Lease Under Pandemic

Today, businessmen’ pressing issue is inability to pay a rental fee.

The RF Government has determined the category of businessmen who are entitled to recon upon deferral of the rental fee payment during a decision on establishing a high-alert or emergency situation regime or upon termination thereof:

In Moscow, the high-alert regime was imposed on March 05, 2020, in Saint Petersburg – on March 13, 2020.

Thus, it is the landlord’s assigned duty to grant a delay under the lease agreement subject to the conditions specified by the Resolution of the Government of the Russian Federation or to any other conditions not aggravating the tenant’s position.

The terms of deferral shall be applicable to the deferral addenda to the lease agreement irrespective of the date of such addendum.

How can one get a rental fee deferral?

To get a rental fee deferral, a tenant whose type of activity has been recognized by the RF Government as the most seriously affected economic branch should apply to the landlord in writing with a claim for granting a rental fee deferral. I recommend that the letter has appended to it the draft addendum containing the terms for granting a rental fee deferral upon the terms and conditions stipulated in the previous section or upon any other more favorable terms.

Within 30 days following application of the tenant, the landlord is obliged to enter into an addendum providing for the deferral of rental fee payment.

In case the landlord refuses to enter into an addendum on deferral of rental fee payment, one may apply to a court seeking protection of the rights.

Terms for rental fee reduction

If the tenant is not able to use the leased property due to the high-alert or emergency situation regime, he shall be entitled to require that the landlord reduces the rental fee amount.

Rental fee reduction may be granted by the landlord for the period when it is impossible to use a non-residential premise, provided the mall where the tenant renders services or sells the goods is closed in the region.

Therefore, the RF Government encourages all landlords to reduce the rental fee due to the impossibility to use the property for the period of the high-alert or emergency situation regime, however, this regulation does not oblige the landlords to consent to the rental fee reduction and should only be considered as a recommendation.

What should the tenants who are not included in the list of the most seriously affected economic branches do?

To make a decision whether to continue carrying out business activity in the leased premise or not.

If a decision is made to continue leasing a premise:

Granting a deferral and/or reduction of the rental fee payment is a right but not an obligation of the landlord (a deferral and/or reduction of the rental fee payment is granted to the most seriously affected economic branches determined by the RF Government).

If you decided to terminate the lease agreement:

 Cancellation of the lease agreement is based on Article 451 of the RF Civil Code, the change of the circumstances shall be recognized as essential, if they have changed to such an extent that in case the parties could have wisely envisaged it, the agreement would not have been concluded by them or would have been concluded on the essentially different terms. In this situation spread of coronavirus infection is deemed the essential change of the circumstances.

It should be taken into account that the proposed solution of the existing severe situation is the general one as each agreement is entered into upon individually determined terms and conditions.

I recommend to analyze the terms the lease agreement was concluded under. Before addressing the landlord to be granted the rental fee deferral and/or reduction, one should resort to a legal counsel in order to analyze the lease agreement. When appealing to a court, please note that it is the court only that may take a decision with regard to the claim on the agreement cancellation upon its own belief, with due account of the terms and conditions of the agreement concluded, legislation, and clarifications of the Supreme Court of the Russian Federation.

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