Legal alerts / 16.06.2020

New support measures for lessees

On May 22, 2020, the State Duma of the Russian Federation adopted and sent to the Federation Council a recently widely discussed draft law that provides for, inter alia, further support measures for lessees during the coronavirus (Federal Law “On Amending Certain Legislative Acts of the Russian Federation in order to take urgent measures aimed at ensuring the sustainable development of the economy and preventing the consequences of the spread of a new coronavirus infection “(draft No. 953580-7),  – the “FL on Urgent Support Measures“).

The initial version of the FL on Urgent Support Measures provided for any lessees to have a right to terminate a lease agreement in the case of a decrease in income of more than 50% without paying any sanctions upon termination (we wrote about this in more detail in our previous review).

However, the final version of the FL on Urgent Support Measures differs significantly from the initial text:

In accordance with the adopted version of the FL on Urgent Support, lessees that are small and medium-sized businesses from the most affected sectors of the economy [1] are entitled to:

  • demand a reduction of the rental payment for a period of up to 1 year (under lease agreements concluded before the decision was made to introduce a state of readiness in 2020),
  • withdraw from the specified lease agreement [2] no later than October 1, 2020 if the parties fail to reach an agreement between them to reduce the rental payment within 14 working days from the moment of the lessee’s request.

As for payments in the case of such early termination of a lease agreement, then:

  • losses in the form of expectation damages, losses upon termination of the agreement [3] and other amounts of money (if, in accordance with clause 3 of article 310 of the Civil Code of the Russian Federation the lessee’s right to unilateral cancellation of the agreement depends on the payment of a certain amount of money to the lessor stipulated by the lease agreement) are not recovered from the lessee;
  • the security deposit paid to the lessor is not returned to the lessee;
  • other losses are compensated in accordance with civil law.

With regard to lessees of public property, except lessees of land plots, the FL on Urgent Measures of Support provides that the lessor [4] must conclude an additional agreement to the lease agreement to extend the lease term by up to 1 year on the same conditions (or other conditions that do not worsen the situation of the lessee) without bidding and without assessing the market value of the property, provided that the lessee has properly fulfilled its obligations under the agreement.

With regard to lessees of public land plots, the FL on Emergency Support Measures provides that the lessee has a right to demand that the lessor conclude an additional agreement to a land plot [5] lease agreement to extend the duration of such agreement without bidding by March 1, 2021, (for a period not exceeding the initial validity period of the lease agreement or for 3 years, if the initial term was more than 3 years), regardless of the grounds for concluding it, the presence or absence of arrears of rental payments, but provided that on the date of the lessee’s request:

  • the lease agreement has not expired;
  • the lessor has not filed a lawsuit to terminate the lease agreement;
  • there are no violations of the legislation of the Russian Federation revealed due to the supervision of state land or unresolved violations due to the using of the land plot.

The lessor must conclude the relevant additional agreement no later than 5 working days from the date of the request.

 

[1] Decree No. 434 of the Government of the Russian Federation dated April 3, 2020 “On approving the list of sectors of the Russian economy that have been most affected by the deterioration of the situation as a result of the spread of the new coronavirus infection” includes sports and recreational business, the business of tourist agencies, the hotel business, catering, the organization of conferences and exhibitions, the provision of domestic services to the population, and retail trade in non-food goods.

[2] According to article 450 of the Civil Code of the Russian Federation

[3] According to article 393 and 393.1 of the Civil Code of the Russian Federation

[4] Under lease agreements concluded by bidding before the decision was made to introduce a state of readiness in 2020.

[5] Under land lease agreements concluded before the decision was made to introduce a state of readiness in 2020.

 

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