Law and regulation of rental agreements in Bosnia & Herzegovina during Covid-19

Generally, no except in case that the underlaying contract provides this option.

If no official prohibition or restriction is imposed it can be claimed that a lessee does not have a valid basis to close its leased space. In any case, it is also important to review the relevant lease agreement in order to fully determine what options are available for the lessee.

In principle, an order of the Government which prevent the parties to exercise their rights under lease agreement - primarily use of premises – could be qualified as a “force majeure” event. If we assume that such order is of temporary nature, then the lessee may claim that it is not obliged to pay the rent since it cannot access and use the leased space. In respect to COVID-19, at this stage, it is hard to claim that this situation also provides a right to the lessee terminate the agreement, as it cannot be precisely foreseen for how long such orders will be in force.

On the other hand, under local laws, a lessee may also claim existence of so called “changed circumstances”. Accordingly to the law, such circumstances must be of such a degree where it is evident that the agreement cannot meet the expectations of the parties and where it would be clearly unjustified to stay in such agreement (also taking into consideration general opinion).

Accordingly, a party which cannot achieve the purpose of the agreement (e.g., lessee) may terminate the agreement (via court). However, the law also provides that the agreement will not be terminated if the other party (e.g., lessor) offers or accepts to amend the agreement in an equitable way, so in essence there is a mitigation tool for the lessor which may be used to prevent such termination.

In any case, the relevant lease agreement must be reviewed in order to precisely determine all rights and obligations of the parties.

Usually a cash deposit, bank guarantee, promissory notes and rarely some other forms of guarantees.

As explained under 3 above, COVID-19 crisis may entitle a lessee to claim that it is not obliged to pay the rent due to the force majeure event. Also, as noted above, the lessee may also request termination of the lease agreement due to the changed circumstances. However, in any case it is highly important to also review the relevant lease agreement in order to clearly determine all available rights and options.