Leases: Resolution Of The Supreme Commercial Court

02.04.2013

Legal Update No. 413, 2 April 2013

Goltsblat BLP advises that the Plenum of the Supreme Commercial Court has adopted resolution of 25 January 2013 No. 13 “On supplementing resolution of the Supreme Commercial Court of the Russian Federation of 17 November 2011 No. 73 “On certain questions relating to application of the rules of the Russian Civil Code on leases” (the Resolution), which was posted on the SCC RF website on 21 March 2013.

The main points are as follows.

Lease of a future property

  • The possibility is allowed of concluding a lease for a future property (i.e., one that is not owned by the lessor when the agreement is executed). It is important for the lessor to be the registered owner of the real estate or legal possessor of the newly created or transferred real estate when it is passed on to the tenant. If the lessor fails to fulfil its obligation to lease out the item (including if it has not been created or acquired), the lessor will be required to reimburse the tenant for any losses caused by breach of contract.
  • If the lessor does not hold a commissioning permit at the time the property is provided to the tenant, this does not, in itself, invalidate the lease. There is still, however, a possibility of the lessor and/or the tenant being held administratively liable for unlawful operation of the facility. It is stressed that a lease for an unauthorised structure is null and void.

Lease of part of a property

  • The parties are entitled to conclude a lease for use of part of a property (including part of premises or a land plot). If such an agreement is concluded with respect to part of a real estate facility for one year or more, it is subject to state registration, the encumbrance being placed on the entire real estate facility. An entry in the Realty Register on lease of real estate does not preclude an entry being made on another lease relating to the same property.
  • If the right to real property, part of which is provided for use, was previously registered in the Realty Register as being held by the lessor, a document signed by the parties and containing a sufficiently detailed graphic and/or textual description of the given part for the parties to agree the subject of the lease may be submitted for registration. It is not necessary to obtain and submit for registration a separate cadastral passport in relation to the given part. One exception consists in leases providing for use of part of a public land plot, conclusion of which is specifically prohibited by the Russian Land Code without the given land plot undergoing prior cadastral registration.

Lease deformalisation

  • A lease that contains all the substantive conditions but is not recorded in the Realty Register (though subject to registration) should be fulfilled in accordance with its terms and conditions (rental, penalties, and so on). Even so, the rights of the tenant under an unregistered lease cannot have priority over those of third parties (for instance, such a tenant does not enjoy the pre-emptive right to conclude a lease for a new term and, if the title to the property transfers to a third person, the latter is not obliged to accept the rights and obligations of the lessor under such a lease).
  • If the parties have actually fulfilled an agreement, they are not entitled to claim that the lease is invalid or unconcluded merely because the leased property is not appropriately identified.
  • The court does not consider arguments produced by a tenant that uses property without paying to the effect that the title to the leased property belongs to someone else and the lease is void. Certain provisions concerning consideration of disputes under claims brought by an owner of property leased out by an unauthorised person are clarified.

Clarification of certain rental issues

  • By agreement between the parties, the rental may be changed more than once a year, even if this is not specified in the agreement itself. Yet the rental may be changed unilaterally by the lessor only once a year (provided this right is stipulated by law or the agreement).
  • Transfer of a land plot from public to private ownership or vice versa does not automatically entail a change in the rental.
  • The rental under leases for state- and municipally-owned property is not regulated if determined by tender.
  • Under leases with a rental regulated by law, no amendments are required to the lease itself for applying a new rental rate.
  • Clarifications are given of certain other rental issues, including in cases when there is no need for state regulation of the rental but respective authorities have established rules by which it is governed in setting the rental, as well as clarifications regarding how a federal law stipulating the need for rental regulation is applied to leases concluded before the effective date of such a law.

Other clarifications

  • From the time the first person’s title is registered to any premises in an apartment block, the land plot comes into shared ownership of the owners of premises and the lease between the developer and the landlord terminates, irrespective of whether the land plot was publicly or privately owned.
  • Expiry of a land lease by the time an application is submitted for registration does not preclude registration of the title to construction in progress during the term of the lease.
  • The Resolution also contains a number of clarifications relating to the new version of article 17.1 of the Federal Competition Law allowing, in certain circumstances, for public property to be leased without a tender.

If you have any question or would like more detailed information, please contact: Vitaly Mozharowski, Partner, Real Estate & Construction, Goltsblat BLP, by phone +7 495 287 44 44, or by e-mail Vitaly.Mozharowski@gblplaw.com; or Yuri Chernobrivtsev, Partner, Real Estate & Construction, Goltsblat BLP, by phone +7 495 287 44 44, or by e-mail Yuri.Chernobrivtsev@gblplaw.com; or Maksim Popov, Associate Director, Real Estate & Construction, Goltsblat BLP, by phone +7 495 287 44 44, or by e-mail Maksim.Popov@gblplaw.com.

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