I. About This Article
In business practice, lease agreements are often used for the temporary use of offices, commercial premises, production spaces, land plots, agricultural land or other property. However, signing a lease agreement alone is not always sufficient to achieve the legal effect intended by the parties.
In certain cases, especially where one of the parties to the lease agreement is a private law legal entity and the agreement is concluded for more than one year, registration of the lease right with the Public Registry becomes necessary for the lease right to arise.
In practice, problems related to lease registration often arise when parties enter into a long-term lease agreement but do not check whether registration is mandatory. As a result, disputes may arise concerning the entry into force of the lease right, its effect against third parties, registration of amendments or registration of termination.
This article will help you understand when lease registration is required, what documents must be submitted to the Public Registry, what timeframes and fees apply, who may apply for registration and what practical issues should be considered before signing a lease agreement.
The article also explains the importance of the lease term, participation of a legal entity, form of the agreement, registration through a representative and registration of amendments or termination of the lease right.
II. What Is a Lease Right?
Under a lease agreement, the lessor undertakes to transfer specific property to the lessee for temporary use and, during the lease period, to ensure the possibility of receiving fruits if they are obtained as income through proper management of the property.
The lessee undertakes to pay the agreed lease rent to the lessor. Lease rent may be determined in money or in kind. The parties may also agree on other methods for determining the lease rent.
One type of lease is the lease of agricultural land, where a land plot is transferred for agricultural use, together with or without relevant residential or agricultural buildings.
For more information about general legal issues related to lease agreements, see our blog: Lease Agreement – What You Should Know About Lease Rent, Contract Termination and Potential Dispute Risks Arising from Lease Relations.
III. When Is Lease Registration with the Public Registry Required?
Registration of a lease right with the Public Registry is mandatory for the creation of the lease right only in cases defined by law.
The main rule is that registration of the lease right with the Public Registry is mandatory where one of the parties to the lease agreement is a private law legal entity and the agreement is concluded for a term of more than one year.
A private law legal entity may be, for example, a limited liability company, joint stock company, limited partnership, general partnership, cooperative or non-entrepreneurial legal entity.
This rule applies not only to one long-term agreement, but also where several short-term agreements are concluded and their total term exceeds one year.
Accordingly, not every lease agreement requires mandatory registration with the Public Registry.
If a lease agreement does not meet the mandatory registration preconditions described above, registration with the Public Registry is not required for the creation of the lease right.
For example, if the parties are individuals and the agreement is not subject to special registration, or if the agreement is concluded for less than one year and there is no other mandatory registration ground, the creation of the lease right may not depend on registration with the Public Registry.
However, the fact that registration is not mandatory does not mean that lease registration has no practical value. In some cases, the parties may still wish to ensure publicity of the right, especially where the lease is connected with important real estate, investment or long-term use.
IV. Why Does the Term of the Lease Agreement Matter?
The term of the lease agreement is one of the key factors in determining whether lease registration is required.
If one of the parties to the agreement is a private law legal entity and the lease term exceeds one year, registration of the lease right is mandatory for the lease right to arise.
Particular attention should also be paid to cases where the parties sign several short-term agreements. If their total term exceeds one year, the need for lease registration may arise.
Correctly defining the term is important not only from the perspective of registration, but also for termination, extension, payment of rent, investment costs and relations with third parties.
If the lease term is not defined, termination of the agreement is generally allowed only at the end of the lease year, and the agreement may be terminated no later than one month after the end of the lease year.
For more information about termination of lease and long-term contractual relations, see our blog: Termination of a Long-Term Contract – What You Should Know About Article 399 of the Civil Code of Georgia.
V. What Happens If One Party to the Lease Agreement Is a Legal Entity?
If one party to the lease agreement is a private law legal entity and the agreement is concluded for more than one year, registration with the Public Registry is required for the lease right to arise.
This rule is particularly important for businesses because companies frequently participate in lease agreements – for example, LLCs, joint stock companies or non-entrepreneurial legal entities.
For businesses, ignoring the issue of lease registration may create a serious risk regarding the legal effect of the agreement, especially where the property is used as an office, retail space, production facility, warehouse, agricultural property or for another long-term commercial purpose.
Before signing a lease agreement, companies should check not only the rent and term, but also whether the agreement creates an obligation to register the lease right with the Public Registry. Otherwise, the issue of invalidity may arise, and the agreement may fail to produce the intended legal consequences.
For more information about invalid and unlawful transactions, see our blog: Unlawful Transaction – When a Contract Does Not Produce Legal Effects.
VI. Who May Request Lease Registration?
Lease registration is carried out on the basis of submission of the lease agreement by one of the parties to the agreement.
This means that either the lessor or the lessee may apply to the Public Registry, provided that the applicant has a properly certified lease agreement and the necessary documents.
In practice, it is important for the parties to define in advance in the agreement who is responsible for registration, who will pay the relevant fee and within what timeframe lease registration must be completed.
This is especially important in commercial leases, where registration may be critical for the lessee’s investment in the property, licence or permit matters, bank financing or relations with third parties.
VII. What Documents Are Required for Lease Registration?
As a rule, the following documents are required for lease registration:
an application completed in the relevant electronic program; a copy of the identity document of the interested person; a properly certified lease agreement; proof of payment of the service fee; and, if registration is carried out through a representative, a properly certified document confirming representation authority and a copy of the representative’s identity document.
In a specific case, the National Agency of Public Registry may request any additional document or information necessary to make a decision on registration.
VIII. What Fees Apply to Registration of a Lease Right?
The standard service fee for registration of a lease right within 4 business days is GEL 75.
Expedited services are also available. The fee for service on the day of submission of the application is GEL 300, while the fee for service within one business day is GEL 220.
Registration of termination of a lease right within 4 business days is carried out free of charge.
If the holder of the lease right is the state, a self-governing unit or the National Bank of Georgia, registration of the creation, amendment and termination of the lease right is carried out free of charge.
These fees are practical reference data and it is advisable to verify the current Public Registry tariffs before registration.
IX. What Is the Timeframe for Lease Registration?
Lease registration is usually completed within 4 business days.
Under an expedited procedure, registration may be completed on the day of submission of the application or within one business day.
The calculation of the registration period begins on the day following submission or registration of the application and ends upon expiry of the last day of the period. This rule does not apply where the service is requested on the day of submission of the application.
If the last day of the period falls on a holiday or non-working day, the next business day is considered the last day of the period.
X. How Is an Amendment to a Lease Right Registered?
If registered data in the lease agreement changes – for example, the term, party, property description, material rent condition or another registered circumstance – registration of an amendment to the lease right may be required.
To register an amendment, the relevant application, a properly certified document confirming the amendment and, where necessary, other additional documentation must be submitted to the Public Registry.
In practice, it is important that amendments to a lease agreement are prepared with the same level of accuracy as the main agreement. An unclear or uncertified amendment may be insufficient for the Public Registry or may create problems in a later dispute.
XI. How Is Termination of a Lease Right Registered?
Registration of termination of a lease right is required when a registered lease right must be removed or terminated in the Public Registry.
To register termination, an application and a relevant document confirming termination of the lease must be submitted. This may be an agreement of the parties, a circumstance confirming expiry of the contract term, unilateral termination documentation or another proper legal basis.
Registration of termination of a lease right within 4 business days is carried out free of charge.
In long-term or commercial leases, it is important that the termination procedure is properly documented, because a Public Registry entry may continue to have effect in relation to third parties if termination is not properly reflected.
XII. What Happens If Lease Registration Is Carried Out Through a Representative?
If an interested person wishes to carry out registration through a representative, a properly certified document confirming representation authority must be submitted.
Such a document may be a power of attorney or another relevant basis of representation.
A copy of the representative’s identity document is also required.
In practice, lease registration through a representative is particularly convenient where a party is not present in Georgia, is a foreign citizen, is a legal entity or wishes to manage the registration process with legal assistance.
XIII. What Additional Documents May the Public Registry Request?
In a specific case, the National Agency of Public Registry may request any additional document or information necessary for registration of the lease right.
Such documents may relate to identification of the property, authority of the parties, representation, certification of signatures, status of the representative of a legal entity, other registered rights over the property or clarification of the content of the agreement.
For this reason, registration documents should be checked in advance, especially where the agreement concerns high-value property, several parties, a legal entity, a foreign counterparty or complex contractual terms.
XIV. What Should a Business Consider Before Signing a Lease Agreement?
Before signing a lease agreement, a business should assess not only the rent and location of the property, but also legal risks related to registration, use, termination and liability.
First, it should be determined whether the lease right is subject to mandatory registration with the Public Registry. For this purpose, the term of the agreement and whether one of the parties is a private law legal entity are particularly important.
Second, the agreement should clearly define the property description, purpose of use, rent, payment rules, term, possibility of sublease, grounds for termination, allocation of expenses and return of the property.
Third, if the lessee plans to invest in the property, carry out renovation, install equipment or obtain a licence or permit, the agreement should define in advance what happens in case of termination or expiry of the agreement.
Fourth, if the agreement is subject to registration, the parties should determine who will submit the documents, who will pay the fees and within what timeframe registration must be completed.
Fifth, amendment and termination of the agreement should be properly documented and, where necessary, registered with the Public Registry.
XV. How TB Legal Can Help
Within our contract law services, TB Legal assists businesses and individuals with drafting lease agreements, assessing whether lease registration is required, preparing documents for the Public Registry, legally managing amendment and termination of agreements and analysing risks related to registration.
Our approach is based not only on the technical registration procedure, but also on assessment of the content of the lease agreement, commercial interests of the parties, legal status of the property, purpose of use and possible dispute risks.
If you plan to sign a lease agreement, need registration of a lease right with the Public Registry or want to assess whether your agreement is subject to mandatory registration, it is important to receive legal advice before signing.
XVI. Conclusion
Lease registration with the Public Registry is not mandatory in every case, but in legally defined cases it has decisive importance for the creation and legal security of the lease right.
Assessment of the registration issue is particularly important where one party to the lease agreement is a private law legal entity and the agreement is concluded for more than one year. The same may apply to several short-term agreements if their total term exceeds one year.
A properly prepared and, where necessary, registered lease agreement reduces the risk of disputes, protects the interests of the parties and ensures publicity of the lease right.
Contact TB Legal if you need lease registration, preparation of a lease agreement or assessment of registration requirements. We will help you analyse legal risks, prepare documentation and manage the process properly.
XVII. Sources Used
This article is based on the following sources:
- Relevant provisions of the Civil Code of Georgia and the Law of Georgia on Public Registry concerning lease agreements.
- Practical information of the National Agency of Public Registry on registration, amendment and termination of lease rights.
- TB Legal’s practical experience in lease, real estate and contract law matters.
Disclaimer
This article has been prepared for general informational purposes only and does not constitute individual legal advice or a legal opinion. The issues discussed in this article may be assessed differently depending on the legal status of the specific property, the term of the lease agreement, the status of the parties, the form of the agreement, registration requirements, Public Registry requirements and relevant documentation.
Before making a decision in a specific matter, it is recommended to obtain individual legal advice from a qualified lawyer.
