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Lease Performance Claim and the Tenant's Related Objections

Lease Performance Claim and the Tenant's Related Objections

legal insight

February 2024

George Zaouris, Lawyer

Abstract: In a previous article, on the occasion of the analysis of the legal framework governing the correction of first offer price in e-auctions (Art.954 (4) of the Civil Code), we talked about the upward price trend in the Greek real estate market. The ever-increasing purchase and rental price of a property, combined with the economic recession that is being observed, inevitably leads to the difficulty of many tenants to pay the agreed rent. By extension, non-payment of rent to landlords creates a demand by the latter that the tenant leaves and the lease is returned to them. In this article we will discuss objections that the tenant may raise in the action for the return of the lease brought against him by the landlord, that is, the action seeking to return the lease to the landlord's own possession.

1. Concept of lease 

For the purposes of the present analysis, it is necessary to consider what a lease is, first of all. According to the provision of Article 574 of the Civil Code: 'Under the contract for the lease of goods, the lessor is obliged to grant the lessee the use of the goods for the duration of the contract and the lessee is obliged to pay the agreed rent'. It is therefore a continuing contract between the lessor who grants the use of the leased property for the whole agreed period to the lessee, who in turn pays the agreed rent for the whole period of use. In contrast to the transfer of a property, this is a contract of obligation, i.e. the object of the contract is merely the use of the leased property and not a transfer of ownership.

The lease may be for a fixed or indefinite period, depending on the agreement of the parties. A lease for an indefinite period (CC 608(2)) ends on termination by either party, whereas a fixed-term lease simply expires at the end of the agreed term. If the lessee remains in the lease after the agreed term has expired and continues to pay the rent regularly, with the lessor's consent, then the lease becomes an open-ended lease and is now terminated only by termination by either party. However, a fixed-term lease may also be terminated under certain conditions. 

2. On the action for restitution of the lease - Repayment on termination of the lease or termination

The expiry or termination of the lease implies, inter alia, the obligation of the tenant to return the leasehold as he received it (CC 599), i.e. by taking from the leasehold all that he had acquired for his own use. The basis of the lessor's claim for the return of the lease is therefore the lease contract itself.

If the tenant refuses to vacate the lease, then the landlord is entitled to bring an action for restitution of the lease against the tenant (or the joint tenants if there are more than one). If the monthly rent does not exceed EUR 600 per month, the action is brought in the competent local Magistrates' Court (Article 14 of the Civil Code), otherwise in the competent local Single-Member Court of First Instance.

The action must, in any case, refer to a validly drawn up lease contract, the reason for the lease (expiry or termination of the lease due to termination), the legitimacy and legal interest of the plaintiff and a specific request for the lease to be returned, the latter being described in detail so that there is no doubt as to its identity and the action is rejected as indefinite.

In fact, the judgment admitting the action is necessarily declared provisionally enforceable in the sense that the lessor has directly, with the issuance of the original judgment, an enforceable title in his hands to expel the lessee from the lease (Art. 910 No. 1 CCP). 

3. Claim for reimbursement for delayed payment of rent due to maladministration

A tenant in default is, in principle, a tenant who is in arrears, i.e. who has not paid the rent on time. He becomes a defaulter by means of a judicial or extrajudicial injunction, unless a day has been agreed for the payment of the rent, in which case only the expiry of that day is sufficient (CC 1133/1995, CC 1547/1992).

In such a case where the lessee is late in paying part or all of the rent, the lessor may terminate the lease contract at least one month in advance if the lease is for a year or more and ten days in advance in other leases (597 CC). The tenant in this case, if he pays the overdue rent and any costs for the termination, negates the effects of the termination.

Alternatively, in the case of culpable delay in payment of rent, the law reserves the right for the lessor to bring an action for restitution of the lease without having terminated the lease agreement and before its expiry.

In particular, according to Article 66 of the Introductory Law of the Code of Civil Procedure: "If the tenant is in arrears with the rent due to dishonour, the landlord has the right to demand that the tenancy be returned to him for the duration of the tenancy, and if he has not terminated the tenancy in accordance with Article 597 CC. The bringing of the action in this case does not constitute a termination of the contract".

The law therefore gives the landlord the right to proceed directly to bring an action if the tenant has culpably delayed in paying the agreed rent and demanding the return of the lease.

Below, we will discuss indicatively possible objections that the lessee may raise to dismiss the action brought against him, depending on the reason for bringing the action for the return of the lease.

4. Procedural objections to the claim

For example, the tenant may raise the objection of lack of specificity of the action, the objection of lack of legitimacy (if not all the facts that legitimize the plaintiff as a lessor and justify bringing the action against the defendant as a tenant (Art. 216 CCP) are mentioned, then the latter may raise the relevant objection) and the objection of lack of legal interest: 

4.1 Objections relating to the contract 

Objection of nullity of the lease contract. For example, the lessee may raise:

The objection to the virtuality of the lease contract: i.e. if the (new) lease contract was concluded virtually, i.e. seemingly, without any intention to change the pre-existing legal situation, then the lessee can raise the relevant objection, which will lead to the rejection of the claim in substance (CC 681/2016). The prerequisite is that both parties had knowledge of the virtuality of the contract (CC 139). B) The objection of lack of validity of the lease contract. In such a case, as in the case of a constructive lease, the remedy would be to bring an action for recovery or an action for restitution of possession. 

Furthermore, the invalidity of the lease also entails any subleases of the lease, which have been subsequently concluded, due to the incidental nature of the sublease, which can only exist in relation to the master lease, even if the same (sublease) is between the subtenant and the subtenant in all respects valid (AP 281/2020, AP 1192/2013). 

4.2 Other substantive objections

A) Objection of payment: here the lessee needs to prove that he has legally paid the rent due (CC 416 et seq.) and in particular that he has paid:

(i) To the landlord (Payment can also be made by a third party e.g. the sub-tenant or spouse in a family home tenancy, if it concerns the payment of the tenant's rent),

(ii) In time,

(iii) In the manner agreed (usually in money, as the landlord may refuse another method of payment such as a bill of exchange or cheque - AC 1408/1990, AC 363/1993); and 

(iv) That payment of the amount due is in full and not in part. In order to be proper, the payment must be full, i.e. it must include not only the principal rent, but also all its attendant and generally incidental sums due, such as interest on arrears, stamp duty, common charges, etc. (AC 902/1996, MonoprThes 5230/1995, MonoprAth 2898/1993).

In the case of an action for restitution of the rent due to unconscionability, the payment of all rent due up to the date of the hearing of the restitution action, as well as the court costs incurred in bringing the action, shall terminate the proceedings opened by the latter, unless there is repeated delay due to unconscionability, in which case the above shall not apply. Repeated contumaciousness exists where the lessee, despite the lessor's request, delays payment of rent on at least two occasions in a manner that shows persistence in not fulfilling his obligation to pay the rent, one or more of each case (CC 184/1994, CC 1547/1992). The time elapsing between two delays is irrelevant (FAC 25/1985). 

B) Objection to set-off: Offsetting results in a write-off of mutual claims between two persons, as long as they are covered, if they are similar in subject matter and due (CC 440) It has been held in law that: "The tenant, when there is an agreement to set off rent due against expenses incurred by him on the leasehold, may admissibly propose to set off his counterclaim for expenses incurred on the leasehold against the claim for rent due, if the claims set off coexisted [... ] prior to the lodging of the application for an order for payment of the rent and are therefore already mutually extinguished since they have been coexisting' (CP 337/2001). Furthermore, according to the FSA 9099/1990: 'In the view considered to be the most correct, it is sufficient for the counterclaim proposed to be set off to have arisen during the termination period. Furthermore, according to the correct interpretation of the above provision, there can be no set-off against a claim for which the creditor has exercised a right of termination or rescission because a new situation has arisen which cannot be subsequently reversed').

C) Objection of limitation: The bringing of the action is subject to a twenty-year limitation period (CC 249), which starts from the time of the termination or expiry of the lease, when the claim for restitution of the lease arises. By way of exception, in an action for restitution of the lease on account of the tenant's disgrace, where there is no termination, the twenty-year period starts to run from the date of the delay in payment of the rent, since that is when the claim arises.

However, the claim for payment of rent is subject to a five-year limitation period (CC 250 No 16). This practically means that if the landlord does not give notice (CC 597) and does not proceed with the claim within the five years from the time when the tenant was due to pay the respective rent, then the claim will be based on overdue rent and will be rejected.

Finally, according to Article 602 of the Civil Code, the landlord's claims for compensation due to damage or alterations to the leasehold property are time-barred six months after he took it over. 

D) Objection of abuse of right (CC 281): although the tenant is considered to be in bad faith as soon as the agreed date of payment of the rent has passed, the bringing of an action for negligent delay of a rent is abusive and contrary to good faith (CC 288). A similar solution is also available when the tenant fails to pay a small, but insignificant, amount of the rent. It has been ruled in case law that it is abusive to bring an action when the lessor has been collecting rent for more than three years without applying the agreed revaluation clause, creating the belief in the lessee that he will never apply it (M.P.T. 29998/2001). It is not, however, abusive for the lessor to refuse to consent to an extension of the old lease or to the conclusion of a new lease (CC 428/2000).

E) Objection to public deposit: If the tenant had duly offered the rent due from him to the landlord, the latter became in default and the tenant can therefore proceed to a public deposit of the amount in the Deposit and Loan Fund (CC 427 et seq.), proposing the objection, since the debt has been paid off in this way. The same conditions apply to the proper offer of the rent as to the repayment, as explained in the corresponding objection.

F) Objection to seizure: If the tenant has counterclaims against the landlord, e.g. from repair costs of the lease, the tenant can, by means of a retention objection (CC 325), withhold the lease until the landlord has fulfilled his own obligation. The tenant has the same objection when he pays the rent due, but the landlord does not issue a receipt for this reason.

G) Objection of lack of fault in relation to the disgrace: The lessee as a debtor may claim that the delay in payment of the rent or partial payment of the rent is due to an event for which he is not responsible (Articles 330 and 342 CC), in which case his default, and thus also his disgrace, is waived. There is no default and the presumption of liability of the lessee is rebutted under Article 342 CC, if the lessee claims and proves that the delay is due to a reasonable cause, i.e. an event for which he is not liable (MEfPir 169/2020, AC 1606/1999). The financial hardship of the lessee (correspondingly, bankruptcy), whatever the cause, is not a reasonable cause for non-payment of the rent (METFHES 199/2015). However, it is sufficient for the lessee, upon objection, to claim and prove that, due to a real defect of the lease (e.g. damage to the pergola dangerous to physical integrity, moisture in the walls that curl the windows that hinder the agreed use - MephAth 5702/2022), the free and undisturbed use of the lease is prevented to such an extent (in whole or in part) that the right to use it is now rendered meaningless. There is also the possibility of reduced payment of the rent until the damage is repaired. This plea is a defence which is a catalyst for the action for restitution of the lease on the ground of disrepair and, if successful, will result in its dismissal.

H) Objection relating to the amendment of the lease (specifically as to the disrepair): the tenant may claim that by subsequent agreement the lease has been amended, e.g. as to the time of payment of rent, and prove that there is no rent arrears or late payment of rent (disrepair).

5. In lieu of an epilogue

The objections that a tenant may raise vary and differ in content based on the background of each claim. It is therefore important to assess not only the formal elements of the claim but also all the facts on which it is based, as any deficiency or inaccuracy may lead to the rejection of the claim by raising the appropriate objection.

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