Supreme Court victory and landmark ruling for real estate sector

After more than 2 years of litigation, a victory has been achieved in the Supreme Court of Lithuania, representing the client UAB Dneprochem Baltic in a dispute over the termination of a lease agreement. Among other aspects relevant to the case, the core issue in the whole dispute was whether the lessee can in advance waive the right to terminate the lease agreement in the event of change of ownership of the leased property. This right is conferred on the lessee by Article 6.494(3) of the Civil Code. The dispute arose from the lessee’s decision to terminate the lease after a change of ownership of the leased premises, even though the lease agreement stipulated that the lessee had waived this right.

The application of this legal provision has been one of the biggest risks to be addressed and managed by owners and managers of investment (income-generating) real estate when developing, leasing and then selling leased commercial property. Thus, for more than 15 years, market practice has established and accepted the rule that in lease agreements tenants in advance waive their right to terminate the agreement if the ownership of the leased item changes at some point in the future.

This market practice could have been overturned by the Supreme Court’s decision had it upheld the rulings of the courts of first two instances. The NOOR counsel managed to convince the Supreme Court of Lithuania that Article 6.494(3) of the Civil Code is a dispositive legal norm, which allows professional market participants to agree in advance on the continuity of the lease and on the lessee’s waiver of the right to terminate the agreement when concluding lease agreements for commercial real estate.

This ruling was eagerly awaited by the entire real estate sector, as it could have a huge impact on future real estate investment transactions. This is clearly one of the most important court decisions for the real estate industry in the last decade as it preserves the commercial practice that has been established and applied for many years.

We are happy that the client trusted the NOOR team, which has contributed to the development of new and modern case law.