Overview of retail lease agreements in Serbia

Serbian legislation does not differentiate between different types of leases (e.g. commercial, retail, residential), meaning that all those types of leases are regulated by the same law – the Law  on Contracts and Torts (Official Gazette of the Socialist Federal Republic of Yugoslavia, nos. 29/78, 39/85, 45/89 – Decision of the Constitutional Court of Yugoslavia and 57/89, Official      Gazette of the Federal Republic of Yugoslavia, no. 31/93 and "Official Gazette of RS", no. 18/2020).

There are, however additional requirements for lease agreements where the landlord is a public authority (e.g. the State, an autonomous province, a municipality, or a public entity). Such lease agreements are subject to specific execution procedure provided for under the Law on Public Assets (Official Gazette of the Republic of Serbia, no. 72 / 2011, 88 / 2013, 115 / 2014, 104/2016 – other law and 108/2016, 113/2017, 95/2018 and 153/2020). In most such cases, the landlord is obliged to conduct a tendering procedure and obtain consent for conclusion of the lease agreement from the competent authority (e.g. Republic Property Directorate). However, lease agreements where the landlord is a public authority could be concluded by direct negotiation as well, in the event specific situation falls under designated exceptions to the tendering procedure. Generally, the rights and obligations of the parties in these cases are also governed by the Law on Contracts and Torts, with the few specific rules provided for under the Law on Public Assets. The situations where the landlord is the public entity is not very common for retail lease agreements.

The Law on Contracts and Torts provides that a lease agreement may be concluded for either a definite or an indefinite term. But it does not prescribe the minimum or maximum duration of agreements concluded for a definite term.

Lease agreements concluded for a definite term are considered to be converted into a lease for an indefinite term if the tenant continues to use the leased premises after the expiry of the initially agreed definite term.

However, the lease agreement concluded for a period of 10 years or more, could be annotated in the relevant real estate registry.

The Law on Contracts and Torts provides that lease agreements concluded for an indefinite term may be terminated at any time (except an inopportune time), while definite-term lease agreements may only be terminated on statutory grounds and on the grounds specified in the relevant lease agreement.

In accordance with the Law on Contracts and Torts, a lease agreement may be terminated by the landlord if the tenant:

• does not use the rented premises in an appropriate manner;
• does not pay the rent within 15 days after the landlord’s notice; sublets the property without the landlord’s consent.

In accordance with the Law on Contracts and Torts, a tenant may terminate the lease agreement if:

• the use of the premises is substantially diminished;
• the landlord has sold the leased premises;
• a third party claiming the right of ownership over the leased premises is limiting the tenant’s rights under the agreement;
• the leased premises have some deficiencies that cannot be eliminated.

In addition, in accordance with the general rule mentioned above, a tenant may terminate a lease agreement concluded for an indefinite term at any time (except an inopportune time). Definite-term lease agreements may also be terminated by the tenant on the grounds specified in the lease agreement.

There is neither any right of renewal nor an eviction indemnity payable by the landlord unless otherwise agreed in the lease agreement specifically provided under the law. However, the tenant might claim damages for unlawful eviction under the general rules applicable to reimbursement of damages. 

Rent can be revised based on a general provision of the Law on Contracts and Torts regulating termination or amendment of an agreement due to hardship. Based on this provision, if events have rendered performance by one party more onerous after conclusion of the agreement than would reasonably have been anticipated when the agreement was concluded, i.e. if its performance has become excessively burdensome due to an event beyond the party’s reasonable control which it could not reasonably have been expected to have taken into account, the relevant party may ask the courts to grant termination or renegotiation of the agreement.

There are no mandatory provisions regarding fitting-out works. As this issue is not regulated by the Law on Contract and Torts, the parties may freely agree on the scope of fitting-out works, their price and each party’s share in their funding.

The tenant is obliged to deliver possession of the premises to the landlord in a vacant state and in good order, taking normal wear and tear into consideration. If the tenant has made some improvements or additions to the leased premises during the lease period, it is obliged to reinstate the leased premises to the initial condition. However, if these cannot be removed without damage to the premises, the landlord may decide to compensate the tenant for their value and keep them.

Under the Law on Contracts and Torts, subleasing does not require the landlord’s consent, unless the lease agreement in question specifically prohibits subleasing. However, in cases where the landlord is the public authority, sublease is not allowed under the law.

The Law on Contracts and Torts does not regulate the issue of transfer of the lease by the tenant. However, in practice, landlords prohibit such transfers.

The lease is binding on the acquirer, but the tenant is allowed to terminate the lease agreement in the case of the sale of the premises.

Neither the Law on Contracts and Torts nor the Law on Conveyance of Real Estate (Official Gazette of the Republic of Serbia, no. 93/2014, 121/2014 and 6/2015) envisages such a pre-emption right for the tenant.

There are no mandatory rules regarding the form and/or duration of a rental guarantee.

Based on the Law on Contracts and Torts, the landlord is obliged to maintain the premises in proper condition and to perform necessary repairs. The Landlord is also obliged to compensate the tenant for costs incurred for repairs that it was the landlord’s duty to make.

However, the costs of smaller repairs caused by regular use of the premises, and the costs of the use itself, are borne by the tenant.

Both rent and service charges are subject to 20% VAT. Under the Serbian foreign exchange regulations, rent can be paid in euros, while service charges can be fixed in euros but they have to be paid in Serbian dinars.

There are no other important legal provisions or practices.