Georgia: Landlord and Tenant

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Landlord and Tenant

Thanks to BGI Legal, international advisory services group

Can landlord and tenant freely agree rents in Georgia?

Georgian law allows the landlord and the tenant full freedom to negotiate and agree on the rent. The law also entitles the parties to freely negotiate rent increases, as well as cost-of-living rent increases.

Technically, the landlord enjoys an advantage, because if the tenant refuses a landlord’s proposal to increase the rent in accordance with prevalent market trends and conditions, the landlord is deemed to have a ‘legitimate reason’ to prematurely terminate the tenancy agreement. But in practice, given the existing situation, in which supply of residential property exceeds demand, unless the increase is reasonable and justified such a demand could cause the landlord to lose out.

There are no special rent/tenancy tribunals in Georgia. Consequently, jurisdiction over tenancy relations is exercised by the common courts of Georgia. Private arbitration also exists and may be contractually chosen as a dispute resolution form. However at this point, arbitration is not very widespread.

Formally, a tenancy contract which is “manifestly detrimental” to the tenant may be declared null and void, however this right of tenants is rarely used in practice.

Deposits

The amount of the security deposit cannot by law exceed three times the monthly rent. In practice, landlords tend to expect a security deposit of two months’ rent.

Interest at the rate prescribed by law may accrue on the security deposit paid in advance. Upon expiration / termination of the tenancy agreement the deposit shall be returned to the tenant together with the accrued interest (or set off against relevant rent / utility payments). The law further determines that any agreement concluded otherwise to the detriment of the tenant shall be void.

What rights do landlords and tenants have in Georgia, especially as to duration of contract, and eviction?

Georgian tenancy law does not require tenancy contracts to be concluded for any specific period. But if the contract itself does not indicate a specific term, it is deemed to be entered into for an indefinite period.

Indefinite period contracts may be terminated any time provided the terminating party serves three months notice to the other party. No other condition is necessary for the termination of indefinite period contract; therefore, such arrangement does not provide any stability to the tenancy relations for either of the parties. Consequently, the vast majority of tenancy agreements in practice in Georgia are fixed-term contracts.

No termination notice is required upon expiration of a fixed-term contract. But if the tenant continues to use the property and the landlord does not object thereto, then the contract is deemed to have been extended for an indefinite term.

Both the landlord and the tenant can prematurely terminate a fixed term tenancy agreement (but such termination must be in writing) in the following cases:

The landlord is entitled to early termination if the tenant does not pay the agreed rent for three consecutive months. He may also terminate early if the tenant (having ignored a notice given by the landlord) substantially damages the property, or creates an apparent danger threatening substantial damage.

Otherwise the landlord may only terminate early for legitimate reasons, viz:

1. the tenant has substantially breached his obligations under the contract;
2. the landlord needs the residential property personally for himself or for his close relatives;
3. the tenant refuses to pay an increased rent, that corresponds to market rates, offered by the landlord;
4. the tenant has committed an illegal or immoral act against the landlord, which renders the continuation of their relation impossible.

But if the subject of the tenancy relation is a furnished apartment, then the landlord may always terminate the contract provided he observes the time period fixed for termination of the contract, i.e. three months notice prescribed by law, or other period agreed under the relevant contract.

The established practice in Georgia is that a three-month notice is required for the early termination of any kind of tenancy relations, though in fact a three-month prior notice is only mandatory to terminate a fixed tenancy agreement if it is concluded for a term of more than ten years.

The tenant is entitled to terminate the contract before the expiration of its term, provided he gives at least one month’s notice to the landlord, and offers a substitute tenant who is solvent and acceptable to the landlord, and who agrees to be the tenant over the remainder of the term.

In addition, the tenant may terminate the contract without observing the time period stipulated for the termination of the contract if the transfer of the rented property to the tenant is delayed in whole or in part, or if afterwards the tenant is deprived of the right to use the property. Termination of the contract is allowed only if the landlord does not cure the default within the time allowed by the tenant. However granting such a cure period is not necessary if the tenant has lost interest in the tenancy as a result of those circumstances that gave grounds for termination.

If a residential property is in such condition that its use creates a significant hazard to the health of the tenant, then the tenant is authorized to terminate the contract without observance of the prescribed notice period. Strangely, the tenant enjoys this right, even if he was aware of the danger when entering into the contract, but did not assert a claim then.

Upon termination of the rental contract the tenant must return the property to the landlord in the same condition in which he received it, taking in to account normal wear and tear, or alternatively, in the condition specified in the contract.

How effective is the Georgian legal system?

Tenancy regulations, as part of the civil legislation, are enforced by the courts of Georgia, unless the parties agree to submit to arbitral proceedings.  Court proceedings are usually lengthy, and no specific dates may be determined in advance as to the reasonable time period for the final settlement of tenancy disputes. Depending on the complexity of the merits of the tenancy case, it could take from three months up to 2 years to resolve the issue.

Legislation

Tenancy relations are regulated by the 1997 Civil Code of Georgia, in particular, Section III, Chapter III of the Code.

Brief history: Recent changes in Georgian landlord and tenant law

Georgian tenancy legislation underwent major reform in November 1997, when the Civil Code of Georgia was adopted. No alterations have been introduced to the relevant chapter of the Civil Code since 1997. Prior to that, old Soviet regulations were governing tenant / landlord relations and all issues arising out of such relations.

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