In its judgment of 10 November 2021, Case No. 26 Cdo 740/2021, the Supreme Court dealt with a situation where the son concluded a lease agreement with his parents as tenants while the previous Civil Code was still in force. The lease agreement was concluded for a period of 35 years, with the subject of the lease being land and a house intended to be used by the parents solely for living purposes.
Subsequently, however, the son lost the subject of the lease as part of foreclosure proceedings against him. The new owner decided to seek annulment of the lease agreement in accordance with the procedure set out in Section 2000 of the Civil Code and sued the parents of the previous owner.
According to Section 2000 of the Civil Code, if a contract has been concluded without serious justification for a definite period of time, so that it binds a person for the duration of their lifetime, or binds anyone for a period of more than ten years, it is possible to seek its annulment once ten years have lapsed since the creation of the contract. The court shall also annul the contract if the circumstances on which the parties appeared to rely when the contract was made have changed to such an extent that the obligor cannot be reasonably required to remain bound by the contract.
Section 2204(2) of the Civil Code is also relevant to the case under review, according to which a lease agreed between parties for a period of more than fifty years is deemed to have been agreed for an indefinite period, with the proviso that during the first fifty years the lease may be terminated only for the agreed reasons and within the agreed notice period.
The Supreme Court noted that after the new Civil Code came into force, a marginal voice was heard in the scholarly literature that in the case of leases, only the special regulation set out in Section 2204(2) of the Civil Code applies, which excludes the general regulation under Section 2000 of the Civil Code.
The Supreme Court, however, confirmed the generally prevailing legal opinion that these two provisions apply to lease relationships independently of each other, as they both address a different legal issue. While Section 2204(2) deals with whether the lease was concluded for an indefinite or a definite period, Section 2000 comes into play only after that matter is settled and generally governs the possibility of cancelling long-term contracts concluded for a definite period.
Nevertheless, in the case at hand, the Supreme Court found that there had been serious reasons for the negotiation of a lease agreement for a fixed term exceeding 10 years, which meant that the conditions set out in Section 2000 had not been met, and thus upheld the decisions of the previous courts which had dismissed the lawsuit.
Judgment of the Supreme Court of 10 November 2021, Case No. 26 Cdo 740/2021
14th March 2022
22nd June 2022