Konstantin Boytsov told CRE about the challenges of terminating rental contracts

Konstantin Boytsov - Counsel

At the end of June 2022, Russian President Vladimir Putin signed a law giving owners of retail facilities the right to demand full rents from companies that have suspended operations or are withdrawing from the Russian market or to unilaterally terminate their contracts without penalties. In the autumn the Russian State Duma may also pass a law recognising the consequences of sanctions and current circumstances as force majeure.

However, Konstantin Boytsov, Senior Associate, Head of Real Estate and Construction practice of Maxima Legal told CRE magazine that the law does not regulate some essential aspects of rent contracts termination in such situations. In particular, the expert pointed out that in such cases there is a necessity to bring the rented property into initial condition, ideally for the landlord – suitable for renting it out to another tenant.

“Repair and restoration work often requires substantial financial costs and time, during which the property cannot actually be used for its intended purpose. By virtue of applicable civil law, the tenant, unless otherwise provided for in the rental contract, is obliged to return the property in its original condition when returning it. The return of the property in a modified condition gives the landlord the right not to accept such property and to continue to charge rent until the obligation to return the rented property has been duly fulfilled. In practice, the questions of who repairs the property, to what extent and at whose expense, as well as the fate of leasehold improvements made by the tenant, become one of the main subjects of negotiations between the parties to the rental contract being terminated,” explained Konstantin Boytsov.

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