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The government has approved the new rules concerning benefits for tenants from affected industries and socially-oriented not-for-profit organisations

21.05.2020
4 min read
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The Russian Government has adopted an instruction on the introduction of additional rules for tenants of state real estate.

The amendments primarily cover two groups of persons

  1. Tenants that represent small and medium-sized enterprises (“SMEs”) included in the register of SMEs; and
  2. Tenants that are socially-oriented not-for-profit organisations included in the register of service providers of socially useful services.

Release from rent payments

Tenants that perform activity in one or several industries according to the list of the most affected in the conditions of the spread of the new coronavirus infection (according to the Russian Government's Resolution No. 434 dated 3 April 2020) are subject to a release from rent payments. Period of the release: from 1 April until 1 July 2020.

Implementation mechanism: applying to the federal executive body authorised to enter into a lease agreement with regard to federal real estate which within 7 business days is obliged to enter into a supplemental agreement that provides for such a release.

Please note: the tenant is determined based on the principal or additional types of economic activity according to OKVED (the Russian National Classifier of Economic Activities) which are entered into the Unified State Register of Legal Entities as at 1 April 2020.

Please note: the tenant is determined based on the principal or additional types of economic activity according to OKVED which are recorded in the Unified State Register of Legal Entities as at 1 April 2020.

Deferral of rent

Other tenants not performing activity in the most affected industries according to the list of the Government, but that are representatives of small or medium-sized businesses included in the register or are socially-oriented not-for-profit organisations included in the register of services providers of socially useful services have the right to a rent deferral for the period from 1 April until 1 October 2020.

Persons released from rent from 1 April until 1 July 2020 also have the right to a deferral from 1 July until 1 October.

Implementation mechanism: applying to the federal executive body authorised to enter into a lease agreement with regard to federal real estate which within 7 business days is obliged to enter into a supplemental agreement that provides for such a release.

Liquidation of rent debt

The Government has approved the following extended procedure for settling debts:

  1. The deadline for settling debt is set by the tenant. The maximum length which can be proposed: from 1 January 2021 until 1 January 2023 (this means 24 months).
  2. The settlement is made on a step-by-step basis, by equal payments, once a month at most. At the same time the amount of payment aimed at settling the debt should not exceed a half of the monthly rent.
  3. Fines, default interest, interest and other measures of liability do not apply in connection with such deferral (even if the agreement provides otherwise).

Therefore, if the mechanisms for settling the deferral is implemented for the term from 1 January 2021 until 1 January 2023, one will need to settle within 24 months the debt accrued during 6 months of the deferral period (or for 3, if the entity was released from 1 April until 1 July 2020).

What to think about and what to do

Compare your OKVED codes specified in the Unified State Register of Legal Entities for 1 April 2020 with the List approved by the Russian Government Resolution No. 434 dated 3 April 2020.

If you are a tenant of federal property, send an application to the authorised representatives of the landlord concerning the entry into a supplemental agreement for a deferral of (or a release from) rent for the corresponding period.

Local governmental bodies are recommended to implement similar measures: check whether similar benefits are granted under the regulations of the governmental bodies of your constituent entity of the Russian Federation.

If you fall within the scope of none of the benefits known to you, you might 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), including through court proceedings.

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 contracting parties, 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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