Verification of the lease agreement for non-residential premises

Contents:

• Rent of non-residential premises
• Possible problems of renting non-residential premises
• How to individualize a room that is an independent real estate object?
• How to individualize a room that is not an independent real estate object?
• Verification of the lease agreement for non-residential premises
• Prolongation or renegotiation of the lease of non-residential premises
• Termination of the lease agreement for non-residential premises
• Common mistakes of lease agreements
• Sublease and what is its danger.

Rent of non-residential premises

For a non- residential premises lease agreement, the essential conditions are:

• subject of the agreement.
• the amount of rent.

If the parties, when signing the agreement, did not agree on the essential conditions, the court may invalidate the contract. At the same time, the parties cannot refer to the invalidity of the agreement if they have confirmed it by their actions. Thus, a tenant who has accepted a room from the landlord and paid the rent is deprived of the right to claim that an agreement has not been reached.

Possible problems of renting non-residential premises

To avoid problems in the future, it is better to check the lease agreement of non-residential premises before signing the agreement. Only a qualified lawyer will be able to point out weaknesses and controversial points in the text of the document. However, it is also useful for the parties to the agreement to know what to pay attention to.

So, it is important to individualize the subject of the contract, that is, to describe and define the non-residential premises that are rented. Indicate that it is transferred for a fee and only for a while.

How to individualize a room that is an independent real estate object? 

You will find the necessary information on the governmental website (Rosreestr) thanks to the service of reference information on real estate objects. On the same website, you can order an extract from the government property registry (EGRN) in electronic form, which will also reflect all the necessary information.

Specify in the lease agreement of non-residential premises:

• cadastral number.
• address.
• area in square meters.
• purpose.
• room, floor type.
• room number on the floor plan.

To avoid disputes whether the object has been agreed upon, attach to the contract a fresh extract from the EGRN and a technical plan of the premises. The graphic part of the plan displays the location of the premises – you will find such a requirement in article 24 of the Law on State Registration of Real Estate.

How to individualize a room that is not an independent real estate object? 

This is a little more complicated, since such property is not on cadastral registration, and it is impossible to obtain an extract. To individualize such a room, specify in the contract:

• individual characteristics of the building in which the room is located.
• individual characteristics of the room.

In other words, describe its location and specify the area. You can make a description of the boundaries of the room in text form or prepare a graphic image (diagram, plan). The main thing is to make it clear which part of the building the landlord has transferred to the tenant for use.

Even if there is no information about a part of the leased object in the state real estate cadaster, such a description signed by the parties will allow registering a lease agreement for non-residential premises.

Verification of the lease agreement for non-residential premises

This is a time-consuming procedure that requires preparation and deep knowledge of the subject. Professional verification of the lease agreement of non-residential premises can only be carried out by an experienced lawyer.

The examination takes place in several successive stages:

1. Verification of property rights, the presence of encumbrances. To do this, the expert orders an extract from the EGRN.
2. Checking the status of a legal entity or sole proprietor through the official service of the Federal Tax Service of Russia.
3. Determination of whether the landlord has any legal disputes, whether he has any debts.
4. Study of the room plan, clarification of the footage, reconciliation with measurements and documents. Checking the location of walls and rooms for compliance with the plan.
5. Distribution of fire risks and responsibility for equipment in the contract.
6. Clarification of potentially controversial points, for example, whether it is possible to unilaterally raise the rent, whether rental holidays are provided, whether consent is given to the signboard, whether there are meters, and so on.
7. Checking the items that relate to responsibility for the maintenance of the house territory, the prohibition on compensation for inseparable improvements.
8. Clarification of the terms of payment for unilateral withdrawal from the contract. If the parties have provided for the possibility to terminate the contract unilaterally.
9. Determining who will register the agreement, will take care of the payment of fees and visiting the governmental body (MFC).

Prolongation or renegotiation of the lease of non-residential premises

In practice, the renegotiation of a contract is understood as the signing of a new document with the same or modified conditions. Renewal of the lease agreement for the same period and on the same terms takes place if, after the expiration of the contract, the tenant continues to use the property in the absence of objections from the landlord.

Prolongation is an extension of the term of the lease agreement for non-residential premises. It is possible only before the expiration of the original term of its validity: by agreement of the parties or automatically if there is a corresponding clause in the document itself.

If the lease agreement is an annexation agreement, then this happens by signing a draft agreement prepared by the tenant by the landlord. In the standard draft of the contract, it remains only to agree about the contract itself and prescribe the amount of rent, the details of the tenant. In addition, some conditions will be different depending on whether the contract is subject to state registration or not.

At the same time, in each specific case, the tenant may, in agreement with the landlord, change certain conditions of a standard contract. For example, if the lessee insists on including a penalty in the contract in case of early termination of the contract at the initiative of the landlord.

In any case, when drafting a lease agreement and at the stage of agreeing its terms with the tenant, the landlord’s lawyer needs to check three main issues. Namely, does the text of the agreement correspond to:

• legislation.
• agreements already reached with the tenant.
• optimal distribution of rights and obligations between the parties from the point of view of the landlord.

Termination of the lease agreement for non-residential premises

Civil legislation provides for the following rights of the parties.

• termination of the contract by agreement of the parties or at the request of one party in court.
• refusal of the contract (its execution), if the contract is concluded for an indefinite period, or this right is provided for by the contract.

In this case, the lease agreement may also establish other grounds for early termination of the contract.

The following should be noted. Firstly, the standard contract does not contain specific conditions for the use of the rental object since the purpose of the leased non-residential premises can be different: from commercial to office.

Secondly, in many norms of the Civil Code of the Russian Federation regulating the legal relations of the parties under the lease agreement, it is stated that the provision of the article is valid, unless otherwise provided by the contract. That is, the legislator grants the parties the exclusive right, when concluding a contract, to establish exactly the conditions that they will be guided by mutual agreement in the future. And this circumstance must be considered.

Common mistakes of lease agreements

The first mistake is ignoring the essential terms of the contract. For example, an unauthorized person may sign an agreement. Or one of the parties does not have ownership rights to the object. It would be a serious mistake not to specify the term of the contract, the procedure for its modification, extension, termination. The terms of payment, fines and penalties should be clearly indicated in the text.

The lease agreement has clear requirements, if ignored, it can be considered not concluded. The signed contract must comply with the requirements of the law and business turnover.

The second common mistake: there is no complete description of the subject of the contract and its individual data are not specified. In this case, it is impossible to establish the subject of the lease, which means that the contract is easy to challenge.

The third mistake is the lack of acceptance certificates. In practice, in the absence of acceptance and transfer (return) of the object, the contract is considered valid (even if the terms of the contract have expired).

The fourth mistake: an attempt to terminate the contract unilaterally if it is not provided for by the document itself. In accordance with the current legislation, if the lease agreement does not specify the possibility of unilateral refusal of performance with prior written notification, then such contracts are terminated only in court.

Also, it should not be assumed that if there are penalties for early termination of the contract in the form of security payments, nothing can be done about it. In fact, these fines can be challenged if you have notified the landlord of the termination of the contract 3 months in advance (depending on the terms of the contract).

It would be a mistake not to comply with the claim’s procedure for dispute resolution. If this condition is present in the contract, then it is mandatory for the parties who have concluded the contract. Otherwise, the court will leave the claim without consideration.

It would also be a mistake to assume that you need to contact a lawyer only after a dispute has arisen. If you seek advice and legal analysis of the transaction before its conclusion, then protect yourself from imposed and unfavorable rental conditions.

Sublease and what is its danger.

The risk that the sublease agreement is terminated prematurely is much higher than in the case of a lease. Thus, the conditions under which the subtenant will be forced to return the received property are not limited to those specified in the law and in the sublease agreement. They are closely related to the grounds prescribed in the lease agreement.

In addition, the subtenant is seriously dependent on the integrity of the original tenant. The risk of negative consequences in this case is borne not only by the subtenant, who is forced to return the received property, but also by the tenant, who, in this regard, may have an obligation to compensate the losses of the transaction partner.

To ensure the interests of both parties, it is necessary to compare the grounds for early termination of the sublease agreement with similar rules in the original lease agreement. If the sublease agreement provides for the same or a larger list of grounds, the risk that the sublease will return the property without considering these requirements is reduced.

An important risk of the lease agreement is that the termination of its validity entails the termination of the sublease agreement. However, the subtenant has the right to conclude a lease agreement, but in fact this is not feasible if the owner refuses. Therefore, a subtenant who invests money in a room, who receives licenses for a certain room, is at great risk, it is better to choose a direct lease agreement in these cases.

It is also necessary to check the prohibition in the lease agreement on the conclusion of sublease agreements since the conclusion of the contract contrary to this prohibition entails its invalidity. In addition, it is necessary to check compliance with the terms of the sublease agreement, as non-compliance with these requirements may also entail negative consequences.

In addition, it is important to check compliance with the procedure for concluding a lease agreement to the main one, since its non-compliance may lead to nullity, and it, in turn, entails the nullity of the sublease agreement.