Emergency measures to support the economy in the area of rental

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Pepeliaev Group explains the legal consequences of state measures to support the economy for landlords and tenants in the situation of the COVID-19 outbreak

On 1 April 2020 the draft law “On amending individual items of Russian legislation with respect to preventing and eliminating emergency situations” was submitted to the Federation Council for consideration. After the draft law has been signed by the President and officially published, the measures set out in it to support business will come into force; these affect, among others, landlords and tenants of real estate.

In accordance with the text of the draft law, tenants will be granted two important rights:

Firstly, the right to request that the landlord conclude a supplemental agreement to extend the deadline for the payment of the rent for 2020. The landlord, in turn, will be obliged to conclude with the tenant an agreement to extend the deadline within 30 days from the day of the tenant’s request. The government will subsequently set the conditions and the period for such an extension of the deadline.

Secondly, the right to demand that the landlord reduce the amount of the rental payment for 2020. This can be done if it has become impossible to use the property any longer owing to the state authority having adopted a decision to introduce a regime of high alert or emergency.

Please note that the specified measures apply only to lease agreements that had been concluded before a state authority of a Russian constituent entity adopted in 2020 a decision to introduce a regime of high alert or emergency.

It should be borne in mind that in addition to the newly introduced measures, in some cases the outbreak of the coronavirus infection may serve as a ground for amending or terminating a contract owing to a material change in circumstances (article 451 of the Russian Civil Code) as well as for force majeure (article 401 of the Russian Civil Code).

comment.jpgPlease note that the application of this law is not limited to lease agreements for state and municipal property. The above rights are granted to tenants regardless of the form of title to the leased item.

What to think about and what to do

Analyse whether the state authorities of the Russian constituent entity in which your leased property is located have introduced a regime of emergency or high alert. Make sure you know the date when the relevant item of legislation was adopted.

If your lease agreement had been entered into before the regime of emergency or high alert was introduced, assess whether using the measures set out in the draft law is prudent. Please bear in mind that the Russian Government will subsequently add more detail as to the procedure and conditions for extending the deadline for the rental payment.

If the lease agreement was concluded after the Russian constituent entity had adopted the item of legislation, please consider applying other mechanisms set out in the legislation - amending or changing an agreement owing to a material change in the circumstances (article 451 of the Russian Civil Code) or the prospects of relying on force majeure (article 401 of the Russian Civil Code).

Help from your adviser

Pepeliaev Group's lawyers are ready to assist in assessing any circumstances and facts as they apply to each specific obligation, and in developing a position with regard to the most reasonable conduct depending on the situation. We will also provide any other legal support, including in resolving contentious situations, in negotiations with counterparties, and in preparing agreements in the current crisis.

We are also ready to provide complex legal assistance and support during court proceedings, both in commercial courts and courts of general jurisdiction.

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