The mere non-use of leased property does not constitute grounds for termination of the lease agreement — Supreme Court

The Supreme Court, sitting as the Commercial Cassation Court, considered dispute No. 910/7394/25 regarding the termination of the lease agreement for the premises of a school catering unit and the eviction of the tenant. The subject of the dispute was whether the non-use of leased property for organizing student meals can be considered a violation of the property's intended purpose and grounds for early termination of the municipal property lease agreement.

Case Summary

The Department of Municipal Property of the Executive Committee of the Rivne City Council and Rivne Lyceum No. 8 filed a lawsuit against the LLC to terminate the lease agreement dated November 26, 2021, and to vacate the catering unit premises of 100 sq. m located in the lyceum building.

The plaintiffs stated that the disputed premises were leased exclusively for providing services to organize student meals at the general secondary education institution. In their opinion, starting from January 2025, the tenant effectively ceased using the premises for the intended purpose defined by the agreement, as they did not provide meals to the lyceum students.

The courts established that in November 2021, following an electronic auction, LLC "Ramedas Ukraine" leased the catering unit premises. The agreement stipulated the use of the property for housing a catering establishment and organizing meals for the educational institution's students.

In January 2025, contracts for the procurement of school meal services were concluded between the lyceum and the company. However, on January 29, 2025, the parties mutually agreed to terminate these contracts early.

In April 2025, representatives of the lessor and the lyceum inspected the premises and recorded that children’s meals were not being provided and that repair works were being carried out in the leased premises. These circumstances became the basis for filing a lawsuit demanding early termination of the lease agreement.

Decisions of the Courts of First and Appeal Instances

The Commercial Court of Rivne Region dismissed the claim. The Northwestern Appellate Commercial Court upheld this decision.

The courts reasoned that the plaintiffs failed to prove the fact that the leased property was used not for its intended purpose. The inspection report confirmed repair works in the premises, indicating the physical impossibility of providing meal services during that period, but did not confirm the use of the premises for other purposes.

The courts also noted that neither the Law "On Lease of State and Municipal Property," nor the Law "On Education," nor the lease agreement itself provide for early termination of the lease agreement solely on the basis of non-use of the property for its intended purpose. The courts believed that inactivity cannot be equated with using the property for activities other than those defined by the agreement.

Furthermore, the case materials contained no evidence of the tenant’s intention to use the premises for other purposes or evidence of systematic non-payment of rent. The termination of contracts for organizing meal services was also not recognized as grounds for terminating the lease agreement, as these contracts were terminated by mutual consent, and no evidence of breach by the defendant was provided.

Legal Conclusions of the Supreme Court

The Supreme Court agreed with the conclusions of the lower courts and dismissed the cassation appeal.

The Court emphasized that the plaintiffs did not prove with proper and admissible evidence that the leased property was used not for its intended purpose. The repair works recorded in the inspection report indicated the physical impossibility of providing meal services during their execution but did not confirm the use of the premises for other purposes.

The Supreme Court stressed that neither the Law of Ukraine "On Lease of State and Municipal Property," nor the Law of Ukraine "On Education," nor the lease agreement conditions provide for early termination of the lease agreement on the grounds of non-use of the property for its intended purpose. The Court specifically noted that non-use of the property for its intended purpose cannot be equated with its actual use for other activities beyond the scope defined by the agreement.

The Commercial Cassation Court emphasized that the issue of early termination of lease agreements for state and municipal property must primarily be resolved by applying part 2 of article 24 of the Law "On Lease of State and Municipal Property" as a special norm. Accordingly, the lessor may demand termination of such an agreement only on grounds expressly provided by law or the lease agreement itself.

The Supreme Court also rejected arguments for the need to form a new legal conclusion regarding the application of part 2 of article 651 of the Civil Code of Ukraine, the Law "On Lease of State and Municipal Property," and part 4 of article 80 of the Law "On Education." The Court noted that these arguments do not refute the courts’ established fact of failure to prove the use of leased property not for its intended purpose. Moreover, the Supreme Court stated that even a possible violation of the requirements of part 4 of article 80 of the Law "On Education" alone cannot be grounds for terminating the lease agreement. Such circumstances may be relevant for deciding on the invalidity of the agreement but not for its early termination.

As a result, the Supreme Court upheld the decision of the Commercial Court of Rivne Region and the ruling of the Northwestern Appellate Commercial Court, which denied the termination of the lease agreement and eviction of the tenant.

The cassation court’s ruling takes legal effect from the moment of its adoption, is final, and not subject to appeal.

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