From March to July 2020, lawyers and advocates of the Yurproekt Bar Association regularly analyzed the ongoing changes: bans, restrictions and requirements for doing business in the conditions caused by the COVID-19 coronavirus pandemic, support measures.

We have prepared and made freely available useful materials for business owners and tenants of real estate. Available for viewing and downloading:

1. Anti-crisis_handbook — updated as new regulations and clarifications of the Supreme Court are published
2. Sample documents for tenants
3. Restrictions and bans for business and citizens in Kuzbass 16.07.2020< li> pdf , in Kuzbass

We hope that our advice will help you better understand how to act in the current situation.

Anti-crisis guide navigator:

1. "Force majeure": what gives and how to use it correctly?

1.1. What is "force majeure"?

1.2. Is the coronavirus pandemic a force majeure or not?

1.3. How to prove "force majeure"?

1.4. If you prove "force majeure", what does it give, what are the consequences?

1.5. If the business is banned or there is no way to pay creditors due to a decline in buyers - is this a "force majeure" and you can not pay?

2. Rent for real estate: how to get rid of it, reduce it, get a deferment?

2.1. Is it possible not to pay or reduce the rent in the context of Covid-19 and the introduction of restrictive measures?

2.1.1. Exemption from rent due to the inability to use the rental object.

2.1.2. Reduced rent due to restrictions on the use of the rental object.

Bonus 1. Working schemes to reach agreements between the tenant and the landlord to reduce the rent.

Bonus 2. The algorithm of actions of the tenant to get a rent reduction.

2.1.3. Release from rent as a result of termination of the contract.

2.1.4. Exemption from rent as a measure of state support.

2.2. Who can get a rent deferment and how?

Bonus 3. Tenant's steps to change the lease agreement.

Bonus 4. Table - tenant rights and support measures in the context of Covid-19 in Kuzbass.

* Who is at risk of losing regional support measures?

3. Tax reduction as a measure to support landlords in the Kemerovo region.

* Who can be deprived of the right to reduce corporate property tax?

4. Final recommendations for tenants and landlords.

1. "Force majeure": what gives and how to use it correctly?

1.1. What is "force majeure"?

Force majeure circumstances (force majeure) are extraordinary and unavoidable circumstances that arose during the validity of the contract (Article 401 of the Civil Code of the Russian Federation, paragraph 8 Resolution of the Plenum of the Supreme Court of the Russian Federation dated March 24, 2016 N 7). That is, these are circumstances that could not reasonably be expected at the conclusion of the contract, or avoided or overcome, which are beyond the control of the parties to such an agreement.

In particular, such circumstances may include: natural disasters, mass diseases (epidemics), transportation restrictions, prohibitive measures of states, prohibition of trade operations, including with individual countries, due to the adoption of international sanctions, and others not circumstances depending on the will of the parties to the agreement (contract) (from="_blank">Regulations on the procedure for witnessing force majeure circumstances by the Chamber of Commerce and Industry of the Russian Federation).

1.2. Is the coronavirus pandemic a force majeure or not?

The COVID-19 pandemic itself is not among the situations covered by the concept of “force majeure circumstances” (force majeure). However, force majeure should include its consequences - the introduction of restrictive measures by the authorities: bans on shops, the introduction of quarantine (a ban on citizens leaving their homes), etc.

Force majeure circumstances are considered exclusively on an individual basis and do not apply to all contractual relationships. If this is Italian business clothing, which is sewn from fabrics made only in Italy and nowhere in the world you can buy and deliver such fabrics, then due to the closure of the customs borders of the Russian Federation with Italy, this will become a force majeure in relations with the clothing customer for such an atelier - obviously, clothes made of Belarusian fabrics will not suit him.

1.3. How to prove force majeure?

The procedure for testifying to force majeure circumstances (force majeure) falls within the competence of the chambers of commerce and industry. In the Kemerovo region, the Kuzbass Chamber of Commerce and Industry issues such conclusions on force majeure circumstances under agreements concluded between Russian legal entities (individual entrepreneurs). You can read about the procedure for obtaining it on the KuzCCI website. Now the conclusions are issued free of charge.

But the conclusion of the chambers is not a panacea (does not provide 100% protection in the event of a litigation) and is not the only possible proof of force majeure. That is, your counterparty may not accept the opinion (certificate) of the Chamber of Commerce and Industry. And then you will have to prove in court that this particular circumstance (for example, a ban on catering organizations) is extraordinary for you and unavoidable for your company to fulfill the contract (for example, hold a wedding or a banquet). The court must determine on a case-by-case basis whether this circumstance constitutes force majeure and evaluate its impact on the ability of a party to fulfill its obligation under the contract.

1.4. If you prove force majeure, what does it give, what are the consequences?

The occurrence of a force majeure event in itself does not terminate the obligations of the parties under the contract forever and does not entail the termination of the contract itself, if its execution becomes possible after they terminate. That is, if you cannot perform repair and construction work in April 2020 due to the impossibility of delivering material from abroad, then if such an opportunity presents itself in May 2020, you will be obliged to perform the work if the contract does not expire and the customer will not refuse him.

The legal consequence of force majeure is temporary delay in the performance of an obligation and release from liability for its non-performance or delay in performance. That is, for this period it will be necessary to pay later, but there are no grounds to charge penalties, penalties, or recover losses for late payment.

1.5. If a business is banned or there is no way to pay creditors due to a decline in buyers, is this force majeure and you can not pay?

If there are no force majeure conditions in the lease agreement and any other (it is not defined in any way what applies to it and what does not), the court will determine in each specific case whether this or that event is a majeure circumstance.

According to the current legislation, everything that is covered by the concept of “business risks” cannot be attributed to force majeure (force majeure), including: violation of obligations by the debtor’s counterparties, lack of goods on the market necessary for execution, lack of the necessary funds (clause 3, article 401 of the Civil Code of the Russian Federation).

The Supreme Court in 2016 explained that cannot be considered insurmountable the force of circumstances, the occurrence of which depended on the will or actions of the party to the obligation, for example, the debtor's lack of the necessary funds, etc.

And on April 21, 2020, in connection with the spread of COVID-19 and ongoing changes in legislation, the Supreme Court approved review of practice and acknowledged that force majeure may be the inability to pay if you cannot pay due to the imposition of restrictive measures.

The most important thing from the explanation of the Supreme Court of the Russian Federation about force majeure:

“At the same time, it should be borne in mind that the debtor’s lack of the necessary funds, as a general rule, is not a basis for exemption from liability for failure to fulfillment of obligations. However, if the lack of necessary funds is caused by the established restrictive measures, in particular, the ban on certain activities, the establishment of a self-isolation regime, etc., then it can be recognized as a basis for exemption from liability for non-fulfillment or improper fulfillment of obligations on the basis of Article 401 of the Civil Code RF. Exemption from liability is permissible if a reasonable and prudent participant in civil transactions, carrying out activities similar to the debtor, could not avoid adverse financial consequences caused by restrictive measures (for example, in the event of a significant decrease in the amount of profit due to forced closure of a public catering establishment for open visits).

To whom this is relevant:

• tenants who have closed due to the introduction of bans from the authorities under the "High Readiness" regime, cannot use their business facility and earn money, or the landlord (owner of the shopping center) has restricted their access in pursuance of the bans imposed by the authorities;
• Entrepreneurs running businesses that have fallen under the ban on their premises;
• to everyone who has lost the opportunity to earn a profit due to the bans imposed on citizens to visit crowded places.

What are the consequences:

• this will not make it possible not to pay at all to those who owe,
• this will make it possible to receive a deferred payment without sanctions (fines, penalties, damages)!

Don't forget to contact a lawyer for:

• preparation of force majeure notices,
• negotiating with a creditor (landlord, etc.) in order to find a balance of interests,
• achievement and legal consolidation of optimal agreements that exclude litigation

2. Real estate rent: how to get rid of it, reduce it, get a deferment?

Since March 2020, many owners have closed their buildings in pursuance of acts of the authorities on the introduction of restrictions for various types of “contact” businesses. Now some are resuming work, including because the bans on their business have been lifted (for example, hairdressing and / or manicure and pedicure services, multifunctional centers and law firms Order of the Government of the Kemerovo Region dated April 8, 2020 No. 184-r ).

Let's analyze the following questions:

• If the owner closed the building on the basis of an order from the authorities, is it possible for the tenant not to pay rent to the owner of the shopping center?
• And if you haven’t closed it, but you can’t use it under the threat of a fine, what can you do?
• And if there was no ban, but the flow of visitors / buyers decreased, is it possible to reduce / delay the rent?

2.1. Is it possible not to pay or reduce the rent in the context of Covid-19 and the introduction of restrictive measures?

The solution to this problem may be different depending on the situation. Below we have considered 4 situations and points of view.

2.1.1. Exemption from rent due to inability to use the rental object.

The first position of the Russian courts, which can be found in the past, is “You can’t use the rented object at all - you can not pay the rent.”

This position is defended by clarification of the Supreme Court of the Russian Federation of 2015: the tenant does not is obliged to pay rent for the period in which he is deprived of the opportunity to use the leased object due to circumstances beyond his control.

The courts refer to paragraph 2 of Article 328 of the Civil Code of the Russian Federation. It is about the fact that if you are supposed to be provided with something under the contract, and you also have to do something for it (for example, pay for what you received), then if you were not provided with this something, then you should not with your parties to fulfill their obligations (pay).

The judges of the Supreme Court logically justified the right of the tenant not to pay as follows:

“The lease agreement is mutual. Since the lessor at the time of the impossibility of using the leased property due to circumstances beyond the control of the lessee does not provide any provision, accordingly, he loses the right to receive rent.

2.1.2. Reduced rent due to restrictions on the use of the rental object.

The second point of view, which can be deduced from the analysis of the current legislation, is “Used the rented objects at least somehow - pay”.

The current legislation (Art. 614 of the Civil Code of the Russian Federation, Art. 19 of the Federal Law No. 98) speaks unambiguously only about reducing the rent in a situation where it was impossible to use the leased object in full due to restrictions from the authorities, and the rules of law, which seem to make it possible not to pay rent at all (Article 328 of the Civil Code of the Russian Federation), are general and there are no guarantees that they will be applied by the courts in the current situation.

Legal grounds for rent reduction:

• Clause 4 of Article 614 of the Civil Code of the Russian Federation provides for the right of the tenant to demand a corresponding reduction in the rent if, due to circumstances for which he is not responsible, the conditions of use stipulated by the lease agreement have deteriorated significantly. This article is not only about the physical, but also the legal conditions of use.
• Article 19 of Federal Law No. amendments to certain legislative acts of the Russian Federation on the prevention and elimination of emergency situations" gives the Tenant the right to demand a reduction in rent for the period of 2020 due to the impossibility of using the property associated with the adoption by the state authority of the subject of the Russian Federation of a decision to introduce a high alert regime or an emergency on the territory of the subject.

Court practice:

• In general, the courts have not yet had to resolve disputes between tenants and landlords due to such disasters on a federal scale, when similar restrictions on business have been introduced in all regions of the country.
• The same 2015 Supreme Court position can be interpreted as follows: the Supreme Court clarified that no rent is due if the landlord does not provide any. And if the landlords can prove that the “provision” was, for example: the tenant’s property was stored there or he could use it for another purpose, then these cases will give the landlords reasonable arguments against the tenants’ demands to “zero out” the rent.
• In a fresh review of practice No. 2 dated 04/30/2020, the Supreme Court clarified (point 5):
  
  “... the rent is subject to reduction from the moment when the indicated impossibility of using the property for the originally agreed purpose occurred, regardless of the date of conclusion of an additional agreement to reduce the amount of rent or the date the court decision on compelling the lessor to change the lease agreement in part rent reduction.
  
  In addition, the tenant has the right, as an objection to the claim for the recovery of rent, to indicate that the landlord unreasonably evaded concluding an additional agreement to reduce the rent. In this case, the rent is subject to collection in the amount determined taking into account the requirements of Part 3 of Article 19 of Law N 98-FZ, for example, the amount of the reduced rent may be determined taking into account the amount by which the rent is usually reduced in the current situation".

2. Other tenants:

• Relevant to: (1) if the landlord does not agree to a rent reduction and (2) there are no reliable legal grounds to seek a reduction or exemption from it through the courts (for example, if the tenant's activity was not prohibited, but the conditions of rent and / or business have deteriorated due to bans on the import of goods, recommendations for self-isolation for citizens and a general economic downturn of the situation).
• How to get: see instructions below

Bonus 3. Tenant's workflow to change the lease agreement

1. Prepare immediately a proposal to amend the terms of the contract at least for the period of restrictive measures of the authorities with a proposal not to apply penalties: Article 451 of the Civil Code of the Russian Federation allows the party to the contract to initiate its change due to "materially changed circumstances" - when the parties at the conclusion the treaties could not foresee that the authorities would impose prohibitions and restrictions on doing business. To demand changes is to offer to reduce the amount of rent, change the payment term, including receiving a deferral of payment.
2. A proposal to change the terms of the contract must be sent to the lessor in writing (you must get confirmation of the direction and receipt - get a receipt from the Russian Post and track the receipt by the lessor on the site).
3. If possible, hold negotiations on which to determine the conditions for changing the contract that suit both parties.
4. Upon reaching agreements, sign an additional agreement that will reflect the amended terms of the agreement (reduced rent, provides for an interest-free or percentage deferral for its payment, etc.) - in the same form as the agreement itself (clause 1 article 452 of the Civil Code of the Russian Federation): i.e. if the contract was certified by a notary, then the additional agreement to it must also be certified by a notary (any).
5. If the landlord does not agree to concessions, demands the payment of penalties, or does not respond at all to the proposal to change the contract within 30 days, then you can go to court to change the terms of the contract or to terminate it and oblige the landlord to take back the property (Clause 2, Article 452 of the Civil Code of the Russian Federation).

Pay attention:

• There is very little positive judicial practice on amending and terminating a contract by a court due to a significant change in circumstances - the court can amend a contract due to a significant change in circumstances only in exceptional cases. Although, of course, the current situation is unlike any other in modern history (bird flu and others), and can be considered exceptional.
• The disadvantage of this method of protecting rights is that, as a general rule, when the contract is changed or terminated in court, obligations are considered changed or terminated from the moment the court decision to change or terminate the contract enters into force. That is, in court, the tenant will need to justify the need to change the contract not from the date the decision enters into force, but from the date of the onset of negative consequences.

The following procedure for the tenant to change the contract will apply:

• when he does not have the right to demand a reduction in rent (for example, due to the impossibility of using the property) or there is no right to exemption from it (for example, in relation to state property);
• when he does not have the right to withdraw or unilaterally change the contract;
• applies to cases of termination of the contract (it also works in the opposite direction - the landlord can initiate), as well as for other types of contracts (not only for rent).

Bonus 4. Table - tenant rights and support measures in the context of Covid-19 in Kuzbass

We systematized all the types of rights of tenants in relation to rent provided for by the current legislation, depending on the category of the tenant, the type of his business and the object of the lease.

Some rights can be exercised out of court (release, deferral of state property) - apply to government agencies and obtain an additional agreement to the lease agreement.

Other rights (reduction, deferment of rent in relation to property that is privately owned) will have to be sought during negotiations with the landlord or defended in court.

Who is at risk of losing regional support measures?

Support measures may be deprived of those tenants who were brought to administrative responsibility after 03/31/2020:

• for violation of legislation in the field of ensuring the sanitary and epidemiological welfare of the population (Art. 6.3 Administrative Code),
• for non-compliance with the rules of conduct when introducing a high alert regime in a territory where there is a threat of an emergency, or in an emergency zone (Article 20.6.1 of the Administrative Code of the Russian Federation)
• for violation of labor legislation and other normative legal acts containing labor law norms (Article 5.27 of the Administrative Code of the Russian Federation)

3. Tax reduction as a measure to support landlords in the Kemerovo region

For property owners in accordance with the regional law "On the tax on property of organizations" a>) provides for the possibility of reducing the tax on property of organizations:

1. Reducing the property tax on the cadastral value from 2 to 1%

Prior to the adoption of the law, the tax rate for 2020 for corporate property tax in the Kemerovo region and most regions of Russia was 2% of the cadastral value of the property.

Who pays tax at this rate?

Taxpayers are legal entities that own real estate objects that meet simultaneously two conditions:

1. The objects belong to the category: (a) administrative and business centers, shopping centers (complexes) with a total area of ​​over 1000 sq. meters and rooms in them; (b) non-residential premises with a total area of ​​over 250 sq. m., the purpose, permitted use or name of which is offices, retail facilities, public catering and consumer services, or which are actually used to accommodate such facilities;
2. These objects must be included in The list approved by the executive authority of the constituent entity of the Russian Federation for 2020 (order Administration of the Kemerovo region dated December 3, 2019 No. 6-ra).

Who will get the property tax cut in 2020?

This measure applies only to those legal entities whose main OKVED in the Unified State Register of Legal Entities as of March 1, 2020 is included in the list in accordance with the annex to this regional law new coronavirus infection, approved by Decree of the Government of the Russian Federation of April 3, 2020 No. 434) .

! Please note that this support measure does not apply to personal property tax. That is, if a shopping center or premises in it are owned by a private person who pays a tax on the property of an individual in the amount of 2% of the cadastral value, then the adopted regional law will not help reduce this tax. The issue of reducing the tax on the property of individuals is within the competence of municipal authorities.

2. Reduction of property tax from the average annual value from 2.2% to 1.1%

Prior to the adoption of the law, the tax rate for 2020 for corporate property tax was in the Kemerovo region and most regions of Russia 2.2% of the average annual value of the property.

Who pays tax at this rate?

Taxpayers are legal entities that own real estate objects and simultaneously meet two conditions:

1. They do not apply the simplified taxation system, which allows not to pay tax on the property of organizations (clause 2 of article 346.11 of the Tax Code of the Russian Federation);
2. They are not required by law to pay property tax on the cadastral value (paragraph 2 of article 375, article 378.2 of the Tax Code of the Russian Federation).

Who will get the property tax cut in 2020?

The same criteria as for the property tax of organizations from the cadastral value (see earlier).

3. Reduction of up to 50% property tax in the amount of rent reduction to the tenant

They are provided with a reduction in property tax by the amount by which they reduce the rent to their tenant, but the tax can be reduced by no more than 50%.

A reduced property tax rate will be received by property owners who have entered into an additional agreement with their tenants to reduce the rent, subject to the following conditions:

1. the lease entered into prior to March 1, 2020, and was duly registered (although we understand that the requirement to register a lease is only for leases of 1 year or more; in general, unregistered short-term leases may have problems obtaining this support measure).
2. an additional agreement to the lease agreement was concluded after March 1, 2020 (an additional agreement on rent reduction is assumed);
3. in relation to these buildings and premises, state registration of property rights was carried out (there are earlier property rights to real estate that may not be registered in the USRN)
4. the main type of economic activity of the tenant in accordance with the information of the Unified State Register of Legal Entities / EGRIP as of March 1, 2020 is one of the following types: in accordance with the annex to this regional law (as we found out earlier, it copies the list of the most affected sectors of the Russian economy, approved by Decree of the Government of the Russian Federation of April 3, 2020 No. 434) or refers to section G "Wholesale and retail trade; repair of motor vehicles and motorcycles” OKVED OK 029-201.

Who can be deprived of the right to reduce corporate property tax?

The effect of the regional law No. 44 does not apply to taxpayers brought to administrative responsibility in the period from March 16, 2020 to December 31, 2020 under the following articles:

• article 6.3 (violation of sanitary rules and hygienic standards, failure to comply with sanitary and hygienic and anti-epidemic measures during the state of emergency or in the event of a threat of spread a disease that poses a danger to others, or during the implementation of restrictive measures (quarantine) in the relevant territory, or failure to comply with the issued legal order or the requirement of the state sanitary doctor to carry out sanitary and anti-epidemic measures in time );
• part 1 of article 19.4 (disobedience to a lawful order or requirement of the state sanitary doctor);
• article 20.6.1 (failure to comply with the rules of conduct when a high alert regime is introduced in a territory where there is a threat of an emergency, or in an emergency zone).

In addition to the fact that fines for violations under Articles 6.3 and 20.6.1 of the Code of Administrative Offenses are set at a fairly high amount (up to 1 million rubles), the right to a reduced property tax rate can also be lost.

4. Final recommendations for tenants and landlords

In any scenario, we recommend:

1. Tenants - to make every effort to reach an agreement with the landlord without a trial, legally correctly record these attempts and consolidate the agreements reached as completely and in detail as possible. Even if subsequent jurisprudence changes the general rule, the parties will be able to insist on the implementation of the terms of the agreement reached. In extreme cases, it will be possible to use legal remedies against an unscrupulous party that initially signed the document on the same terms, and then tries to “replay” the situation in court (this is the “estoppel” principle, it is provided for in a number of articles of the Civil Code of the Russian Federation: paragraph 4, paragraph 2 article 166, paragraph 5 article 166, paragraph 3 article 432, paragraph 5 article 450.1)
2. Landlords - take into account the possibilities for negotiations with tenants. Supreme Court in paragraph 4 review of practice No. 2 dated 04/30/2020 provided such leverage to landlords - if it is proved that the tenant was not actually injured and obviously will not be harmed, and his requirements are a manifestation of bad faith (for example, in the case of using the object of the lease despite the established restrictive measures), the court may refuse the tenant's demands for a delay and satisfy the landlord's claims for full payment of the rent in 2020, and not in 2021-2023.

An Anti-Crisis Handbook prepared by:

• Dmitriy Malinin, Attorney-at-law, Chairman of Yurproekt Agency
• Daria Tretyakova, Attorney-at-Law, Head of Representative Office of Yurproekt Agency in Moscow
• Yana Aleksandrova, Senior Associate, Head of Land, Real Estate, Construction Practice at Yurproekt
• Evgeniy Georginskiy, Senior Associate, Tax, Bankruptcy, Corporate Practice

Follow the latest news on "coronavirus" topics:

• in News section of our site 
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• on our YouTube channel Topical Lawyers

Watch us on YouTube

“Russian force majeure: who owes whom?”

“How to reduce rent?”

“How not to pay rent?”

“PROHIBITION for business during Covid-19 period. Overview of measures taken”

“SUPPORT” measures for tenants during the pandemic”

Persons

Yana Yurievna Alexandrova

Daria Vladimirovna Tretyakova

Georginsky Evgeny Vladislavovich

Author

Dmitriy Alexandrovich Malinin

Chairman of the Bar Association "Jurproekt"