Can your business claim the postponement of the lease payment?

On April 3, 2020 the Government of the Russian Federation, by Resolution No. 439, approved the requirements with regard to conditions and terms of postponement of rent payment under real estate lease agreements (hereinafter – the “Requirements“) in developing the provisions of Article 19 of the Federal Law No. 98-FZ dd. 01.04.2020 “On Amendments to Certain Legislative Acts of the Russian Federation on Issues of Emergency Situations Prevention and Elimination”.

With Decree No. 439, the Government has limited the range of persons eligible for rent deferred payments. According to the Requirements, such persons include only those tenants – organizations and individual entrepreneurs – who operate in sectors of the economy most affected by the spread of coronavirus.

According to Government Decree No. 434 of April 3, 2020, the list of sectors of the Russian economy most affected by coronavirus includes air travel, culture, organization of leisure and entertainment, physical fitness and sports, the tourism, hotels, catering, additional education and non-governmental education, organization of conferences and exhibitions, personal services (repair, laundering, dry-cleaning, hairdressing and beauty salons).

The abovementioned persons have the right to demand a deferral of payment of rent in the following cases:

• deferral is requested under lease agreements for premises located in administrative and business centers and shopping centers (complexes) concluded for more than 1 year
• such lease agreements should have been concluded before the authorized authorities made decisions on introduction of the high readiness regime or emergency situation in the territory of the respective subject of the Russian Federation.

At the same time, no postponement is granted for residential premises.

Deferred rent payment is provided until October 1, 2020 on the following terms:

a) Rent arrears are to be paid not earlier than January 1, 2021 and not later than January 1, 2023 in stages, not more than once a month, by equal payments, the amount of which does not exceed half of the monthly rent under the lease agreement

b) postponement is provided for the period of validity of the high readiness regime or emergency situation in the subject of the Russian Federation in the amount of the rent for the relevant period and in the amount of 50% of the rent for the relevant period from the date of termination of the high readiness regime or emergency situation up to October 1, 2020

c) fines, interest for the use of money, or other liability measures (including those stipulated in the lease agreement) in connection with the postponement are not applied

d) establishment of additional payments by the lessor to be paid by the lessee in connection with the deferment is not allowed

e) the amount of the lease payment for which the deferral is granted may be reduced by agreement between the parties

f) if the lease agreement provides for the inclusion of charges for utilities and/or expenses for the maintenance of the rented property, no postponement of such part of the rent shall be provided, unless during a period of high readiness or an emergency, the lessor is exempt from paying for such services and/or expenses.

In order to provide economic support to lessors who have granted deferment to lessees under real estate lease agreements, state and local authorities are recommended to provide such lessors – owners of the respective real estate objects – with support measures concerning payment of corporate property tax, property of individuals, land tax, and land lease fees for the period of deferment.