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The coronavirus as force majeure: fine aspects of application

The coronavirus as force majeure: fine aspects of application

LEGAL DIGEST, NEWS \ 08.04.2020

How can a rental payment be postponed or reduced?

Federal Law No. 98-FZ came into force on 1 April allowing a tenant to make a provision for having rental payments reduced if the facility it leased can no longer be used. The new rules will be in effect from the day when the high alert regime or an emergency situation has been introduced in your city.

  1. A tenant is now entitled to have payments for 2020 reduced if it could not use the relevant real estate.
  2. At the tenant’s request, the landlord, within 30 days, must conclude a supplemental agreement and grant a grace period for 2020 (the conditions and the timeframes are yet to be determined).
  3. The amount of rental payments can be changed at any moment and on any number of occasions further to an agreement of the parties.

Please be reminded that in March 2020 this rule only applied to state-owned real estate. However, the Russian Government has revisited this matter and extended the application of the governmental resolution to private real estate as well.

In accordance with the Russian Government’s Resolution No. 439, a tenant’s principal right is to the postponement of rental payments. This rule applies only to companies from the industries that have been affected most during the emergency situation. The grace period will be from the date when the state of emergency was introduced until 1 October 2020. This period can conditionally be divided into two stages:

– during the state of emergency, a tenant does not pay anything except for utility charges if these were included in the rent;

– during the remaining period until 1 October, the tenant pays 50% of the rental payments.

Companies that are not on the list of the most affected enterprises may postpone their rental payments only further to an agreement with the landlord. The tenant and the landlord will independently agree on the repayment of the debt. This issue, however, has been also regulated in the Resolution:

– the repayment of debt should start not earlier than 1 January 2021;

– the debt will be paid in equal instalments;

– the amount of an instalment cannot exceed 50% of the rental payment for the outstanding month.

Government authorities of constituent entities of the Russian Federation are advised to provide landlords who offered grace periods to their tenants with state support measures concerning the payment of property tax, land tax, and rental payments for land on which the relevant real estate is situated.

How can a force majeure opinion be obtained?

For the duration of the state of emergency situation, regional branches of the Chamber of Commerce and Industry have started to issue free of charge their opinions confirming force majeure with respect to foreign trade contracts. To obtain a positive opinion, the following intricacies should be taken into consideration:

  1. An opinion must be obtained for each separate contract, meaning that you will be unable to obtain such opinion for the company or the period in general.
  2. When filing an application you should explain the reasons of how specifically the force majeure prevented you from performing your obligations. Given that the period from 6 until 30 April 2020 is officially a non-working period, it is advisable to forward your application to the official email address of the Chamber of Commerce and Industry.
  3. A set of documents must be attached to your application:

– a copy of the contract, attaching all annexes;

– a statement on the scope of obligations already performed by the time when the force majeure circumstances occurred;

– documents relating to the whole chain of contracts, if a contracting party was the first to default on its obligations owing to the force majeure;

– correspondence with the contracting party concerning the start of force majeure, including confirmation that notice of the force majeure was sent;

– to confirm force majeure caused by the introduction of a non-working week, constituent documents must be submitted confirming that clause 2 of the Russian President’s Decree No. 206 (stating categories of enterprises to which the Decree does not apply) was not applicable. We further recommend that you submit a letter describing the company’s activities.

The period for obtaining a reply from the Chamber of Commerce and Industry is three-four days approximately. If you obtain a force majeure opinion, it will release your company from default interest and fines for missing the deadlines for performing your obligations. Please note that the opinion does not give you any grounds whatsoever not to perform your obligations under a contract because you did not have any revenue during the period when restrictions and bans were introduced.