A Guide to Commercial Leases under the OHADA Uniform Acts for Multinational Companies in the OHADA Region - (Part B)

Recap of Part A

In the first Part of this Guide, we discussed the fundamental framework of commercial leases under the OHADA Uniform Acts, covering the Applicable Scope and Exclusions of the Commercial Lease provisions under the OHADA Uniform Act on General Commercial Law (the Act), Formation and Duration of a Lease, and Rent. We highlighted the importance of understanding these principles for multinational and local companies operating within the OHADA region to ensure compliance and mitigate risks in lease agreements.

Introduction to Part B

In this section, we will discuss the specific obligations of the lessor, the continuity of the lease in the event of death or dissolution, the obligations of the lessee, Termination and Renewal provisions, dispute resolution, and ancillary services under the Understanding these obligations is crucial for maintaining a harmonious and legally compliant lease relationship.

Obligations of the Lessor

The Act makes copious provisions regarding the obligations of the Lessor, requiring the Lessor to provide premises in good condition, perform major repairs, refrain from altering premises without consent, and compensate for disturbances. Responsibilities continue even after transfer or death of the lessor (if a natural person).

Condition of Premises (Article 105): The lessor must rent out premises in good condition. This will naturally encompass structural soundness, functionality, and suitability for the intended use. This provision protects the lessee by guaranteeing that they are renting premises that are safe and fit for their business operations. This obligation is presumed to be fulfilled:

- When the lease is verbal. This means that in the absence of a written contract, the law assumes that the lessor has met their duty to provide premises in good condition. This presumption operates to simplify the legal process and reduce disputes about the state of the premises at the time of leasing.

- When the lessee signs the lease without raising reservations about the condition of the premises.

Major and Urgent Repairs (Article 106)

Article 106 of the Act outlines the obligations of the lessor regarding necessary and urgent major repairs. This provision ensures that the lessor is responsible for maintaining the structural integrity and functionality of the leased premises and protects the lessee from bearing the burden of significant repairs, and further provides mechanisms for judicial relief when necessary. Let us discuss the provisions in a little more detail.

-?The lessor must bear the cost of necessary and urgent major repairs. These repairs include significant structural elements such as: Big walls, Vaults, Beams, Roofs, Retaining walls, Fence walls, Septic systems, and Sump pits. The rationale is that such repairs are essential to ensure the premises remain safe and usable for the lessee’s operations.

-?If major repairs are required, they might negatively affect the lessee’s use and enjoyment of the premises. In such cases: 1) The amount of rent shall be decreased proportionally to the time and extent of reduced enjoyment of the premises. 2) If the repairs are so urgent and extensive that they prevent the lessee from using the property, the lessee may seek a suspension of the lease during the repair period.

-?The lessee has the right to request judicial termination of the lease if the major repairs are so disruptive that continued occupation is not feasible. This can be sought from the competent court, which is required to rule expeditiously. The court’s role is to provide a legal remedy and ensure that both parties are treated fairly during such unavoidable disruptions.

Authorization for Repairs (Article 107)

This article protects the lessee by providing a legal avenue to ensure that essential repairs are carried out, even if the lessor is unwilling or unable to fulfill his obligation.

- If the lessor refuses to pay for major repairs for which he is liable, the lessee can seek authorization from the competent court to undertake the repairs on behalf of the lessor.

- The court must rule expeditiously, setting the amount for such repairs and the modalities for the lessor to refund the lessee.

Restrictions on Changes (Article 108)

This provision ensures that the lessee's use of the premises is not disrupted or diminished by arbitrary actions from the lessor, thereby providing stability and predictability in the lease agreement.

- The lessor cannot make changes to the state of the leased premises or restrict their use without the lessee's consent. Well, there is no proviso that "the consent should not be unreasonably withheld". However, the competent court is always available where such disputes arise.

Liability for Disturbances (Article 109)

This article holds the lessor accountable for ensuring that the lessee can use the premises without interference or disturbances caused by the lessor or those under the lessor’s control. The lessor is liable to the lessee for disturbances caused by the lessor, successors, or attendants.

Transfer of Lessor's Rights - ARTICLE 110:

This provision ensures the continuity of the lease agreement even if ownership of the premises changes, protecting the lessee’s interests and providing stability for their business operations If the lessor's rights to the premises cease (e.g., due to transfer), the new lessor automatically assumes all obligations under the lease and continues with the lease. The lease shall not be terminated if the lessor’s rights to the leased premises cease.

CONTINUITY OF LEASE IN CASE OF DEATH OR DISSOLUTION

Article 111 of the Act provides mechanisms for the continuation or termination of the lease in the event of the lessee’s or lessor’s death or the dissolution of the lessee’s legal entity, ensuring that the transition is handled smoothly and fairly.

Death of the Parties

·?????? Lessor's Death: The lease remains in effect and is not terminated due to the death of the lessor. The new owner or heirs of the lessor will automatically assume the obligations of the lease, ensuring the lessee's rights are protected.

·?????? Lessee's Death (Natural Person): The lease does not terminate upon the death of the lessee. The lease can continue with the lessee’s immediate family members (spouses, immediate ascendants, or descendants) who notify the lessor within three months of the lessee's death. The notification must be served by a bailiff or through any means ensuring actual receipt by the lessor. In cases where multiple family members request to continue the lease, the lessor can seek a court ruling to appoint a single successor. If no notification is received within the three-month period, the lease terminates automatically (ipso jure).

Dissolution of a Legal Entity Lessee

·??????Dissolution: The lease does not automatically terminate if the lessee is a legal entity that dissolves. The liquidator of the dissolved entity must continue to fulfill the lessee’s obligations under the lease agreement. If the liquidator fails to act on these obligations, the lessor can issue a formal notice to the liquidator. If the liquidator does not respond or comply with the notice within 60 days, the lease terminates automatically (ipso jure).

Implications:

- For Lessors: The lessor must recognize the continuation rights of the lessee’s family members and the liquidator of a dissolved entity, and cannot unilaterally terminate the lease upon such events.

- For Lessees: The lessee's family members or the legal entity’s liquidator must act promptly to notify the lessor or risk automatic termination of the lease.

- Legal Certainty: This article provides legal certainty and protection for both parties, ensuring continuity and stability of the lease arrangement despite significant life events.

OBLIGATIONS OF THE LESSEE

The Act outlines the lessee’s financial obligations, proper use of the premises, maintenance responsibilities, and procedures for vacating the premises. The provisions aim to ensure the lessee upholds their end of the lease agreement, maintains the premises in good condition, and adheres to agreed-upon terms regarding the use and termination of the lease. The provisions also provide mechanisms for resolving disputes and protecting the lessor's rights:

Payment of Rent - ARTICLE 112:

- The lessee must pay rent as agreed with the lessor, either by correspondence or electronically.

- The payment terms must align with the conditions agreed upon with the lessor or the lessor’s authorized representative.

Use of Premises - ARTICLE 113:

- The lessee must use the premises in good faith according to the lease's terms or presumed use.

- If there is no written agreement, the lessee must use the premises based on the presumed intended use.

- Any change or addition to the use stipulated in the lease requires the lessor's prior consent. The lessor may oppose such changes with valid reasons.

- In case of disagreement, either party can seek resolution through the competent court.

Maintenance and Repairs - ARTICLE 114:

- The lessee is responsible for maintenance and minor repairs during the lease. The lessee must ensure that the premises are kept in good condition throughout the lease term. I believe that minor repairs, which are non-structural in nature, should fall under the Lessor's obligations.

- The lessee is liable for any damage or loss resulting from inadequate maintenance.

Vacating Premises - ARTICLE 115:

- At the end of the lease, if the lessee fails to vacate the premises without the lessor's consent and outside the reasons for termination specified in Article 126, the lessee must pay an occupancy fee equal to the rent for the duration of the lease.

- The lessor can claim additional damages beyond the occupancy fee for any losses incurred due to the lessee’s failure to vacate.

Summary of Legal Obligations of the Lessee

The Lessee is obligated to ?Pay rent, use premises in good faith as per lease terms, obtain consent for changes in use, maintain and repair the premises, and vacate at lease end.

Recap:

In Part B, we delved into the specific obligations of the lessor and lessee under the OHADA Uniform Act, covering essential aspects such as the condition of premises, major repairs, the continuity of leases in case of death or dissolution, and the lessee's responsibilities. Key points included the lessor's duty to maintain premises and make urgent repairs, the automatic continuation of leases despite changes in lessor ownership or lessee status, and the lessee's obligations regarding rent, use, and maintenance of the premises.

In the next part, we will explore the processes and legal considerations surrounding the Renewal of Lease, Termination Procedure & Compliance, Dispute Resolution, and how to deal with Ancillary Services to ensure comprehensive lease management and adherence to legal standards.

Navigating commercial leases under the OHADA Uniform Acts requires careful consideration of legal nuances and compliance requirements. Whether you're a multinational company expanding operations or a local business navigating lease agreements in the OHADA region, understanding these regulations is crucial. For tailored guidance and expert advice on optimizing your lease agreements to align with business objectives and ensure legal compliance, feel free to reach out.

#OHADA #CommercialLeases #BusinessLaw #MultinationalCompanies #AfricanBusiness #LegalFramework #TradeAndInvestment #BusinessCompliance #LegalGuidance #InvestmentInAfrica #CorporateLaw #LeasingRegulations