Unilateral Termination of Registered Lease Agreement

Due to the practice of the National Agency of Public Registry of the Ministry of Justice of Georgia (the Public Registry), the unilateral right of the landlord to terminate registration of the lease agreement upon early termination of the agreement, cannot be enforced.

A lease agreement with more than one-year term in Georgia requires registration with the Public Registry. By way of registration, the tenant appears in the extract of the property and identity of the tenant becomes a public knowledge. According to the case law of the Supreme Court of Georgia, the registration or non-registration of the lease does not in any way effect the validity of the lease agreement itself. However, the tenants to the long-term lease relations usually request to register such right before the Public Registry. To avoid complications related to termination of such registration, landlords usually insert a provision in the lease agreement which entitles the landlord to unilaterally terminate the registration upon expiry or early termination without any further approval or consent of the tenant. Such provision also includes authorization for the landlord and an irrevocable consent of the tenant to carry out the above termination without any further approval from the tenant or the requirement to present to the Public Registry any documents confirming termination of the lease.

Despite such express agreement between the parties, the Public Registry tends to request mutual agreements on termination of registration of the lease agreement. In this sense, the Public Registry relies on the general statutory discretionary power which allows the registration authority to request any additional information/document for the purposes of the application, if deemed necessary.

It appears that by such approach, the Public Registry exercises its discretionary authority to protect the interests of the tenants which might dispute the lawfulness of termination of the lease. As mentioned above however, according to the law as well as court practice, termination of the registration of the lease does not cause automatic termination of the lease agreements itself and does not prejudice the rights of the tenant.

More importantly, this practice disregards the interests of the landlord as it is least likely for the defaulting tenant to agree to the termination of the registration. This puts good-faith landlord in a complicated situation when a new long-term tenant insists on registration of the lease. In such case, if the former tenant refuses to agree to terminate registration, the landlord needs to resort to time and cost consuming litigation to obtain relevant judgment from the court for the purposes of termination of registration. By the time the issue of registration is resolved by the court, the landlord might lose income if the new tenants refuse to enter lease relation without registration of the lease right.

Since the cornerstone of a Georgian civil law is a principle of freedom of contract, it is hard to grasp why the Public Registry refuses to enforce the irrevocable right explicitly set out in the contract. As discussed, protection of the interests of the tenant is not a sufficient justification for such approach of the Public Registry. Considering the above, it is evident that the Public Registry needs to establish more efficient practice to balance the legitimate interests of both parties to the lease agreement.

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