Julian Juhasz
For the business community, including lessors of real property as well as lessees, it is of utmost concern that leasing decisions are free from all unnecessary regulation. A lot of money can be gained or lost depending on whether businesses are able to implement business strategies, which involve leasing of non-residential property, in the quickest and most efficient manner possible. For this reason, changes to the archaic system of approvals for non-residential leasing in the Slovak Republic would be a positive step toward instilling investor confidence and attracting new business, especially foreign business. It would be difficult to adequately assess the number of business deals that have been scrapped on the basis of cumbersome regulations such as the approval process for business leasing.
Under Slovak law, non-residential premises that are sought to be leased to stores or service providers may not be leased without the consent of local authorities. The existence of this power of local authorities is attributable to a law having its origins as far back as 1950. Under the former Communist regime such decisions were made pursuant to an economic plan developed by the national committee. The intent behind the law of 1950 was to implement policy of a centrally planned economy regulating public administration of such property, as well as to implement economic goals of the regime. Not only was the lease of non-residential property subject to approval by the national committee, but in the past, available non-residential property had to be notified to the committee.
It is time to bring this and related laws into further conformity with international business expectations and realities. Also burdensome is the fact that a contract for the lease of commercial property was, and still is, invalid if signed prior to the receipt of such approval.
Kevin Connor
Obviously, the inability even to sign a valid agreement for lease of commercial property, which could be binding once permission from the local authority is granted, poses a level of uncertainty that is unacceptable to the workings of twenty-first century business.
The damage to business can be significant. Conditional contracts on lease of commercial property, which could be used to secure a valuable location, are not valid until approval is given. The time necessary to secure an approval also slows down the construction process and increases the required period between planning and implementation of business ideas.
Finally, another law permits municipalities to regulate the types of businesses that may operate in a particular area as well as regulate business hours. There is a legitimate public interest in regulating businesses within a municipality. Because local municipalities regulate the types and number of businesses allowed to operate in a particular area, there is no need for a separate requirement for approval of commercial leases.
Julian Juhasz and Kevin Connor are attorneys with Squire, Sanders & Dempsey. Their column appears monthly. Send comments or questions to propertyinvestor@ssd.com.
