When a business operating in an administrative building wants to terminate a contract for the maintenance of common areas, it often seems that one decision is enough – the contract is open-ended, notice of termination has been given, and an alternative service provider has already been selected. However, in practice, such a decision often comes up against the will of other owners of premises in the building: services are provided for the entire building, common property is indivisible, and there is no joint decision. It was precisely this situation that the Supreme Court of Lithuania assessed and concluded that the right to terminate such a contract is not absolute.
The Supreme Court of Lithuania (hereinafter referred to as the SC) issued a new important ruling in a civil case and stated that a co-owner of an administrative building does not have the right to unilaterally terminate a contract for the maintenance of common use objects without the unanimous decision of all co-owners.
According to Mantas Baigys, a lawyer from the AVOCAD law firm representing the party in the case, this decision highlights a very important rule: the right to terminate a service contract is not absolute in all cases, especially when the contract relates to the maintenance of common property and affects the interests of all co-owners.
"The newly formulated rule of the Supreme Court shows that a person's right to terminate a service contract cannot be exercised under any circumstances," says lawyer M. Baigys.
The case dealt with whether the owner of premises in an administrative building could unilaterally terminate individually concluded open-ended maintenance service contracts if there was no joint decision by all owners (co-owners) of the premises to change the administrator and terminate the contractual relationship.
The Supreme Court upheld the findings of the lower courts and emphasized that in relationships of this nature, the specifics of joint partial ownership and the decision-making procedure of co-owners in administrative buildings are of decisive importance. The ruling highlights several important points:
- In administrative buildings (where most of the space is non-residential), decisions on the management of common property are essentially linked to the agreement between the co-owners.
- Although the Civil Code allows for the termination of an indefinite contract, this rule must be applied after assessing whether the law or contract imposes any restrictions. The Supreme Court emphasized that restrictions in the administration and supervision of joint property are determined precisely by the co-owners acting "as a single owner" in relations with third parties.
- When the subject matter of the contract covers the maintenance of all common areas (rather than a separate part thereof) and all co-owners have concluded a similar contract, such agreements may be regarded, in terms of their content, as a single joint agreement, which may only be amended or terminated by a joint decision.
According to AVOCAD lawyer Kamilė Šemeklytė, who represented one of the parties in the lower courts in this case, this court ruling is particularly important for owners and administrators of commercial and administrative buildings. This is especially true when some owners want to change service providers but there is no consensus, when services are actually provided to the entire building, so "disconnection" may have consequences for others; when questions arise as to whether a unilateral notice is sufficient to terminate the contract.
“The Supreme Court of Lithuania’s interpretation in this situation focuses on balancing interests and ensuring the continuity of the management of the jointly owned property until the co-owners reach a joint decision or establish rules for its use,” the lawyer emphasizes in her commentary on the ruling. This decision by the Supreme Court of Lithuania is final and not subject to appeal.