional conditions, if not restricted by the law, grant the debtor a reasonable period to perform his obligation, if his condition so requires and the 13 Article 435- Civil Code 14 Article 564- Civil Code 35 creditor does not suffer any grave harm from such postponement15. Place of Delivery: In the event the object of the obligation is specified, it shall be then delivered where it existed at the time it was constituted, as long as no agreement or provisions states otherwise. In other obligations, payment shall be at the place where the debtor’s domicile is located at the time of payment or at the place where the business of the creditor is located if the debt is related to such business16. Sanctions for Violation of Such Obligation: The creditor may obtain a judgment compelling the debtor with a specific performance to perform such obligation if specific performance of obligation is not possible or unsuitable unless it is performed by the 15 Article 346-Civil Code 16 Article 347-Civil Code 36 debtor. The debtor shall then pay a warning fine if he refrains from doing so. If the judge deems that the amount of the fine is not sufficient to compel the debtor refraining from performance, the judge may then increase the fine every time there is a reason for increase17. In the event it is impossible for the debtor to perform the obligation in specie, a judgment is then rendered thereupon with compensation for the non- performance of obligation, unless the debtor proves that the impossibility of performance was caused by a foreign reason beyond his control. Same provision applies if the debtor is delayed in performing his obligation18. 17 Article 213-Civil Code 18 Article 215-Civil Code 37  2) The Lessor’s Obligation to Maintain the Object: Lease contract is a continuous contract, it extends to a specific period accordingly, the leased premises will not be suitable for use unless it still is at the same condition of delivery. Lessor is not obliged with simple maintenance which results from the usual use of the leased premises, the lessor is obliged only with the important maintenance. Sanctions for Violation of Such Obligation: In the event the lessor, after warning him, is delayed in performing the obligation of maintenance, the lessee may then obtain a permission from the court to perform such obligation and recover the costs by deduction from 38 the rent, without prejudice to his right to request rescinding or decrease of rent. The lessee may, without obtaining permission from the court, perform the urgent or simple restorations required from the lessor, whether the defect existed at the beginning of lease or later if the lessor does not perform them after being warned in an appropriate time 19. Moreover, the lessee may recover the costs by deduction from the rent under the following conditions: 1) The maintenance shall be simple or urgent. 2) The lessee shall notify the lessor and get the court authorization. 3) If the lessee was not able to perform such maintenance according to its high expenses, he can claim 19 Article 568-Civil Code 39 only for reduction of rent or resolution, moreover he can claim for damages. 3) Obligation of Warranty: The lessor shall refrain from all acts which might result in the inability of use by the lessee of the leased premise and may not incorporate any changes violating such use. The lessor’s guarantee is not exclusive to his acts or his affiliates’ but rather extends to any interception or damage based on a legal ground by any other lessee or any other person receiving the right from the lessor20. In the event there are several lessees to one premise, the lessee possessing such premise first without fraud is then preferred. 20 Article 571-Civil Code 40  In the event a lessee registers his contract in bona- fide prior to another lessee possessing the leased premise or prior to renewing his lease contract, such lessee is then preferred. If there is no ground for preference of one of the lessees, they are then not entitled in such conflict except to claiming compensation21. The lessor does not warrant the lessee material interruption if committed by a foreign person as long as the interceptor does not claim a right. This does not prejudice the lessee’s right to file a case in his name against the inceptor claiming compensation and all kinds of seizure claims. If the materialistic interception occurs beyond the control of the lessor and is of gravity preventing the lessee from using the leased premise, the 21 Article 573- Civil Code 41 lessee may then – according to circumstances – request contract rescission or rent decrease22. 4) Obligation of Guarantee Against Defects: The lessor guarantees all the items in the leased premise against defects preventing from the use or gravely decreasing such use but does not guarantee defects normally accepted. The lessor is liable for the premise being clear of any characteristics which he explicitly undertook to be clear of or the premise’s characteristics required for its use, unless the agreement otherwise states. The lessor does not guarantee the defect if the lessee was notified or aware about it at the time of the contract23. The Defect is the barrier that stands against the use of the leased premises, it shall be effective, which means 22 Article 575- Civil Code 23 Article 576-Civil Code 42 that if lessee was able to identify this defect at time of contracting, he will not decide to enter into such contract. Moreover, the defect shall be hidden from lessee as he cannot discover it at time of creating the contract, if the lessee was able to know the defect at time of creating the contract such defect shall not be hidden. If there is a defect in the premises effecting guarantee, the lessee – according to circumstances – may request contract rescission or rent decrease and may also request the repair of the leased premises or repair it himself at the expense of the lessor if such repair does not oppress the lessor. In the event damage occurs to the lessee due to the defect, the lessor shall compensate him, as long as it is not evidenced that he was unaware of the defect24. 24 Article 577- Civil Code 43  Obligations of Lessee Towards the Lessor 1) The Lessee is obliged to Maintain the Leased Premises: Lease contract is a temporary contract, it depends on the passage of its term, the lessee shall maintain the leased object during the term of contract, this obligation extends to cover all annexes received by lessee25. The Level of Care Required in Maintaining the Leased Premises: The lessee shall exercise the ordinary effort in using and maintaining the leased premises. The lessee is liable for damage or destruction arising from unusual use and occurring to the premises during his use26. 25 Article 611 of Civil Code decides “In the event the lessee receives livestock and agricultural equipment owned by the lessor, he shall then maintain and cater for them in the customary manner.” 26 Article 583- Civil Code 44  The lessee’s care changes according to the variety of the surrounding circumstances, it depends on the nature of leased premises, custom and aim of use of the premises. The court has the authority to decide if the lessee had performed the due care or not. For example; if the leased premises was a furnished house the lessee is obliged not to expose the furniture to a direct source of dust or water. 2) The Obligation to Pay the Rent: The obligation to pay the rent is one of the most important obligations the lessee shall perform. The lessee shall pay the rent mentioned through the contract. Time of Payment: The lessee shall pay the amount of rent at the time mentioned in the contract according to the final 45 agreement of parties and in the event there is no agreement, rent shall be paid at the times determined by the custom27. The parties can freely agree on the time of paying the rent. If the contract failed to determine clearly the time of paying the rent, therefore any doubt shall be in favor of lessee as he is the debtor obliged to pay the rent28. For instance, if the contract decides the rent shall be paid every month without deciding a special day therefore the time of paying the rent will be by the last day of month. If the contract did not mention a specific time for paying the rent therefore it shall be paid according to custom’s regulations. For example, the rent of buildings is paid at the beginning of every month before the use of building. 27 Article 586- Civil Code 28 Article 151- Civil Code 46  If both contract and custom fail to determine the time for paying the rent, therefore the payment shall be by the end of use of premises. Place of Payment: The parties can freely agree on the place of paying the rent, if the contract fails to determine the place of paying the rent, the lessee shall pay it according to custom’s regulations like in case of buildings the rent shall be paid at leased premises even if it was not the place of the lessee’s residency. According to article 586/2 if both contract and custom fail to determine the place of payment, it shall be paid at the lessee’s domicile or at the place of activities related to lease. Prescription of Lease: The rent lapses by the passage of five years from the time set for paying it. If the rent takes the form of 47 premiums therefore prescription starts from the date of payment of each premium. Prescription affects only the right of lessor to claim demanding the rent, it doesn’t extend to affect the rest of lessor’s rights such as the right of suing for damages which lapses by the passage of fifteen years. Violation of Obligation of Paying the Rent: Lease contract is a bilateral contract, therefore if one of its parties fails to perform his obligations the other party can claim for rescission of agreement or specific performance. Specific performance is applied through distrain of the lessee’s movables and selling them by auction according to civil procedure rules. Rescission: Rescission can be through; an agreement between lessor and lessee, court judgement or 48 through application of explicit rescission condition depending on lessor’s intention without judgments. The lessee is considered late in performing such obligation by reaching the date of payment mentioned in the contract and receiving legal notice from the lessor. This notice puts the lessee in the position of being late in performing such obligation. 49  Transfer of Rights and Obligations Transfer of Lease by the Transfer of Ownership: Lease contract does not prevent the lessor to transfer ownership of leased premises. The lessor still has the authority to sell the leased premises, donate it as a gift or submit it as a share in a corporate. Moreover, the lessor’s creditors can distrain the leased premises and sell it by auction to receive their own debts from price. What will happen to lease is a very important question that imposes itself in this situation? The main rule; that transfer of ownership doesn’t terminate lease contract, but this rule is not a matter of public order therefore the parties can agree to violate it. This happens if the lessor includes the contract a condition that terminates the contract if he sells the leased premises. If the contract did not decide its termination by the transfer 50 of ownership the contract will continue to produce its legal effects between the two parties29. 29 Article 604-Civil Code, Article 146 – Civil Code decides “In the event the contract constitutes personal rights and obligations in connection with an object that is later transferred to singular successors, such rights and obligations are transferred to such successors at the time the object is transferred if they are of its requisites and the singular successors are aware of it at the time of transfer of the object.” 51  Assignment and Subleasing of Lease Article 593 – Civil Code decides “The lessee has the right to assign lease or sublease all or part of the leased object unless there is an agreement stating otherwise”. Assignment: Assignment of lease contract means the transfer of lessee’s rights and obligations to the assignee; this operation includes two legal operations. The first is the transfer of rights and the second is the transfer of debts. The assignment of lease is a consensual agreement that could be done for a consideration or through donation, therefore it does not require a special form. It is formed only by the consent of assignee and assignor without consent of lessor. Subleasing: Subleasing is a contract that obliges the lessee of a specific premises to grant third party the opportunity to use such premises for a specific consideration. This 52 means that the subleasing is a new lease contract between the original lessee who will be a lessor in the new contract and a third party who will be the lessee in the new contract. Preventing the lessee from subleasing necessitates preventing him from lease assignment and vice versa. In the event of lease assignment, the lessee remains guarantor to the assignee in his performance of obligations. 53  Termination of Lease Contract Lease Contract terminates by the passage of its term, but in sometimes it terminates during the period of execution according to accidental reasons. Termination of Lease Contract by Passage of its Term: Lease contract terminates by the passage of its term even if that is not mentioned in the contract or determined by law. When the contract clearly defines the term of lease, accordingly the contract terminates by the passage of its term. If the contract stipulates a notification for termination and evacuation from premises therefore the contract shall not terminate unless such notification takes place. If the contract fails to determine its term accordingly the law considers that term as the term 54 required for paying the rent that decided by article 563 of civil law. This article stipulates a legal notification from the party intents to terminate the contract. If both parties stipulate a legal notice for termination therefore the term of contract extends if that legal notice did not take place at the time mentioned in the contract. This extension will be for another term equals to the original one and governed by the same conditions. Lease Contract may extend according to article 599/1 that decides “In the event the lease contract and the lessee keeps using the leased premise with the acknowledgment of the lessor and without objection on his part, the lease is then deemed renewed under its previous terms but for an indefinite term. In the event the lease is renewed in this manner, it is then subject to the provisions of Article 563”. 55  Termination of Lease Contract Depending on Accidental Reasons: Lease contract always requires some time for its performance, this may face unexpected difficulties which cause hardness in performing obligations mentioned in the contract. Accordingly, the legislator decides the termination of lease contract due to some accidental reasons such as; lessee’s death and insolvency, agreement of two parties due to the personal need, changing the residency of employee and occurrence of unexpected and dangerous circumstances. 1) Death or Insolvency of the Lessee: The lease does not expire by the death of the lessor or the lessee. If the lessee passes away, his heirs may request the termination of the contract if they prove that due to the death of their testator the burdens of the contract have become so cumbersome for their resources, 56 or that the lease exceeded their need; in such event the vacating dates indicated in Article 563 must be observed and the request to terminate the contract must be within a maximum of six months from the time of the lessee’s death30. In the event the lease is only concluded due to the profession of the lessee or other considerations in connection to his person, his heirs or the lessor has the right to request termination of the contract if the lessee dies31. The insolvency of the lessee does not result in the maturity of rent not due yet. However, the lessor may request to rescind the contract if no securities 30 Article 601- Civil Code 31 Article 602- Civil Code 57 guaranteeing payment of the rent are submitted to him in an appropriate time32. 2)Agreement of Both Parties Depending on the Lessor’s Personal Need: In the event it is agreed upon that the lessor may terminate the contract if a personal needs to the premises occurs, he shall warn the lessee to vacate the premises while exercising this right at the times determined in Article 563 unless the agreement states other regulations33. 3) Changing the Residency of Employee: If the lessee is an employee or servant, in the event his work requires that he changes his residence, may request the termination of the lease of his house if such lease is of a definite period, provided that he observes 32 Article 603- Civil Code 33 Article 607- Civil Code 58 the dates indicated in Article 563. All other agreements stating otherwise are null and void34. 4) Occurrence of Unexpected and Dangerous Circumstances: In the event the lease is for a definite period, both parties may request the termination of the contract prior to its expiry if unexpected and dangerous circumstances occur which might make the execution of the lease impossible during its effectiveness, provided that vacating warning times indicated in Article 563 are observed and that the other party is fairly compensated. In the event the lessor is the party requesting the termination of the contract, the lessee is then not obligated to return the leased premises until he receives compensation or sufficient security35. 34 Article 609 – Civil Code 35 Article 608 – Civil Code 59