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Is it possible to compensate the lessee for the cost of improvements made without the consent of the lessor?

Andrei Slabko, lawyer

QUESTION: Is it possible to compensate the lessee for the cost of improvements, which are not separable without harm to the property, made without the consent of the lessor?

Short answer: Yes, it is possible, but with the consent of the landlord.

Improvements that are firmly connected with the leased property and cannot be separated from the property without harming it and, in addition, entail a change in the value of the property.

As a general rule, the cost of inseparable improvements is subject to compensation to the lessee, if such improvements are made with the consent of the lessor and at the expense of the lessee’s own funds, unless otherwise provided by the contract (clause 2 of article 594 of the Civil Code).

However, if the lessee made inseparable improvements without the consent of the lessor, the cost of such improvements is not refundable in accordance with clause 3 of article 594 of the Civil Code, unless otherwise provided by law. At the same time, as we consider, clause 3 of article 594 of the Civil Code does not indicate that the lessor cannot subsequently agree on (approve) the inseparable improvements made by the lessee. The lessee may contact the lessor for approval of inseparable improvements after works were perfomed as well.

Our point of view is based on the fact that citizens and legal entities are free to conclude contracts which must comply with mandatory rules for the parties established by law. Legislation prohibits the compensation of inseparable improvements made without the consent of the lessor. At the same time, in our opinion, the legislation does not prohibit the further approval of inseparable improvements. This is also indicated by the resolution No. 1 of the Plenum of the Supreme Economic Court of the Republic of Belarus dated February 15, 2012 “On some issues of the consideration of cases arising from lease legal relations”: the lessor’s consent to improve the leased property at the expense of the lessee’s own funds can be agreed upon lease agreement, as well as in the process of its execution.

Documentation of such consent should be made by amending the lease agreement. After obtaining the consent of the lessor to the previously made inseparable improvements, the lessee will be entitled to compensation of the cost of inseparable improvements (article 594 of the Civil Code).

However, the lessee should take into account that the lessor has the right to refuse to agree on inseparable improvements made without his consent, and to demand the return of the property in the condition in which the lessee received it, taking into account normal wear and tear or in the condition stipulated by the contract. Therefore, we recommend discussing this question with the lessor before the improvements were made.

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