Landlord and Tenant
May 14, 2015
Can landlord and tenant freely agree rents in Georgia?
Georgian law allows the landlord and the tenant full freedom to negotiate and agree on the initial rent amount. The parties can also freely negotiate increased rents as well as cost-of-living rent increases.
Technically, the landlord enjoys an advantage. In case the tenant refuses the landlord’s proposal to increase the rent in accordance with prevalent market trends and conditions, the landlord is deemed to have a ‘legitimate reason’ to prematurely terminate the tenancy agreement. In practice however, given the existing situation on the Georgian market (i.e., supply of residential property exceeding the demand), unless the increase is reasonable and justified, it may well translate into an overall loss for the landlord.
There are no special rent/tenancy tribunals in Georgia. Consequently, jurisdiction over tenancy relations is exercised by the common courts of Georgia. Private arbitration also exists and may be contractually chosen as a dispute resolution form, however at this point arbitration is not very widespread.
Formally, a tenancy contract which is “manifestly detrimental” to the tenant may be declared null and void, however this right of tenants is rarely used in practice.
The law does not require making a deposit as a condition precedent for the effectiveness of the tenancy. This too, can be contractually agreed upon by the parties.
However, the law stipulates that, in the event the tenant is required by the relevant tenancy agreement to submit a security deposit, the amount of such deposit may not exceed three times the monthly rent.
Interest at the rate prescribed by law must accrue on the security deposit paid in advance. Upon expiration / termination of the tenancy agreement the deposit shall be returned to the tenant together with the accrued interest (or set off against relevant rent / utility payments). The law further determines that any agreement concluded otherwise to the detriment of the tenant shall be void.
In practice, landlords tend to expect a security deposit in the amount of two-months’ rent. Although mandated, the requirement of accrual of interest almost never is observed in practice.
Duration of contract/Eviction
Georgian tenancy law does not require tenancy contracts to be concluded for any specific period, i.e. in case the contract itself does not indicate specific term, it is deemed to be entered into for an indefinite period.
Indefinite period contracts may be terminated any time provided the terminating party serves three months notice to the other party. No other condition is necessary for the termination of indefinite period contract; therefore, such arrangement does not provide any stability to the tenancy relations for either of the parties. Consequently, the vast majority of tenancy agreements in practice in Georgia are fixed-term contracts.
If a tenancy contract is concluded for a fixed term, then the tenant may claim extension of the contract for an indefinite term by giving written notice thereof at least two months before termination of the rental relation, provided the landlord consents to this.
A termination notice is required in case the contract is terminated prematurely, but not upon expiration of the contract. That a tenancy relation is terminated upon expiration of the term of the contract is given in the law. In the event the tenant continues to use the property after expiration of the term and the landlord does not object thereto, then the contract shall be deemed to have been extended for an indefinite term.
As opposed to the indefinite contracts, a three-month prior notice is mandatory to terminate a fixed tenancy agreement only if it is concluded for a term of more than ten years and that also after expiry of ten years.
Nevertheless, the established practice in Georgia is that a three-month notice is required for the early termination of any kind of tenancy relations.
As for the ability of the parties to terminate tenancy prior to the expiration of the fixed term, under Georgian law both the landlord and the tenant are authorized to prematurely terminate the tenancy agreement at or absent cause.
Normally, the tenant is entitled to terminate the contract before the expiration of its term, provided he gives notice thereof to the landlord not less than one month before the intended effective date of termination and offers to the landlord a substitute tenant who is solvent and acceptable for the landlord and who agrees to be the tenant over the remainder of the term.
In addition, the tenant may terminate the contract without the observance of the time period stipulated for the termination of the contract in the event that the transfer of the rented property to the tenant, in whole or in part, is delayed, or if afterwards the tenant is deprived of the right to use the property. Termination of the contract is allowed only if the landlord does not cure the default within the time allowed by the tenant. Granting such cure period is not necessary if the tenant has lost interest in the tenancy as a result of those circumstances that gave grounds for termination.
Furthermore, if a residential property is in such condition that its use creates a significant hazard to the health of the tenant, then the tenant is authorized to terminate the contract without observance of the prescribed notice period. Strangely, the tenant enjoys this right even if he was aware of the danger when entering into the contract but did not assert a claim.
The law also affords the landlord the right to terminate the contract prior to its expiration date. Namely, the landlord may terminate the contract before expiration if the tenant, having ignored the notice given by the landlord, substantially damages the property or creates an apparent danger threatening substantial damage.
The landlord is entitled to early termination in the event the tenant does not pay the agreed rent for three consecutive months.
In addition, the landlord may terminate the tenancy contract only if legitimate reasons exist for termination. A reason is considered legitimate if:
- the tenant has substantially breached his obligations under the contract;
- the landlord needs the residential property personally for himself or for his close relatives;
- the tenant refuses to pay an increased rent, that corresponds to market rates, offered by the landlord;
- the tenant has committed an illegal or immoral act against the landlord, which render the continuation of their relation impossible.
Finally, the law stipulates that in case the subject of the tenancy relation is a furnished apartment, then the landlord may always terminate the contract provided he observes the 3 months time period fixed for termination of the contract.
Upon termination of the rental contract of a property the tenants shall be bound to return the property to the landlord in the same conditions in which he received it, taking in to account normal wear and tear, or in the condition which was specified under the contract.
Note that termination of the tenancy contract must be made in writing.
How effective is the Georgian legal system?
Tenancy regulations, as part of the civil legislation, are enforced by the courts of Georgia, unless the parties agree to submit to arbitral proceedings. Court proceedings are usually lengthy and no specific dates may be determined in advance as to the reasonable time period for the final settlement of tenancy disputes. Depending on the complexity of the merits of the tenancy case, it could take from 3 months up to 2 years to resolve the issue.
Tenancy relations are regulated by the 1997 Civil Code of Georgia, in particular, Articles 531-575.
Georgian tenancy legislation underwent major reform in November 1997, when the Civil Code of Georgia was adopted. No alterations have been introduced to the relevant chapter of the Civil Code since 1997. Prior to that, old Soviet regulations were governing tenant / landlord relations and all issues arising out of such relations.