New legal changes set to transform the tenancy market
The Russian Supreme Commercial Court’s approach to the landlord and tenant sector is marked by its balance. In its attempts to tailor its approach to the developing practice on the Russian market, the Court is trying to meet the needs of both tenants and landlords.
It is, in fact, impossible to overstate the demand for such legal developments. This is especially so among foreign tenants and landlords, who are used to being able to agree more or less any term in a contract unless it violates general legal principles.
On the 21st of March 2013 the Russian Supreme Commercial Court issued a legal opinion clarifying the legal framework of landlord-tenant relations.
The opinion covers both specific and general issues, the most notable of which are:
- A lease agreement may be entered into for future real estate, meaning that the lease agreement may apply to premises or a building which does not physically exist when the lease agreement is made (e.g. buildings under construction). The same applies to buildings which have already become operational but with ownership title that has yet to be registered. Importantly, the court ruled that the tenant may recover damages if the landlord fails to hand over the premises because the building has not been constructed.
- Nevertheless, no lease agreement may be entered into for future real estate (and any lease that is concluded will be void) should it be proved that the premises/the building are, in fact, an unauthorized construction. This also covers the circumstances where the parties have concluded a lease agreement subject to a condition that the landlord will go to court to have title to the unauthorized construction facility legally recognized. The court will refer to the law and note that an unauthorized construction may not be the subject matter of a civil transaction.
Another notable change is undoubtedly the new draft Russian Civil Code, a small part of which entered into force on 1 March 2013 , having been approved by the State Duma and then signed by the President on 30 December 2012.
Although the law covers a wide range of critical issues, the most interesting points for tenants and landlords are:
- The principles of reliability of the public real estate register and verification of legal grounds for registration have been introduced: these aim to protect third parties who rely on information from the public register (provided that no entity may benefit from this protection if it knows, or should have known. that the register was inaccurate);
- The state registration authority is now liable for any inaccuracy in state registration (as long as the registration authority is found to be at fault). As a result, it is necessary for the registration authorities to have an additional responsibility to consider the legal side of each transaction they are asked to register (including the potential invalidity of each transaction).