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Real estate lease contract – in USD or UAH? On lease payments.

USD or UAH? What are the types of lease contracts?


Lease of apartments is always related to a certain financial risk; moreover, such risk exists for both lessee and lessors. This is related to a threat of sudden change in UAH rate to foreign currency. The most common currency is considered USD. The secret of USD is the world's confidence to this currency, because there is a confidence to the country's economy that produces the currency.

What to do, if according to the law all payments should be made only in UAH (national currency), and nobody wants to lose due to the instability of exchange rates. Many lessors require payment in foreign currency. How illegal is that and is it possible to include such a clause in a contract?

 

What lease contracts are typical in practice?

Contract 1. In UAH

Payment in UAH, calculation in UAH – everything is simple.

Such an agreement between the parties of a lease contractdoes not presuppose any additional questions. For the owner of the real estate it is easier to find a tenant with price in UAH.

 

Agreement 2. UAH – USD

Payment in UAH, calculate in USD.

Why do such types of agreements take place?

Owners put forward an essential condition – payment in UAH still related to a certain foreign currency, as they try to predict the situation on the foreign exchange market and protect themselves from decrease in the UAH rate and take advantage of increase in the USD rate.

What does it look like? Is it allowed to put another currency in a lease contract?

If the parties sign a contract and agree upon payment in foreign currency, the question is: how to put this clause in a lease contract correctly? The wording “equivalent to the amount in USD” is often used in lease contracts. Mentioning USD in contracts does not violate the law. The law demands payment in national currency. This is interpreted in the following way: the banknotes the owner of an apartment receives should be in national currency. A USD equivalent mentioned in the lease contract is the certain indexation of the lease payment. The parties may agree upon indexation in the lease rate.

Contract 3. USD

Payment in USD, calculation in USD.

Therefore, what happens in case of payment in USD? Quite often, the payment for an apartment takes place in foreign currency.

Thus, do those, who pay in USD or receive USD, violate the law? Maybe, two parties violate the law? Of course, a tenant should pay to the owner of an apartment in UAH. For this purpose, of course, he should go to the bank and exchange USD for UAH. The tenant was going to do that. However, he did not manage to. In addition, as the tenant trusts the owner of the apartment, he asked the lessor to exchange USD in a bank on his own. Asked in a legal language means empowered orally. In addition, the law does not forbid giving small powers orally.

Contract 4. Lease with an index

What does it look like? The lease contract indicates that the amount of lease payment may change according to change in the inflation index; increase in the UAH rate to the currency, etc. The lease contract should include the amount of lease rate in UAH and calculation formula of lease payment.

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