23.05.2024

The fate of the sublease: what happens when the lessor's title is abolished?

According to Article 1.819 of the Civil Code, the termination of the lessor's title automatically terminates the tenancy agreement. However, if the lessee has acted in good faith when concluding the contract, the contract may continue for the period originally stipulated, but not more than one year after the termination of the title.

I. What is a lease?

According to Article 1777 of the Civil Code, a lease is a contract whereby one party, called the lessor, undertakes to provide the other party, called the lessee, with the use of a property for a certain period in exchange for a price, called rent. The letting of immovable property and movable property is called a lease, and the letting of agricultural property is called a lease.

A lease is therefore a contract whereby the lessor undertakes to provide the lessee with the use of immovable or movable property for a certain period in return for a consideration. In the context of this Article, we note that securing the use of the asset is the lessor's principal and essential obligation.

Thus, the lessor is bound to do all that is necessary to ensure the continued quiet and useful use of the property by the lessee, and must refrain from any act which would hinder, impair or interfere with such use.

II. When is subletting allowed?

Under Article 1805 of the Civil Code, the lessee may sublet the tenancy, in whole or in part, or even assign the tenancy, in whole or in part, to another person, unless he is expressly prohibited from doing so. However, if the goods are movable, subletting or assignment shall be permitted only with the written consent of the lessor.

If subletting has been expressly prohibited under Article 1806 of the Civil Code, the prohibition on subletting includes the prohibition on assigning the tenancy, and the prohibition on subletting applies to both total and partial subletting.

III. What does the dissolution of the lessor's title mean?

The dissolution of the lessor's title may occur, for example, as a result of annulment or termination or as a consequence of the lessor's eviction^[1].

There are various causes that may lead to the lessor's title being dissolved: (i) either the absolute nullity, (ii) or the relative nullity of the legal act by which the lessor acquired the right to the leased asset, (iii) or the termination/resolution of these acts following the occurrence of specific causes, (iv) or the termination of the effects of the legal act of acquisition following the fulfillment of a resolutive condition or a resolutive term, (v) or various causes of eviction[2].

In another vein, according to Article 1794 of the Civil Code, if a third party claims any right over the leased property, the lessor is obliged to defend the lessee even in the absence of a factual disturbance. If the lessee is deprived, in whole or in part, of the use of the property, the lessor must compensate him for any damage suffered as a result.

IV. What happens to the sublease?

The rule laid down by Article 1819 para. (1) of the Civil Code is that the termination of the right enabling the lessor to ensure the use of the leased property shall result in the termination of the lease contract.

By exception, however, the same article provides in para. (2) that the tenancy shall continue to have effect after the termination of the lessor's title for the period stipulated by the parties, not exceeding one year from the date of termination of the lessor's title, but only if the lessee was in good faith at the time of the conclusion of the tenancy.

Par. (2) of Article 1819 of the Civil Code is a provision that allows the contract to be maintained, and is therefore a provision of favor contractus[3] .

In the case of subletting, it has been held that the sublease contract will continue to have effect, after the dissolution of the title of the head lessor, if the head lessee (both at the conclusion of the head lease and at the conclusion of the sublease) and the sublessee (at the date of the conclusion of the sublease) were in good faith[4].

To that end, the effects in question will extend to the person who (re)becomes the holder of the right to use the asset. He will have to ensure the lessee's continued use of the asset, taking over all the lessor's rights under the lease[5].

The solution is natural, because as noted above, the lessor's main and essential obligation is to ensure the use of the asset. However, in the event of termination of the title, the lessor can no longer ensure the use of the asset, which is why the tenancy cannot continue with the lessor in the hypothesis of the lessee in good faith, but with the current holder of the right.

As to the actual legal mechanism by which the tenancy continues, it has been held that the third party in whose favor the original lessor's title has been terminated is obliged to agree with the lessee in good faith to continue to ensure the use of the property for the benefit of the latter for at least one year after the termination of the title, with the continuation of the payment of the original rent and the performance by both parties of the mutual obligations arising from the original tenancy[6].

We consider, however, that we are in the presence of a legal assignment of the contract, whereby the third party, in whose favor the title of the original lessor has been dissolved, is subrogated to the rights and obligations of the original lessor.

The mechanism is the same as in the case of Article 1813 of the Civil Code, where, in the event of alienation of the leased asset, the acquirer is subrogated to the rights of the original lessor (...) the subrogation realized in the latter case also occurs with respect to the obligations of the former lessor, so that we are dealing with more than a mere legal subrogation - with a legal assignment of contract[7].

An article signed by Laura Mihalache (lmihalache@stoica-asociatii.ro) - Senior Partner, and Marius Chelaru (mchelaru@stoica-asociatii.ro) - Managing Associate, STOICA & ASOCIAȚII.

[1] Flavius-Antoniu Baias, Eugen Chelaru, Rodica Constantinovici, Ioan Macovei, Noul Cod civil. Commentary on articles, 3rd edition, C.H. Beck Publishing House, 2021, p. 1841.

[2] T. Prescure, Curs de contracte civile, Editura Hamangiu, 2012, p. 126.

[3] I.F. Cofaru, Existence of the principle of favor contractus in the Romanian Civil Code, Ed. Universul Juridic, Bucharest 2022, p. 270.

[4] Flavius-Antoniu Baias, Eugen Chelaru, Rodica Constantinovici, Ioan Macovei, Noul Cod civil. Commentary on articles, 3rd edition, Editura C.H. Beck, 2021, p. 1842

[5] R. Dincă, Contracte civile speciale în noul Cod Cod civil, Editura Universul Juridic, 2013, p. 197.

[6] Fr. Deak, L. Mihai, R. Popescu, Tratat de drept civil. Special Contracts, Universul Juridic, 2021, p.106.

[7] L. Pop, I. F. Popa, S. I. Vidu, Drept civil. Obligations, Second Edition, Universul Juridic Publishing House, 2020, p. 505.