Coronavirus – New opportunities for tenants – Russia

Russia

Coronavirus - Country overview
Coronavirus - Real estate

15-06-2020

On 1 April 2020, the President of the Russian Federation signed Federal Law No. 98-FZ On On 08 June 2020 the President of the Russian Federation signed the Federal Law No. 166-FZ of 08 June 2020 “On amending certain legislative acts of the Russian Federation in order to take urgent measures ensuring a sustainable development of the economy and preventing the consequences of the spread of the new coronavirus infection”. In particular, it introduces several amendments to Federal law No. 98-FZ of 01 April 2020 (the “Law”) and provides for new options for tenants:

Rent reduction

Who is entitled to claim a rent reduction?

Tenants fulfilling the following conditions:

has a lease agreement concluded before the current state of high alert was established
is a small- or medium-sized business
conducts activities in sectors of the economy that are included in the government’s List of Affected Industries

Period of rent reduction

Up to one year.

Amount of the rent reduction

Not regulated. The parties should conduct negotiations.

Is the landlord under an obligation to give a rent reduction?

No, the Law does not provide for any such obligation.

How does this change differ from the previously existing right for other tenants to claim a rent reduction?

Under Art. 19(3) of the Law, which we reviewed in an earlier Legal Alert, the tenant must prove that they are unable to use the leased premises. These is no such obligation for tenants that meet the criteria above.

Repudiation (termination) of the lease agreement

Who is entitled to repudiate (terminate) the agreement?

Tenants fulfilling the following conditions:

has a lease agreement concluded before the current state of high alert was established
is a small- or medium-sized business
conducts activities in sectors of the economy that are included in the government’s List of Affected Industries

In which cases can the tenant repudiate the agreement?

If the parties have not come to an agreement on rent reduction or other amendments to the lease agreement within 14 business days after the tenant has requested a rent reduction.

What are the conditions for repudiation?

repudiation must happen at the latest on 01 October 2020
compensation for damages incurred as lost profits, or damages for termination or repudiation of the agreement, if provided for in the agreement, are not chargeable to the tenant
any deposit provided for in the lease agreement and paid by the tenant, is not refundable to the tenant
only fixed-term lease agreements may be repudiated under this rule

Lease extension for state and municipal property

Lease object	Land plots	Other property
Extension term	Not longer than initial lease term, but in any way event three years maximum	Not longer than one year
Prerequisites	lease agreement is concluded before the regime of high alert was introduced in the relevant region an extension request should be submitted before 01 March 2021, provided that the lease agreement has not expired and the landlord does not require its termination on the date thereof the tenant has remedied any identified violations of land use legislation	the lease agreement is concluded through auction before the state of high alert was introduced in the relevant region the tenant duly performed its obligations
Terms of extension	no auction the landlord to conclude an agreement within 5 business days after the tenant’s request	no auction or market valuation of the lease object to be conducted the lease is extended on the same conditions as before, or other conditions agreed upon by the parties, that do not worsen the position of the tenant

This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

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