Russia has adopted rules allowing to renegotiate real estate leases and postpone lease payments in certain cases. These rules affect both landlords and tenants. In this LawFlash we address the basics of these rules as adopted on the federal level. The rules may differ depending upon where the real estate in question (buildings, premises, or land plots) is located as some Russian regions have adopted their own regulations on this subject matter.
Article 19 of Federal Law On Amendments to Certain Legislative Acts of the Russian Federation on Prevention and Liquidation of Extraordinary Situations, No 98-FZ. dated 1 April 2020 (98-FZ Law) allows parties to renegotiate the lease. It states that upon the introduction of a so-called “high alert regime” in a particular region of Russia (this regime has been introduced in all Russian regions by now), a tenant of a real estate located in that region may request its landlord that the lease payments be postponed, and the landlord must accommodate such request within 30 days, by entering into an addendum to the lease agreement. The tenant may also request that the lease payments are reduced if it is unable to use the leased property because of the measures it must take under the laws aimed at preventing the spread of the coronavirus (COVID-19).
The 98-FZ Law required the Russian government to elaborate these rules.
On 3 April, the Russian government adopted the Requirements to Terms and Conditions and Timeline for Postponement of Lease Payments under Real Estate Lease Agreements (the Requirements).
The Requirements provide that, if a tenant requires so, the following measures apply:
The Requirements mention that the parties can renegotiate the terms of existing leases to find an amicable solution.
On 30 April, the Russian Supreme Court issued the Overview of Court Practice Involving Application of Legislation and Measures for Prevention of Spread of the New COVID-19 Infection in Russia, No.2 (Overview No. 2). Overview No. 2 provides that:
Notably, the Supreme Court does not have legislative power and cannot interpret the matters of substantive law in the absence of court cases on these matters. Given Overview No. 2 was issued just about one month after 98-FZ Law, the legal force of Overview No. 2 is unclear. However, courts in Russia will be guided by Overview No. 2, and, therefore, landlords and tenants must take it into the account when considering how to deal with the existing leases.
The COVID-19 situation remains extremely fluid and rules keep changing. For example, Russia’s Ministry of Economic Development prepared a draft law allowing tenants of nonresidential premises and land plots to early terminate their real estate leases without bearing termination fees, provided (i) they have not been in breach of their obligations under existing lease; and (ii) their revenues fell by at least 50% during the “high alert regime.” This draft has been adopted in the first reading by the State Duma, the lower chamber of the Russian parliament, on 12 May and is currently scheduled for further deliberations. It faced significant criticism and currently it is unclear whether (and if yes, how quickly) this draft will go through further readings and become law.
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