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North Macedonia

Law and regulation of rental agreements in North Macedonia during Covid-19

Table of contents
  1.  Is a lessee eligible for rent reduction due to a significant decline in footfall and consequently its turnover as a result of COVID-19?
  2.  Is a lessee eligible to temporarily close its leased space - on its own initiative – and opt for rent reduction as a result of COVID-19?
  3.  Is a lessee eligible for rent reduction in the event its leased space is closed following an order by the Government as a result of COVID-19?
  4.  What kind of security is generally provided by a tenant in connection with a lease, a bank guarantee, a deposit or otherwise?
  5.  Could a lessee consider other legal options, such as a lease termination, not paying rent at all or other options as a result of COVID-19? 
North Macedonia
Updated on 31.03.2020

1. Is a lessee eligible for rent reduction due to a significant decline in footfall and consequently its turnover as a result of COVID-19?

No, in principle not.

2. Is a lessee eligible to temporarily close its leased space - on its own initiative – and opt for rent reduction as a result of COVID-19?

Unless otherwise agreed in the lease, a lessee is eligible to temporarily close its leased space on its own initiative but, in principle, it cannot suspend or reduce the rent unilaterally.

3. Is a lessee eligible for rent reduction in the event its leased space is closed following an order by the Government as a result of COVID-19?

According to the Law on Contracts and Torts, in the event of partial inability to fulfil the obligation of the lease agreement due to an event for which neither party is responsible (order by the Government), one of the parties may terminate the lease agreement if the partial fulfilment does not meet its needs. However, if the lease agreement remains in force, the lessee has the right to request a proportionate rent reduction in its liability. Therefore, according to the law, it appears that the lessee has the right for rent reduction, however this should be additionally agreed with the landlord. In case if the landlord does not agree with this, it appears that the concluded contract remains applicable.

4. What kind of security is generally provided by a tenant in connection with a lease, a bank guarantee, a deposit or otherwise?

Both bank guarantees and deposits are widely used.

The availability of such options would depend on the scope and duration of the Government intervention during the state of emergency. Lease termination would be possible if there are circumstances after the conclusion of the lease that make it difficult for one party to fulfil the obligation or if the purpose of the lease cannot be completed. This should be to the extent that the lease no longer meets the expectations of the contracting parties, and that in the general opinion it is unjustifiable to maintain the contract in force as it is. If the party who has difficulty fulfilling the contract obligation i.e. the party who could not achieve the main purpose of the lease, due to changed circumstances, it may require its termination. However, the lease would not be terminated if the other party decides to offer or agree to modify the terms of the lease on more fair terms.

On the other hand, a lessee is not permitted to unilaterally decide not to pay the rent. If the lessee did stop paying rent, this may result in a compensation claim by the lessor to the court.

Authors

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Dusan Bosiljanov